Improving relations with neighbouring Sudan and a nascent recovery in the all-important oil sector are motivating rival parties in South Sudan’s long-running civil war to seek to implement the 2018 peace deal and to form a transitional government. However, foreign investors may be dissuaded from committing to new projects due to continued insecurity, widespread corruption, and potential repayment issues as pre-export oil financing deals increase the debt burden.
The government has admitted that the economy is slowing, although it still refuses to blame weak debt management. As the import bill is set to rise and debt servicing costs creep up, the risk of delayed payment on state contracts and sovereign default will remain high in coming months. Chinese companies are seeking mining assets as collateral in case of non-payment, leaving western investors potentially more exposed.
A shock to global oil prices leaves many African markets unprepared for more expensive import bills, while some crude producers may struggle to reap the benefits of higher oil export revenues. EXX Africa assesses the risk outlook for Africa’s largest oil producers and the continent’s main fuel importers.
The government will capitalise on Robert Mugabe’s legacy to consolidate its authority and establish further control over patronage networks in the banking and agricultural sectors. However, it is failing to make headway on an economic recovery, taming inflation, and restoring power supply. The opposition is set to resume protests and strikes in coming weeks, raising the risk of a complete economic shut-down. Foreign partners, even benevolent ones, will struggle to push through any form of debt relief and a mooted bailout as the crisis deepens.
The new government will have little time to celebrate a court ruling confirming its electoral victory earlier this year, as concerns mount over weak tax collections and rising debt servicing costs at a time of sluggish economic growth. The administration will also need to apply measures to protect its commercial assets like crude cargoes from seizure following a recent court ruling over a gas dispute.
The presidential election remains too close to call as establishment parties are set to rally behind a unity candidate in the second round to fend off a challenge from emerging populist candidates. Low voter interest in the presidential contest indicates that the real political battle will focus on the parliamentary vote in October. Whoever wins the elections, the current IMF programme is likely to remain in place. Benefits from the loan programme are starting to show as inflation slows and the government issues new bonds to finance its budget deficit.
Just weeks away from publishing its much-anticipated master plan for the struggling power sector, the government is considering prescribing financial assets and forcing pension funds and banks to invest in state utilities’ debt as an alternative to seeking IMF support. However, the government’s intention to renew nuclear power capability may be more considered and economically prudent than previous nuclear procurement plans.
State-owned enterprises in Africa have a notorious reputation for being mismanaged and for repeatedly requiring financial bailouts. EXX Africa unpacks this notion by looking at some of the best and worst-performing entities across the continent. Our analysis spans from examples in Morocco, Ghana, and Ethiopia to Zambia and South Africa.
Falling output in the farming sector is mostly due to disastrous state interventionist policies orchestrated by the current government. Lower revenues from the agricultural sector will add stress to the government’s fiscal balance, while also posing heightened risk of default and bankruptcy within the local banking sector.
President Adama Barrow is promoting symbolic measures such as a new look for its local currency note to purchase political capital ahead of 2021 elections as his own coalition unravels over second term ambitions. Progress on political and security sector reform has been slow and the truth commission’s performance has been heavily criticised. Yet eventual oil production would offer an economic boon and improve the country’s ability to service its debts.
- EXX Africa director Robert Besseling moderated a panel on Africa’s commodity rollercoaster at GTR Commodities in Geneva hosted by Global Trade Review (GTR)
- SOUTH SUDAN: DEBT BURDEN AND CORRUPTION MAY DISSUADE FRESH FOREIGN INVESTMENT
- TUNISIA: MAIN POLITICAL PARTIES SEEK TO MITIGATE IMPACT OF UPSET ELECTORAL DEFEAT
- ZAMBIA: CHINA SEEKS MINING ASSETS AS COLLATERAL TO PROTECT AGAINST LOOMING DEFAULT
- SPECIAL REPORT: SHOCK TO GLOBAL OIL PRICES WILL IMPACT AFRICAN PRODUCERS AND IMPORTERS