South Africa’s budget deficit is projected&nbsp;to widen sharply while debt is seen ballooning significantly, the Treasury said&nbsp;on Wednesday, as the COVID-19 pandemic further stifles the recession-hit&nbsp;economy.



In a supplementary budget in response to the coronavirus crisis, the&nbsp;Treasury projected the budget deficit would widen to 14.6% of gross domestic&nbsp;product in the current 2020/21 fiscal year, from a shortfall of 6.8% of GDP seen&nbsp;in February.&nbsp;



The projected deficit would be the highest in South Africa’s post-apartheid&nbsp;era.



The Treasury said gross government debt will rise to 81.8% of GDP in the current fiscal year from 63.5% last year.



“Debt is our weakness. We have accumulated far too much debt; this downturn will add more,” Finance Minister Tito Mboweni said in his budget speech.



President Cyril Ramaphosa announced a 500 billion rand relief package in April, equivalent to 10% of South Africa’s GDP, to cushion the economic blow of the pandemic on an economy that was in recession when the virus outbreak hit the country.



A strict nationwide lockdown from late March severely curtailed production across key sectors like mining and retail, with the Treasury now predicting a&nbsp;GDP contraction of 7.2% this year.



Some lockdown restrictions have since been eased to allow key sectors to&nbsp;resume operations.

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South Africa’s budget deficit, debt seen widening as virus hits economy

By Shani Smit &#8211; Economist



Travel bans and containment measures around the world are having a devastating effect on the tourism sector in Mauritius, which was already experiencing sluggish growth in 2019. According to Statistics Mauritius, the total number of tourists visiting the island’s shores declined by 1.1% in 2019, while gross tourism earnings fell by 1.5% to Rs63.1bn.



The tourism industry as a whole is an essential component of the Mauritian economy and is estimated to have accounted for 18.8% of GDP and 19.1% of total employment in 2019.



In the first four months of 2020, tourism arrivals dropped by 33.9% y-o-y. Meanwhile, tourism earnings, which are not updated as regularly as tourist arrivals, are estimated to have fallen by 3.8% y-o-y in the first two months of 2020.



The United Nation’s World Tourism Organisation (UNWTO) estimates that global travel could fall by 60% &#8211; 80% in 2020, which would suggest a drop of between 850 million and 1.1 billion in international tourists, the loss of $910bn &#8211; $1.2trn in export receipts from tourism, and as many as 120 million direct jobs in the tourism sector being at risk.



Prior to the pandemic, the government’s vision was to attain 1.6 million tourists by the end of 2020, to increase tourism earnings to the tune of Rs71bn and create 12,208 (compared to 41,792 jobs in 2017) additional direct jobs in the tourism sector.



Tourists visiting Mauritius are primarily European, accounting for about 60% of all tourists. European tourists are mainly French, British, and German, but the government has undertaken numerous initiatives to diversify its tourism market, with a particular focus on Asia, Oceania, and America.



While many countries have started to ease their lockdown measures, potential tourists will be anchored down by travel restrictions, tighter budgets, and health-related fears.



While the tourism sector has been the hardest hit, other economic sectors such as the textile, transportation, and manufacturing sectors are also facing the brunt of the economic slowdown.



As a result, unemployment figures have started to soar. According to the minister of finance, Mauritius could see unemployment increase by 150% to a total of 100,000 active non-employed workers; that is, 17.5% of the active population.



This would represent an increase of around 60,000 of unemployed persons across Mauritius, he said.



As part of the government’s fiscal support measures amid Covid-19, a wage support scheme and self-employed assistance scheme have been implemented.



The purpose of the two schemes is to cushion the socio-economic impact of Covid-19 by providing financial support to employees who have become unemployed on a temporary basis, as well as those who are employed in informal sectors or self-employed.



On April 17, the government extended the schemes until the end of April, allocating an additional Rs4.5bn in spending. Meanwhile, temporary amendments have been made to the Workers’ Rights Act and the Employment Relations Act under the Covid-19 Bill to protect the rights of workers and support businesses.



For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a>

Op-Ed: Tourism sector in Mauritius devastated by COVID-19

South Africa&#8217;s Minister of Economic Development Ebrahim Patel said that the country could rapidly move to phase 3 of lockdown should it avoid a sharp increase in levels of infections as 1.5 million people prepare to return to work as the country <a href="https://www.cnbcafrica.com/wp-content/uploads/2020/05/Risk-Adjusted-Strategy-Regulations-29-April-2020.pdf">enters phase 4</a>. See the full statement below&#8230;



Parliament, Friday, 1 May 2020 – The Portfolio Committee on Trade, Industry and Competition, together with the Select Committee on Trade and Industry, Economic Development, Small Business, Tourism, Employment and Labour today heard that should the country avoid a sharp increase in the levels of infections with the return to work of large numbers of workers and expanded testing and healthcare facilities, the economy could shift to level 3 as soon as possible. Minister Ebrahim Patel told the committees that the country does not need to stay at level 4, which commenced today, for a specific number of weeks but can move rapidly to a lower level should risks be mitigated. The committees heard that the initial return to work will be based on the national level, but will progressively be expanded to provincial and district level, enabling workplaces to adapt to the level of infections and healthcare readiness in localities. He emphasised that the Covid-19 pandemic will impact the South African economy in deep ways due to the closure of many companies during level 5. “Work is still underway to establish the extent of the impact. We are keen to restart as many economic areas as possible.” The committees heard that the department is taking responsible steps to deliberately reopen the economy in phases, with the safety of the South African people at the forefront of how that is done, in ways that allow livelihoods to be preserved – and protecting the productive assets of the nation and sustaining as much of the economy as it can, while protecting lives. The estimated impact on the economy varies at the moment, and will be driven by the trajectory of the virus both in South Africa and globally. The International Monetary Fund estimates that the gross domestic product (GDP) will fall by 5.8% in 2020. The South African Reserve Bank estimates that the GDP will fall by 6.1% in 2020. The Industrial Development Corporation estimates that the GDP will fall by 6.3% in 2020 The committees were informed that the Competition Commission received about 1 000 concerns and complaints. Many have already achieved closure on some cases where penalties were imposed or remedial action was taken. Some prosecutions are also pending. Furthermore, about 1 700 complaints were raised with the National Consumer Commission. The Minister said the department is trying to find a balance between due process and the right of the public to be heard. The committee heard that the R500 billion Covid-19 stimulus package that was announced by the President is not an elitist package as it includes the Unemployment Insurance Fund, which is an “absolute lifesaver” for low-level paid workers. The Committee Chairperson, Mr Duma Nkosi, said the committee commends the responsible and decisive manner in which the government is dealing with the Covid-19 pandemic. “We know that the lives of our people come first, and we will be guided by this principle. At the same time, we recognise the difficulty in the balancing act of keeping our people safe and reopening the economy, as these are interlinked.” ISSUED BY THE PARLIAMENTARY COMMUNICATION SERVICES ON BEHALF OF THE CHAIRPERSON OF THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY, MR DUMA NKOSI.

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SA’s economy can move rapidly to level 3 lockdown if no sharp increase in infections: Minister Ebrahim Patel

By Banji Oyelaran-Oyeyinka



The COVID-19 pandemic, one of the world’s most significant events, has resulted in cessation of economic activities that will lead to a significant decline in GDP, an unprecedented social disruption, and the loss of millions of jobs. According to estimates by the African Development Bank, the contraction of the region’s economies will cost Sub-Saharan Africa between $35 billion and $100 billion due to an output decline and a steep fall in commodity prices, especially the crash of oil prices.



More fundamentally, the pandemic has brutally exposed the hollowness of African economies on two fronts: the fragility and weakness of Africa’s health and pharmaceutical sectors and the lack of industrial capabilities. The two are complementary.



This is because Africa is almost 100 percent dependent on imports for the supply of medicines.



According to a recent McKinsey (2019) study, China and India supply 70 percent of Sub-Saharan Africa’s demand for medicine, worth $14 billion. China’s and India’s markets are worth $120 billion and $33 billion respectively. Consider a hypothetic situation where both India and China are unable or unwilling to supply the African market? Africa surely faces a health hazard.



The root of Africa’s underdeveloped industrial and health sectors can be encapsulated in three ways. First, some African policy makers simply think that poor countries do not need to industrialize. This group believes the “no-industrial policy” advocates who engage in rhetoric that does not fit the facts. The histories of both Western societies, and contemporary lessons from East Asia, run contrary to that stance.



Clearly, governments have an important role to play in the nature and direction of industrialization. Progressive governments throughout history understand that the faster the rate of growth in manufacturing, the faster the growth of Gross Domestic Product (GDP).



From the Economist magazine five years ago: “BY MAKING things and selling them to foreigners, China has transformed itself—and the world economy with it. In 1990 it produced less than 3% of global manufacturing output by value; its share now is nearly a quarter. China produces about 80% of the world’s air-conditioners, 70% of its mobile phones and 60% of its shoes. Today, China is the world’s leader in manufacturing and produces almost half of the world’s steel.” The keyword is “making”.



Two, rich countries therefore became rich by manufacturing and exporting to others, including high-quality goods and services. Poor African countries remain poor because they continue to produce raw materials for rich countries. For example, 70% of global trade in agriculture is in semi-processed and processed products. Africa is largely absent in this market while the region remains an exporter of raw materials to Asia and the West.



Lastly, African countries are repeatedly told that they cannot compete based on scale economy, and as well, price and quality competitiveness because China will outcompete them. For this reason, they should jettison the idea of local production of drugs, food and the most basic things.



The question is: &nbsp;How did Vietnam, with a population of 95 million, emerge from a brutal 20-year war and lift more than 45 million people out of poverty between 2002 and 2018 and develop a manufacturing base that spans textiles, agriculture, furniture, plastics, paper, tourism and telecommunications? It has emerged as a manufacturing powerhouse, becoming the world’s third-largest exporter of textiles and garments (after China and Bangladesh).



Vietnam currently exports over 10 million tonnes of rice, coming third after India and China.



How is it that Bangladesh, a country far poorer than many African countries, is able to manufacture 97% of all its drugs demand, yet it is next door to India, a powerhouse of drug manufacturing?



The COVID-19 pandemic has exposed Africa. African leaders need to look in the mirror and ask where this continent will be in 2030 and 2063. Africa must adopt progressive industrial policies that create inclusive, prosperous and sustainable societies.



What then should be done? A three-pronged approached is urgently needed.



First, Africa needs a strong regional coordination mechanism to consolidate small uncompetitive firms operating in small atomistic market structures. With a consumer base of 1.3 billion and $3.3 trillion market under the African Continental Free Trade Area (AfCFTA), the continent has no choice but to bring together its fragmented markets.



Second, Africa needs to build better institutions, strengthen weak ones and introduce the ones missing. No better wake-up call is required than the present pandemic.



Third, one important institution that has been abruptly disrupted is the supply chain for medicines and food, for example. Logistics for transporting capital and consumer goods across the region need predictable structures. Building or strengthening supply chains involve fostering and providing regulations for long-term agreements and competences that leverage both private and public institutional challenges such as customs regulations.



Finally, development finance institutions (DFIs) such as the African Development Bank are mandated to, and are currently, trying to fill the gaps left by private financial institutions. There is an opportunity to Africa to rethink and reengineer its future. The Africa of tomorrow must look inwards for its solutions. &#8211; whether in feeding its own people, build industrial powerhouses led by African champions.



The African Development Bank stands ready to help target and push for deeper economic transformation. Africa needs to execute structurally transformative projects that generate positive externalities and social returns. Keep our eyes on the days after.



Professor Banji Oyelaran-Oyeyinka, is the Senior Special Adviser on Industrialization to the President of the African Development Bank. He is a fellow of the Nigerian Academy of Engineering and Professorial Fellow, United Nations University. His recent book is “Resurgent Africa: Structural Transformation and Sustainable Development”, UK: Anthem Press, 2020



For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a>

Sub-Saharan Africa to suffer 23.1% decline in remittances in 2020 – World Bank

Op-Ed: Where will Africa be post COVID-19?

By Irmgard Erasmus – Senior Financial Economist



Acutely aware of Ethiopia’s vulnerability to the health and
economic repercussions of the Covid-19 pandemic, Prime Minister Abiy Ahmed
urged “collective leadership and coordinated responses” to overcome the
challenges posed by the unprecedented shock. 



The Ethiopian leader has taken a dominant position in the campaign
for comprehensive stimulus packages and debt relief for the African continent,
stressing that “we are not prepared to overcome the virus on our health systems
and the long-term impact on our economies”. 



Echoing this concern, a consortium of African ministers of finance
emphasised in a communique dated April 1 that “urgent need” exists “for fiscal
stimulus to contain the crisis”.



On April 1, G20 leaders indicated that they are preparing a
response package for Africa that will include debt relief and financial aid.
The response package will incorporate “recent demands from President Cyril
Ramaphosa of South Africa and Prime Minister Abiy Ahmed of Ethiopia”, according
to Politico. 



This also came after the United Nations Economic Commission for
Africa (UNECA) again requested the “urgent and immediate release” of a $100bn
support package to aid domestic response actions in the fight against the
health and economic implications of the Covid-19 pandemic. 



While the ministers welcomed the IMF and World Bank’s call for
official bilateral creditors to “provide breathing space” to African countries,
the consortium believes that “such relief should be extended to countries
across the region and by other creditors during this exceptional period”. 



A comprehensive $100bn support package for Africa will be
formalised for discussion and presentation at the World Bank and IMF’s
stakeholders’ initiatives on April 15.



For the public sector, disbursements will be utilised for the
servicing of public sector debt and interest payments, including on sovereign
bonds, in order to create “immediate fiscal space and liquidity” for
governments to focus their attention on domestic fiscal stimulus needs amid the
crisis. 



The consortium proposes that the $44bn disbursement be pooled into
a global special purpose vehicle (SPV) to be used for external debt service
“for effective management purposes till economic recovery takes hold and
agreement can be reached with creditors”. The ministers stressed that this
measure would guard against default by countries. 



The ministers requested the IMF to raise Special Drawing Rights
(SDRs) availability over the next two to three years. The consortium believes
that it would service the debt relief SPV facility and provide crucial
liquidity support.



Ethiopia has already rescheduled debt servicing agreements with
“some major creditors”, which will alleviate hard currency liquidity demands.
By September 2019, public external debt stock stood at $26.8bn, or half of
total outstanding public debt. 



Public external debt comprised a 60:40 split between central
government and state-owned enterprises, according to official records. 



Public external debt servicing costs amounted to $548.4m during Q1
FY 2019/20 (the fiscal year commences on July 8), of which $457.2m was due to
SOE debt servicing. 



Ethiopia has been among the most vocal of African nations to
request debt waivers or debt relief – while African finance ministers called
for a $100bn stimulus package, Prime Minister Abiy Ahmed urged G20 members to
provide $150bn under a proposed three-point action plan. The disbursal should
take the form of supplementary budgetary support, debt relief, and private
sector financing, according to the proposal. 



The prime minister furthermore urged G20 nations to support the
World Health Organisation (WHO) and Africa Centres for Disease Control and
Prevention (CDC) in strengthening public health delivery and emergency
preparedness.



Cognisant of the fragility of the private sector, especially as
small- and medium-sized enterprises account for over 70% of the private sector
in Africa, the consortium stressed that liquidity relief should be extended in
particular to service and tourism sectors. 



African finance ministers requested support from the G20, EU, and
all Development Finance institutions to support a proposal aimed at the
refinancing, rescheduling, and implementation of guarantee schemes and
liquidity facilities for the private sector. 



In particular, African airline companies require preservation and
protection “given their significant contribution to the GDP of Africa”.
Ethiopian Airlines suspended flights to 80 destinations in light of the
pandemic. 



Demand for local flights, which are ongoing, dropped by at least
50% already. The airline estimates that it will lose at least $190m due to the
pandemic. 



The Ethiopian government has ordered the central bank to release
Etb15bn ($460m) to private banks as it ramped up its fight against the economic
spillover effects of the Covid-19 pandemic. The liquidity injection will enable
the banking sector to extend debt relief and additional loan facilities to
customers. 



This came in addition to instructions to avail foreign currency to
importers, with priority given to importers of essential goods or the
manufacturing of essential goods. 



In March, the World Bank granted a $500m grant and loan facility
(split evenly) to Ethiopia in support of its reform programme. 



The prime minister voiced his gratitude to “the generosity of the
Ethiopian people” as local stakeholders contributed generously to the National
Resource Mobilisation Committee initiative.



NKC African Economics’ preliminary GDP forecast suggests that
Ethiopia will be hit particularly hard by coronavirus-related disruptions. 



Absent comprehensive external support, a sharp slump in private
sector demand and investment momentum threatens an unprecedented plunge in
economic growth this year to 1.1% – down from a pre-virus forecast of 7.1%. 



Crucially, the pandemic threatens to disrupt progress made under
the reform agenda towards policy overhaul, broad-based privatisation of state
assets, financial liberalisation, and the launch of a domestic bourse. 



An uncomfortable reliance on grant relief amid strained domestic
fiscal capacity threatens to bloom into full-blown crisis in the absence of
comprehensive external financial support.

Lion_of_Judah,_Addis_Ababa,_Ethiopia

Op-Ed: Ethiopia – Abiy leads African appeal for relief actions

New York, March 31, 2020 &#8212; Moody&#8217;s Investors Service (&#8220;Moody&#8217;s&#8221;) has today placed Angola Government&#8217;s B3 long-term issuer ratings and senior unsecured rating and its (P)B3 senior unsecured MTN rating under review for downgrade. The short-term issuer rating is affirmed at Not Prime (NP).



The decision to place Angola&#8217;s ratings on review for downgrade is prompted by the magnitude of the shock from the sharp drop in oil prices and an acute tightening in global financing conditions on Angola&#8217;s already weak public finances and external position, and elevated government gross borrowing requirements. Weak governance, notwithstanding a number of reforms implemented in recent years, undermines the government&#8217;s capacity to respond to this shock and is a driver of this rating action.



The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. For Angola, the shock mainly transmits through a further weakening in the currency that raises the debt burden and debt service; a significant drop in revenues that is likely to prevent the government from pursuing its debt management strategy of paying down short-term debt and reducing rollover risk; and pressure on an already fragile balance of payments.



The review period will allow Moody&#8217;s to assess the overall policy response to the shock and the capacity of the authorities to manage: 1) the additional stress on public finances and the government&#8217;s balance sheet driven by the significant loss of oil-related revenues and a potential further depreciation of the currency; 2) the severity of the increase in external vulnerability given the expected sharp drop in oil export receipts putting pressure on foreign currency reserves; 3) the rising risks associated to large domestic and external debt service payments in a currently dislocated credit market.



Concurrently, all Angola&#8217;s country risk ceilings remain unchanged: Foreign Currency bond ceiling at B2, Foreign Currency deposit ceiling at Caa1, and Local Currency bond and deposit ceilings at Ba3.



RATINGS RATIONALE



RATIONALE FOR INITIATING A REVIEW FOR DOWNGRADE ON ANGOLA&#8217;S B3 RATINGS



As a result of the oil price fall in the face of depressed oil demand and a slow supply response, Moody&#8217;s now assumes that oil prices will average US$40-45 per barrel in 2020, and US$50-55 by 2021, around $20 and $10 below previous expectations in each year.



As a large oil exporter, Angola heavily relies on the oil sector as a source of government revenue (62% of total revenue in 2019) and exports (96%). Such a fall in oil prices heightens the pressure on Angola&#8217;s already weak fiscal and external metrics.



ANGOLA&#8217;S WEAK CREDIT METRICS ARE LIKELY TO DETERIORATE FURTHER, TO AN EXTENT PARTLY DETERMINED BY THE GOVERNMENT&#8217;S CAPACITY TO RESPOND



Angola&#8217;s credit profile is weakened by the oil price shock which negatively affects the government&#8217;s balance sheet and the country&#8217;s external position, through a significant loss of government revenue and export proceeds respectively. Also, the Covid-19 related spending to prevent the spread of the virus throughout the country is expected to further aggravate the fiscal deficit.



Already, Angola&#8217;s fiscal and external metrics are very weak. General government debt increased to an estimated 100.5% of GDP in 2019, from 81% in 2018, and debt-to-revenue was around 500% from 371% respectively. Similarly interest payment-to-revenue exceeded 25% in 2019 against 20.7% a year before. On the external side, vulnerability relates to low net foreign exchange reserves at $11.8 billion at the end of 2019, covering around 6 months of imports of goods and services and external debt amounting to about twice the level of current account receipts this year, according to Moody&#8217;s estimates.



Angola is unlikely to be able to significantly increase its oil production that has been in a secular decline for the last 4 years to offset the price drop. Moody&#8217;s estimates that a $10/barrel decrease in oil price leads to a $2$2.5 billion loss in government revenue (around 3% of 2019 GDP) and a $5 billion fall in exports receipts.



The 2020 budget which was designed to post a small surplus (0.8% of GDP), was passed with a $55/barrel oil price assumption. It would have contributed to a slightly positive balance of payments after International Financial Institutions&#8217; (IFIs) disbursements of concessional loans. As a result of the price fall, Angola&#8217;s fiscal and external accounts will be in deficit, raising pressure on the exchange rate and foreign exchange reserves and incentivizing economic transactions in the parallel exchange rate market.



A budget no longer likely to be in surplus and further pressure on the currency are likely to raise the already very high debt burden. In turn, the government&#8217;s borrowing requirements are likely to increase again in 2020 having fallen to 15% of GDP in 2019 (including clearance of arrears to goods and services suppliers), at a time when international and possibly domestic financing comes at very high costs. Given the current dislocation in credit markets, it will be increasingly challenging for the government to secure financing at affordable costs. Previous objectives, including an ongoing debt management strategy aimed at repaying short-term debt and lengthening its debt maturity and the maintenance of net international reserves above $10 billion have also become far less achievable.



The impact of the oil price shock will be attenuated by the fact that the government posted a small deficit on the budget estimated at 0.3% of GDP and a current account surplus estimated at 4% of GDP in 2019. This is due to the implementation of a vast array of reforms, and strong consolidation efforts under the $3.7 billion and 3-year IMF program, approved in December 2018. But during this transition period, where the authorities, with the support of the IFIs, are trying to spur the private sector, restore macroeconomic stability with a more flexible exchange rate and sounder public finances, having cleared large amount of arrears and improved the debt structure, Angola&#8217;s credit metrics remain highly vulnerable to shocks.



The review period, which may extend beyond the usual three-month horizon, will allow Moody&#8217;s to assess the credibility and sustainability of the government&#8217;s plans and its ability to mitigate the impact of significantly lower oil prices on Angola&#8217;s credit standing.



ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS



Environmental considerations are not material for Angola&#8217;s rating.



As an oil producer and exporter, Angola&#8217;s environmental risks derive from carbon transition. Angola&#8217;s credit profile would face downward pressure in a scenario of rapid global transition to lower reliance on hydrocarbons that would depress global hydrocarbon demand and prices. However, in light of the measures against climate change taken so far, this is not Moody&#8217;s baseline.



Social considerations influence Angola&#8217;s credit profile, given very low wealth levels and high levels of poverty. GDP per capita, at $6,851 on a PPP basis as of 2018, remains low. Additionally, the UN&#8217;s Human Development Index for 2018 ranked Angola 147 out of 189 countries. Social indicators have improved from a very low level since the end of the civil war in 2002, but income inequalities remain very high despite the oil wealth of the country. Since the oil shock and the election of President Lourenco, the authorities have been implementing an ambitious reform agenda despite the political cost and inherent execution risks. Risk of social unrest remains, especially stemming from jobless young people.



Governance considerations are material to Angola&#8217;s credit profile and are a driver of this action. Data transparency and availability are areas of improvements, as well as institutional capacities that remain limited. For example, Angolan banks lost their dollar-correspondent banking relationships in 2016 because of their failure to meet international standards relating to shareholder structures and money laundering, resulting in increased transaction costs and delays. There are also significant weaknesses related to the management of public finance, illustrated by the level of arrears accumulated over the last few years.



FACTORS THAT WOULD LEAD TO A DOWNGRADE OF THE RATING



Moody&#8217;s would downgrade the rating if the review were to conclude that Angola&#8217;s government was unlikely to be able to alleviate the damage to its balance sheet and the subsequent rise in liquidity risk resulting in a credit profile no longer consistent with a B3 rating. Increasing risks of a balance-of-payment crisis would also likely lead to a downgrade.



WHAT COULD LEAD TO CONFIRMATION OF THE RATING AT THE CURRENT LEVEL



Moody&#8217;s would confirm the rating if the review were to conclude that a credible fiscal and economic policy response from the government will efficiently manage the risks arising from the upward trend in government debt, government liquidity risks, and increased pressure on the exchange rate, leaving Angola&#8217;s credit profile consistent with a B3 rating.



GDP per capita (PPP basis, US$): 6,851 (2018 Actual) (also known as Per Capita Income)



Real GDP growth (% change): -1.2% (2018 Actual) (also known as GDP Growth)



Inflation Rate (CPI, % change Dec/Dec): 18.6% (2018 Actual)



Gen. Gov. Financial Balance/GDP: 2.2% (2018 Actual) (also known as Fiscal Balance)



Current Account Balance/GDP: 7% (2018 Actual) (also known as External Balance)



External debt/GDP: 44.4% (2018 Actual)



Economic resiliency: b2



Default history: No default events (on bonds or loans) have been recorded since 1983.



On 26 March 2020, a rating committee was called to discuss the rating of Angola, Government of. The main points raised during the discussion were: The issuer&#8217;s economic fundamentals, including its economic strength, have materially decreased. The issuer&#8217;s fiscal or financial strength, including its debt profile, has materially decreased. The issuer&#8217;s susceptibility to event risks has not materially changed.



The principal methodology used in these ratings was Sovereign Ratings Methodology published in November 2019 and available at <a href="https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1158631">https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1158631</a> . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.



The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.



The local market analyst for this rating is Aurelien Mali, +971 (423) 795-37.



REGULATORY DISCLOSURES



For further specification of Moody&#8217;s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody&#8217;s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx? docid=PBC_79004.



For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody&#8217;s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider&#8217;s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.



For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.



The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.



These ratings are solicited. Please refer to Moody&#8217;s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.



Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.



Moody&#8217;s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at <a href="https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569">https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569</a> .



At least one ESG consideration was material to the credit rating outcome announced and described above.



The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody&#8217;s affiliates outside the EU and is endorsed by Moody&#8217;s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody&#8217;s office that issued the credit rating is available on www.moodys.com.



Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody&#8217;s legal entity that has issued the rating.



Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.



Samar Maziad



Vice President &#8211; Senior Analyst



Sovereign Risk Group



Moody&#8217;s Investors Service, Inc.



250 Greenwich Street



New York, NY 10007



U.S.A.



JOURNALISTS: 1 212 553 0376



Client Service: 1 212 553 1653



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Moody’s places Angola’s B3 ratings on review for downgrade

By Dr Victor Oladokun, outgoing Director of Communication &amp; External Relations at the African Development Bank Group



Why
Africa Urgently Needs an Ubuntu Plan



Africa urgently needs a globally
coordinated Ubuntu Plan in response to COVID-19, a fiscal stimulus that
recognises our shared and connected humanity, as we find ourselves in the midst
of an unprecedented crisis.



The
world&#8217;s largest cities are eerily silent. One virus has disrupted the whole
world in a manner never seen before in history.



COVID-19,
a term that did not exist in our vocabulary a couple of months ago, has brought
virtually everything to a grinding halt. It&#8217;s a surreal almost cinematic scene.
Except that we are all living through it.&nbsp;




With governments balancing economies and
the welfare of their citizens, entire industries and institutional systems find
themselves fighting for survival in the midst of mandatory lockdowns. Food
supply chains, transportation networks, educational systems, governance and
judicial systems are either strained or barely functioning with medical
services being the worst hit.



Unlike
any other pandemic, COVID-19 will alter the way we live, work, and
socialise.&nbsp; The financial costs and the
economic devastation are already of epic proportions. This is why Africa in
particular urgently needs an Ubuntu Plan. A globally coordinated fiscal
stimulus plan that recognises our shared and connected humanity. 



The
case for an Ubuntu Plan



This
past week, America passed a 2 trillion Dollar stimulus package that will keep
markets operational, support Americans out of work, and help reduce Federal
Reserve lending rates. It is the largest bailout in the history of the United
States. European economies likewise have announced stimulus measures in excess
of 1 trillion Euros. Chinese factories are ramping up again, backed by a $344
billion stimulus package.



In
contrast, Africa&#8217;s economies are already buckling. Global demand for oil and
gas and commodity products &#8211; the mainstays of Africa&#8217;s leading economies &#8211; has
stalled. Revenues which were already overextended have dried up and small,
medium, and large enterprises are at risk of total collapse.



Last
Thursday, the United Nations Conference on Trade and Development (UNCTAD)
estimated that the pandemic could reduce the growth of the region&#8217;s gross
domestic product (GDP) from 3.2% to 1.8% in 2020. On 27th March, The Secretary
General of the UN Antonio Guterres said: “Africa is a continent with very
little capacity to respond and I am extremely worried that in those situations,
we might have millions of cases with millions of people dying”.



Lockdowns
are not equal



Even
though the United States, Europe and many parts of Asia are better suited
economically and infrastructurally to a lockdown, they are struggling to cope
with the burden of this sudden pandemic. A situation that will likely will be
worsened by the duration and unpredictability of the pandemic.



If
these societies are struggling, the impact on Africa is best imagined.



Prior
to the crisis, 41% of sub-Saharan Africa’s population lived on less than $1.90
a day which is very little to survive on. Seven out of ten persons (70%) in
Africa are in vulnerable and precarious forms of informal employment eking
their living on a daily basis. Lockdown, homeworking and teleconferencing is
therefore not an option. Family support systems from blue and white-collar
workers and the diaspora, are themselves under threat. Job losses will&nbsp; strain these critical informal support
systems to breaking points.



 In Africa, formal social safety nets rarely exist. Therefore, stockpiling food items for extended periods of isolation is out of consideration. Linked with this, Africa requires vast food supplies to meet the needs of the continent&#8217;s poorest who can barely afford a decent mmeal. 



Recent
cyclones, Kenneth and Idai, and a&nbsp;
plague of locusts, have already put considerable pressure on&nbsp; immediate food supplies for the continent.



Which
is why an Ubuntu Plan is now critical in order to cushion the harsh
social and economic impacts of the COVID-19 pandemic in Africa. Such a plan
would include a fiscal stimulus package, the development of critical
infrastructure and support for the continent&#8217;s most vulnerable populations. 



The
fact is that in the 21st century, clean water supplies and access to
electricity are the stuff of dreams for millions of Africans. Globally, almost
800 million people are without access to clean water. Of these, 40% live in
sub-Saharan Africa.&nbsp; The simple act of
hand washing which the pandemic requires for prevention is still not possible
for millions. Linked with this, less than 58% of Africa&#8217;s population has access
to modern healthcare facilities. 



A
race against time



Africa
and its partners have already been striving hard to tackle the challenge of
eradicating poverty with measures such as the UN’s Sustainable Development
Goals, and the African Development Bank&#8217;s High5 strategy. 



The
COVID-19 pandemic however shines the spotlight on Africa’s&nbsp; poor healthcare delivery systems and
facilities and its vast challenges. Africa has one of the highest population
densities in the world. For people living in tens of thousands of informal
settlements, the idea of social distancing is inconceivable. Millions of
vulnerable low-income people live in cramped communal houses and rooms and
in&nbsp; areas that lack basic amenities,
especially water and sanitation. 



In
the short term, to effectively combat COVID-19, we urgently need self-testing
kits, personal protective equipment (PPEs), makeshift living spaces and
hospitals, recovery units and inexpensive easy-to-operate ventilators. 



The
World Health Organisation (WHO) has already issued a ten-point strategy that
calls for the creation of corridors on the continent to facilitate emergency
deployments and material shipments.&nbsp; The
plan also calls on governments and the private sector to help increase
supplies, medical equipment and care, and to strengthen surveillance and public
awareness, in order to prevent&nbsp;
continent-wide community transmission.



In
the short window available, global cooperation is imperative.



&nbsp;The African Union&#8217;s Vision Agenda 2063 and
action plan states among other things, that “We are part of the global drive
through the United Nations and other multilateral organisations to find
multi-lateral approaches to humanity’s most pressing concerns including human
security and peace, the eradication of poverty, hunger and disease &#8230;”&nbsp; 



Rethinking
the future



In
the mid to long term, we must urgently rethink social life, urban and rural
planning and our budgetary priorities, if life is to be preserved. We must&nbsp; decongest informal settlements rapidly and in
their place&nbsp; develop&nbsp; affordable housing that is suitable for
isolation&nbsp; and quarantine, in the event
of future pandemics.



There
is no better time for a globally coordinated Ubuntu Plan. To stop the
global spread of COVID-19 and its global devastation, it must be stopped in
Africa. The world must pay attention and lend a helping hand by strengthening
global cooperation, now more than ever before.&nbsp;




Ubuntu
&#8211; The preservation of human dignity, health, lives and wellbeing, demands
nothing less.

Victor

Op-Ed: Victor Oladokun on why Africa urgently needs an Ubuntu Plan

NKC African Economics expects the coronavirus-related knock to economic
growth in Africa’s three largest economies alone to shave off 1 ppt from the
continent’s GDP growth this year, from 3.8% to 2.8%. 



Preliminary estimates point towards the weakest continental growth
since the early 1990s.



The continent’s three largest economies, South Africa, Nigeria and
Egypt – together accounting for just under 60% of African GDP – will see a
significant weakening in economic growth this year. 



This slowdown in economic activity will permeate through the
continent as these countries are salient drivers behind economic growth in
their respective regions.&nbsp; 



In addition to the indirect effects stemming from weakness in the
largest economies, other African nations will also have to deal with a much
more volatile external economic environment. 



The collapse in tourism will weigh on economic growth in many
countries (particularly the island nations, Morocco, Egypt, and Tunisia), while
a reduction in both export demand and commodity prices will weaken fundamentals
in Africa’s more export-oriented economies (most notably the oil producing
nations).&nbsp; 



The escalation in the Covid-19 outbreak in Africa implies there is
a lot more at stake than foregone economic production. 



Most African countries will not be able to effectively implement
the severe restrictions on movement that we have seen globally. The
impracticality of implementing widespread self-quarantine in shantytowns or
informal settlements means that this will not be an option. Mismanagement of
the situation could lead to human costs far exceeding economic losses.



Tourism is a key forex generator and employment creator across the
continent. Severe travel restrictions, border closures and lockdowns in key
source markets will result in a collapse in tourism during the first half of
the year, at least. 



Domestic and intra-Africa tourism have been key drivers behind
growth in overall tourism in recent years, but as more Covid-19 cases are
confirmed on the continent we will see an increase in domestic travel
restrictions and regional border closures. 



The island nations will be hardest hit, but the mainland will feel
the effects in the North (particularly in Tunisia, Morocco and Egypt), South
(Namibia, Botswana), East (Tanzania, Rwanda, Kenya) and West (Côte d’Ivoire,
The Gambia, Cameroon). 



Low barriers to entry have led to tourism becoming a key source of
employment. The island nations in particular are dependent on tourism to
generate employment, most notably the Seychelles (where tourism accounts for
around 44% of formal employment), Cape Verde (39%) and Mauritius (19%). 



Tourism has also become a salient job creator on the African
mainland, and a slump in the sector could result in rapid job losses given the prevalence
of micro- and small-sized enterprises operating in the sector.&nbsp; 



The slowdown in global economic activity will translate into a
reduction in demand, while lower commodity prices will compound this negative
effect on exports. 



Africa’s energy exporters will struggle to come to terms with a
much more hostile external environment. Countries such as Nigeria, Angola and
Gabon are highly dependent on oil exports not only to generate forex but also
to fund government spending. 



Countries including Namibia, Zambia, Botswana and Mozambique are
dependent on mineral exports for the same reasons. 



Generally speaking, countries that have a GDP structure orientated
towards exports will feel the pain of a weaker external environment.



Lower international energy prices will have a detrimental impact
on the continent’s oil exporters, but many other countries stand to benefit. 



A reduction in the oil imports bill will have a favourable impact
on external balances while also containing consumer price inflation. Lower
inflation will support consumer spending at a time when a weak external
environment increases the importance of domestic consumption in driving overall
economic growth.&nbsp; 



The South African economy had already entered 2020 on a very
fragile footing before the dramatic external developments related to the
Covid-19 pandemic. NKC forecasts a 5% real GDP contraction this year. Domestic
policy uncertainty and supply-side constraints have now been accompanied by a
deterioration in global business sentiment and a drop in demand for South
African goods, all weighing on the country’s economic recovery prospects. 



In addition, the three-week long nationwide lockdown, which
commenced on March 27, will result in a collapse in consumer spending. The
outlook could deteriorate further if the lockdown is extended.&nbsp; 



The coronavirus has not as yet, as far as we know, taken
significant hold in Nigeria. However, the weaker external environment and more
specifically, the recent collapse in international oil prices, will have a
marked impact on the economy’s performance this year.



Lower oil prices will result in tighter FX liquidity, rising
inflation, falling investment, lower fiscal expenditure and easing consumption
growth. 



As a result, NKC has revised its growth projection sharply lower
to 1.2% this year, with risks still firmly stacked to the downside. 



A more severe domestic outbreak of Covid-19 would cause
significant disruption to daily economic activity, particularly when
considering the population density in the country’s biggest cities. 



Despite the Egyptian government’s efforts, the number of confirmed
Covid-19 cases continues to rise considerably. 



The president has urged all citizens to stay at home for a two-week
period and a night-time curfew has been declared, while the possibility of a
formal lockdown in some regions is also circulating in local media. 



The fiscal deficit is set to widen significantly over fiscal year
(FY) 2019/20 and FY 2020/21 following the announcement of a stimulus and
bail-out package to the value of approximately E£100bn. 



Government revenues already came in far below budget during the
first half of FY 2019/20 and will take a massive knock during the second half
of the fiscal year, which ends in June. 



Lower economic growth reflects weaker consumption, investment, and
exports. 



The recently announced fiscal stimulus measures, however, should
prevent a collapse in domestic demand. 



The economic impact of the coronavirus epidemic will be
considerable, but the human costs will be higher yet. 



As of end March South Africa remains the hardest-hit African
country from a confirmed-case perspective and the expected economic hardship
reflects this. 



However, South Africa is also arguably the best-placed country on
the continent to deal with the pandemic. While it does have a large
immuno-compromised population due to its struggles with HIV, the country might
be able to leverage its sophisticated private healthcare sector to supplement
inadequate public services. 



Most other African nations will not have this benefit. 



Confirmed Covid-19 cases will undoubtedly increase across the
continent in coming weeks, and timely and effective government responses will
be required to ensure that this does not become another African tragedy.



Jacques Nel – Head of Africa Macro



For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a>

Clarification on COVID-19 “hotspots” as SA moves to level 3 lockdown

Op-Ed: African giants to stumble due to Covid-19 pandemic

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The United Nations Economic Commission for Africa predicts that coronavirus will cut 1.4 per cent off Africa’s $2.1 trillion GDP due to widespread disruption of business on the continent and across the world. According to estimates, countries on the continent have so far lost an estimated $29 billion to the coronavirus economic disruption, an amount equal to Uganda’s gross domestic product. Dr Mama Keita, Director of UN Economic Commission for Africa in Eastern Africa joins CNBC Africa for more.

UNECA on COVID-19’s impact on African economies

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Rwanda’s GDP increased by 9.4 per cent in 2019 to RWF9105 billion. The bulk of this came from the services sector which contributed 49 per cent. Jean Claude Mwizerwa, Director of Economic Statistics Department at the National Institute of Statistics of Rwanda (NISR) joins CNBC Africa for more.

How services sector grew Rwanda’s GDP by 9.4% in 2019

PRETORIA, March 3 (Reuters) &#8211; South Africa entered its second recession in two years in the final quarter of last year, as agriculture, transport and construction contracted, data showed on Tuesday.



Statistics South Africa (Stats SA) said the economy shrank 1.4% in the fourth quarter, following a revised 0.8% contraction in the third quarter.



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Economists polled by Reuters had predicted a contraction of 0.1% in quarter-on-quarter and seasonally adjusted terms.


		
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&#8220;The economy is in recession again. That is two consecutive quarters of contraction, after being in recession in the first two quarters of 2018,&#8221; Joe de Beer, Stats SA&#8217;s deputy director-general for economic statistics, told reporters.



On a quarter-on-quarter basis, agriculture declined 7.6%, transport 7.2%, construction 5.9%, electricity 4% and retail 3.8%, the data showed.



Gross domestic product overall shrank 0.5% year-on-year in the fourth quarter after expanding 0.1% the quarter before. The economy expanded 0.2% in the 2019 calendar year compared with 0.8% in 2018.



South Africa has struggled to emerge from an economic slump in the two years since Cyril Ramaphosa became president, promising sweeping reforms.



The Treasury has cut 2020 economic growth forecast to 0.9%. 



(Reporting by Mfuneko Toyana and Tumelo Modiba; writing by Olivia Kumwenda-Mtambo; editing by Larry King)

South African economy enters recession, what you need to know

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Nigeria’s Minister for Mines and Steel Development, Olamilekan Adegbite, says the country’s mining potential can surpass oil and gas. Meanwhile, data from the National Bureau of Statistics shows that Nigeria’s Mining and Quarrying sector contributed 8.85 to the 2019 GDP lower than the 10.68 per cent recorded in 2018. Joining CNBC Africa to make the investment case for Nigeria’s Mining sector is Cyril Azobu, Partner and Head of Consulting and Mining Leader at PwC.

The investment case for Nigeria’s mining sector

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The African Development Bank (AfDB) Group predicted Kenya&#8217;s 2020 GDP to grow at 6 per cent this year, boosted by favourable weather conditions and big-ticket investments around the Big 4 agenda on health, housing, manufacturing and agriculture. Also, Kenya’s private sector activity fell for the first time in nine months to January, largely due to weak consumer demand, pointing to poor cash flow in the country. Rodney Omukhulu, Assistant Investments Analyst at Cytonn joins CNBC Africa for more.

Here’s how Big 4 agenda is expected to grow Kenya’s GDP by 6%

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The construction industry contributed to more than 30 per cent to Rwanda&#8217;s GDP in the quarters two and three of last year which was largely attributed to the country&#8217;s ambitious infrastructure growth. Minister of Infrastructure, Claver Gatete joins CNBC Africa for more.

Minister Claver Gatete outlines Rwanda’s infrastructure targets

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In a recent report the International Monetary Fund (IMF) warned Kenya of a potential implosion in the country&#8217;s pension sector as the gap between retirement dues and savings widens. In 2009 the country rose the retirement age for civil servants from 55 to 60, temporarily staving off the fall out but now with tax collection at 15.6 of Gross Domestic Product (GDP) and pension obligations at 30 per cent, action may have to be taken. Journalist, Joseph Bonyo joins CNBC Africa for more.

How Kenya plans to reform unsustainable pension schemes

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Last year saw Small and medium-sized enterprises (SMEs) contributing over 30 to the Gross domestic product (GDP) of Kenya, with 83.6 per cent of the country&#8217;s total employment created attributed to them, but they did face some challenges. SME Consultant, Victor Otieno joins CNBC Africa to discuss solutions that will enable this sector of entrepreneurs contribute even more in 2020.

Here’s how Kenyan SMEs can raise their GDP contribution in 2020

How Kenyan SMEs can contribute more to the country’s GDP in 2020

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According to World Bank, South Sudan&#8217;s economy recovered with a growth rate estimated at 3.2 during the financial year 2018/2019 from a contraction of 3.5 per cent during the 2017/2018 financial year. These developments reflect activity in the oil sector which rebounded strongly. Also, the country&#8217;s total public debt during the fiscal year 2018/2019 was estimated at 34.2 of Gross Domestic Product (GDP) of which external debt is 30.2 per cent. Parek Maduot, Director of Economic Development &#038;Regional Integration at ICGLR joins CNBC Africa for more.

GDP

South Africa’s budget deficit, debt seen widening as virus hits economy

Op-Ed: Tourism sector in Mauritius devastated by COVID-19

SA’s economy can move rapidly to level 3 lockdown if no sharp increase in infections: Minister Ebrahim Patel

Op-Ed: Where will Africa be post COVID-19?

Op-Ed: Ethiopia – Abiy leads African appeal for relief actions

Moody’s places Angola’s B3 ratings on review for downgrade

Op-Ed: Victor Oladokun on why Africa urgently needs an Ubuntu Plan

Op-Ed: African giants to stumble due to Covid-19 pandemic

UNECA on COVID-19’s impact on African economies

How services sector grew Rwanda’s GDP by 9.4% in 2019

South African economy enters recession, what you need to know

The investment case for Nigeria’s mining sector

Here’s how Big 4 agenda is expected to grow Kenya’s GDP by 6%

Minister Claver Gatete outlines Rwanda’s infrastructure targets

How Kenya plans to reform unsustainable pension schemes

How Kenyan SMEs can contribute more to the country’s GDP in 2020

South Sudan’s rebounding oil sector the catalyst behind growing economy

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GDP

South Africa’s budget deficit, debt seen widening as virus hits economy

Op-Ed: Tourism sector in Mauritius devastated by COVID-19

SA’s economy can move rapidly to level 3 lockdown if no sharp increase in infections: Minister Ebrahim Patel

Op-Ed: Where will Africa be post COVID-19?

Op-Ed: Ethiopia – Abiy leads African appeal for relief actions

Moody’s places Angola’s B3 ratings on review for downgrade

Op-Ed: Victor Oladokun on why Africa urgently needs an Ubuntu Plan

Op-Ed: African giants to stumble due to Covid-19 pandemic

UNECA on COVID-19’s impact on African economies

How services sector grew Rwanda’s GDP by 9.4% in 2019

South African economy enters recession, what you need to know

The investment case for Nigeria’s mining sector

Here’s how Big 4 agenda is expected to grow Kenya’s GDP by 6%

Minister Claver Gatete outlines Rwanda’s infrastructure targets

How Kenya plans to reform unsustainable pension schemes

How Kenyan SMEs can contribute more to the country’s GDP in 2020

South Sudan’s rebounding oil sector the catalyst behind growing economy

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