Debt issuance in sub-Saharan Africa fell by 10 percent in the first half of 2016, data from Thomson Reuters showed on Monday, as sinking currencies and faltering economies forced borrowers to take a breather.
Taking advantage of historically low yields and strong investor appetite, Africans have borrowed heavily in international markets in recent years with debt sales reaching record highs in 2014.
But with the prospect of hikes in U.S. interest rates, slowing economies at home, a gloomy outlook for commodity prices and rising borrowing costs, African states and companies have been more reluctant to tap capital markets this year.
The region raised a total of $6.9 billion in the first six months of the year, down 10 percent compared with the same time last year, according to estimates from Thomson Reuters and Freeman Consulting.
Ivory Coast was the most active issuer nation with $4.1 billion in bond proceeds which accounted for 59 percent of market activity, followed by South Africa with 31 percent market share worth US$2.1 billion in proceeds.
The value of merger and acquisitions (M&A) targeting sub-Saharan African firms fell 27 percent to $12.8 billion during the period. Equity and equity linked issuance rose 18 percent to $4 billion – the region’s highest value since 2007.
Once at the heart of executives’ expansion plans, Africa’s growth prospects were dealt a blow in mid-2014 when prices of oil and other commodities – export mainstays of many economies – dived, partly due to a slowdown in leading consumer China.
Investment banking fees for sub-Saharan African investment banking services also dropped 22 percent to $173.9 million during the period.
Japan’s Sumitomo Mitsui Financial Group Inc earned the most investment banking fees during the period with $22.09 million, or a 12.7 percent share of the total fee pool.