Atta Africa Financial Update

Executive summary: Hard currency gets harder to obtain.

Angola and Zambia both saw sovereign credit rating downgrades this week, mainly off the back of a continued slide in commodities prices.

Despite Angola’s timely response to the oil prices shock, the country’s dependence on its main export has left it vulnerable to further drops in the oil price. Growth has weakened, reserves are falling and government debt is expected to rise to 40% of GDP, up from 23.1% two years ago. Zambia has struggled with a deficient power supply and sliding copper prices, which make up 70% of its export revenue. As a result, the Kwacha has slid 5% against the dollar and both countries’ Eurobonds are falling.

Tightening monetary and fiscal policy as well as allowing the Kwanza to devalue has earned Angola a stable outlook. However these macro-economic indicators are not putting off investors, as local operating environments often tell more about a country’s potential than such high-level metrics. For example, Zambian authorities are finally considering paying more for independently generated electricity, which will attract healthy competition and allow the economy to operate closer to its potential.

Credit rating agencies are careful of Africa, but governments there will likely continue to solicit international markets.

African Development Bank renewable fund to benefit Kenya

  • Kenya is set to benefit from a Sh21 billion (US$200 million) private equity fund established by the African Development Bank (AfDB) to finance development of renewable energy
  • The African Renewable Energy Fund, which is headquartered in Nairobi, will invest in small and medium hydro, wind, geothermal, solar and biomass projects in the Sub Saharan region
  • AfDB and its Sustainable Energy Fund for Africa are the fund’s lead sponsors with equity investment of US$25 million and US$25.5 million respectively. It was set up in March last year with an initial commitment of US$100 million