Zambia’s bonds have reached another grim milestone. The spread on the copper producer’s $750 million of debt maturing in September 2022 rose above 2,000 basis points this week, Bloomberg News reported. At 22%, the yield was 20 percentage points more than U.S. Treasuries of an equivalent maturity. These are levels almost unheard of in the bond world. Only nations already in default, such as Venezuela, have dollar spreads and yields as high as Zambia’s.
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Anil Agarwal, the Indian billionaire owner of Vedanta Resources Ltd., said mining companies are likely to stop operating in Zambia as a result of a state-owned firm seeking to liquidate his copper-mining business there, Bloomberg News reported. Agarwal’s warning, published in a government newspaper on Wednesday as a “personal message” to citizens of Africa’s second-biggest copper producer, comes as his company is trying to meet with President Edgar Lungu over state-owned ZCCM Investments Holdings Plc’s move this month to wind up Konkola Copper Mines Plc.
Zambia will carry out regular audits at all mines to avoid any repeat of the situation at Vedanta unit Konkola Copper Mines (KCM), which has breached the terms of its license, the mining ministry said on Thursday, Reuters reported. Zambian President Edgar Lungu said on Monday the government planned to strip KCM of its mining license and bring in a new investor. His spokesman said the move followed a number of breaches of the terms of the license, without giving details.
Mining company Vedanta and its Zambian unit Konkola Copper Mines (KCM) said they were seeking urgent talks with the Zambian president following a high court order on Tuesday to appoint a provisional liquidator, Reuters reported. The news has rattled foreign investors already nervous governments in central African countries are seeking a much bigger share of resource revenues, which they say will discourage investment the region desperately needs.
Zambia, which the International Monetary Fund has warned is at high risk of debt distress, contracted an additional $2.6 billion of new external loans last year, according to the Finance Ministry, Bloomberg News reported. If the funds are disbursed, they’ll increase the southern African nation’s external debt to $12.7 billion, from $10.1 billion at the end of 2018. The new loans suggest the government is too complacent about rapidly increasing debt risks, Gregory Smith, fixed-income analyst at Renaissance Capital in London, said by email.
Debt stress in Zambia is set to escalate next year as the burden of hefty borrowings from China starts to weigh, throwing the copper-exporting African nation into a struggle to avoid default on its hard currency debt, analysts said. Opinions diverge on whether default can be evaded, partly because certain factors are subject to both market fluctuations and political uncertainties, the Financial Times reported.
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Zambian Finance Minister Margaret Mwanakatwe is no longer having sleepless nights over an International Monetary Fund loan the southern African nation has been trying unsuccessfully to secure for the past two years, Bloomberg News reported. “I’ve talked about four things that keep me awake. Four months ago I was saying IMF. I don’t say that anymore,” she told business leaders Tuesday in the capital, Lusaka, after delivering the 2019 budget last week.
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Zambia, which Moody’s Investors Service cut further into junk this weekend, wants help to refinance its first Eurobond that matures in 2022, President Edgar Lungu said during a meeting with his Turkish counterpart Recep Tayyip Erdogan, Bloomberg News reported. “$750 million is almost due for repayment, and I think we would seek assistance in that respect,” he said in comments broadcast over state-owned TV on Saturday.
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Zambia has seen ‘unprecedented infrastructure’ development in the last six years but at what cost to the economy? In Zambia’s past, debt has been a millstone which has held the country back. The current situation of rising fiscal deficits and public debt coupled with increased spending and flat revenues is a recipe for economic disaster. In recent years, public debt is once again rising at a significant pace, The Mast reported. Maintenance of debt sustainability will remain pivotal in the rebalancing of the Zambian economy.
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Libyan telecommunications company LAP GreenN is considering chasing after Zambia’s offshore assets after the southern African country defaulted four times on an order to pay $257 million in compensation for nationalizing a firm it invested in, Bloomberg News reported. Zambia owes state-owned LAP GreenN more than $400 million including interest, and has defaulted on payments totaling about $220 million following a 2016 judgment in the nation’s high court, according to the Libyan Post, Telecommunication and IT Holding Co. which owns LAP GreenN. Yields on the nation’s dollar bonds climbed.
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