Could Africa see a tapering of Eurobond issuances?


“The Eurobond is a story for the whole of Africa. We are getting a little concerned about the number of these bond issuances and the ability to service their debt. The IMF has released a recent comment as well around the amount of debt Africa is now issuing to fund themselves,” Daniels told CNBC Africa.

“If they’re issuing these debts to protect the currencies in a small way but create some sort of infrastructure build then it’s the right thing that they’re doing. It’s a huge amount of Eurobond issuances that has taken place and I think we’re going to see a tapering off of the amount of issuances going forward.”

(READ MORE: Eurobond issuance on hot pursuit in Africa)


Zambia, most notably, had a successful first Eurobond, and is reportedly testing the market for additional investment options.

The country’s economic prospects also seem to be positive despite the weakening of the kwacha and Daniels believes that the country can certainly survive its current currency volatility issues.  

“They’ve got enough access to funds – they did their IMF loan in April. They have shown their hand to protect the currency. It’s not a case of trying to stop it weakening but the rate at which it weakens. From our point of view, from a trading point of view, we like the yields that are coming in off the bond markets,” he explained.

“It’s a sound country. It’s built on a sound banking system. Things aren’t falling apart in the country just because of a currency weakness. We shouldn’t be saying, ‘can the economy survive,’ otherwise they might have asked the same questions about us in South Africa.”

Zambia’s central bank announced on Monday that it would be increasing its overnight lending rate for commercial banks to 10 percentage points – a move that some traders have said could provide a boost to the markets.

(READ MORE: Zambia Cbank raises overnight rate, move seen aimed at propping kwacha)

Daniels acknowledged that the currency volatility in Zambia is a worry but added that there are infrastructure build projects currently taking place.     

“A lot of guys out of South Africa are looking into road-building projects there. These guys are concerned with the weaker currencies so there has to be a bit of protection for the guys coming in that are then going to earn Zambian kwacha,” he said.

“If we look at the roads and the way that they’re trying to relook at the network for the rail systems as well, there are positive infrastructure builds taking place there.”