Atta Africa Financial Update

US rate hike is significant, but certainly no the end of the world

The chances that the US Federal Reserve will begin exiting zero policy rates towards the end of this year has increased the fear of renewed volatility in emerging economies’ currency, bonds and stock markets. Rising rates and the consequent increase in the value of the dollar could, some fear, send ripples of concern through Africa's government markets, financial institutions, corporations and even households. Concern comes of course from the real local currency value of the hundreds of billion of dollars borrowed in the past few years.

However, although an increase may create turbulence, the risk of outright crises and distress is more limited. First, the Fed will most probably raise rates more slowly than in previous scenarios (such as 2013), responding to signs that US growth is robust enough to sustain higher borrowing costs. Second, central banks have already tightened their monetary policy significantly in many examples across Africa. But most compellingly, most also have a smaller share of dollar debt relative to local currency debt than they did a decade ago, which will reduce the increase in their debt burden when the currency depreciates - their financial systems are typically more sound than when they experienced banking crises.

Investbridge and Centum to partner with SABIS on education

  • Investbridge Capital and Centum Investments are teaming up with education firm SABIS Holdings to set up a firm which will “invest hundreds of millions of dollars” establishing schools in Africa
  • With aims to launch 20 schools in the next three-to-five years, Investbridge and Centum will put up the capital while SABIS will run the schools. Each school is expected to require between US$20 million to US$30 million in investment capital

Mainstream starts work on €140 million (US$154 million) windfarm

  • Irish energy firm Mainstream Renewable Power has started construction on an 80MW windfarm in South Africa
  • The project is part of three wind farms in South Africa with a combined capacity of 360 megawatts
  • The wind farms, which are all located in South Africa’s Northern Cape Province, represent an investment of approximately ZAR 9 billion (US$727 million)