Africa Chart Book

Africa Chart Book

Debt restructuring talks inching forward

The threat of messy outcomes to Sub-Saharan Africa’s debt problems seems to have diminished recently. In Zambia, the new administration vowed to tackle debt problems and press on with restructuring talks under the G20’s Common Framework. And Ethiopia, another participant in the programme, held its first creditor meeting as a political crisis reignited debt concerns. Even so, debt restructuring negotiations will not be smooth sailing, especially following recent revelations that Zambia’s debt owed to China may be substantially larger than officially reported. And elsewhere, debt problems may come back to bite down the line. While immediate risks in South Africa and Ghana are low, policymakers will need to undertake large fiscal consolidation to stabilise public debt-to-GDP ratios.

30 September 2021

Africa Chart Book

Economic damage report from latest virus waves

The evidence from the latest COVID-19 waves sweeping through Sub-Saharan Africa point to a smaller economic blow compared to previous waves. Of course, there is a considerable degree of divergence, especially between countries imposing harsh restrictions – such as Uganda and Kenya – and those with more light-touch measures, like Nigeria or Ghana. Outside of South Africa, there is little sign that daily new cases are about to peak, suggesting that curbs to tame outbreaks will remain in place and continue to dampen activity. Worryingly, low vaccination rates across the region mean that economies will suffer under on-and-off restrictions with the emergence of any new virus waves.

27 August 2021

Africa Chart Book

Delta threat building

The highly contagious Delta variant of COVID-19 seems to be dominant now across much of Sub-Saharan Africa and is driving new waves in many of the large economies. South Africa appears to be over the worst of its latest outbreak, although it now has to contend with the legacy of violence and unrest earlier this month. Elsewhere, cases are rising quickly and could dampen recoveries. Extremely low vaccine coverage makes the region particularly vulnerable to this variant and potential future ones. Even in South Africa, where the rollout is quick by regional standards, at the current pace it would take a year for vaccine coverage to reach the levels offering protection against new variants seen in DMs.

29 July 2021
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Africa Chart Book

Third wave fears grow

Worries about a third wave of COVID-19 in the region have intensified in the past month and the tightening of lockdown measures in some countries – most notably South Africa – will weigh on recoveries. As things stand, surges in cases appear concentrated in countries in the south of the continent; cases have trended down in many of the region’s other large economies (e.g. Nigeria, Ghana and Ethiopia). With vaccine rollouts progressing at a snail’s pace amid low supplies across the region, fresh virus outbreaks will remain a persistent threat to the outlook. The glimmer of hope is that global powers are looking to increase vaccine supplies and, perhaps most importantly, China could be in a position to flood the world with easily-deployable jabs later in the year.

Africa Chart Book

Contrasting currency tales

Currencies of the two biggest economies in Africa have had contrasting fortunes recently, with Nigeria’s official naira exchange rate recently devalued but the South African rand soaring on the back of higher metals prices. Nigerian policymakers have taken a step in the right direction but, while we expect further falls in the naira, the authorities will stop short of the unified and fairly valued exchange rate than many are hoping for. Meanwhile, the star performance of the rand is unlikely to last as we expect most commodity prices to fall back, and that US long-term yields will begin to rise again, putting renewed pressure on EM currencies. In addition, we think the SARB will not tighten policy as quickly as investors now discount, and that concerns about South Africa’s fiscal situation will eventually resurface.

27 May 2021

Africa Chart Book

Recoveries lifted by the commodity high… for now

The sharp rises in copper and iron ore prices this month will have given a much-needed boost to African producers such as Zambia and South Africa. Gold also traded higher in April compared to March, supporting recoveries in the likes of Côte d’Ivoire, Ghana, Rwanda, Tanzania and Uganda. And while the rebound in oil prices stalled a bit this month, Brent crude has risen a long way from last year’s trough. Balance sheet strains in the region’s key oil producers Nigeria and Angola are probably easing already. Nonetheless, we expect that metals prices will begin to fall back later this year, and oil in 2022, removing this prop to the recovery.

29 April 2021

Africa Chart Book

Not hopping on the bandwagon of EM rate hikes

Central banks in Sub-Saharan Africa bucked a recent “trend” of interest rate hikes in other emerging markets this month. Policymakers in South Africa, Nigeria, Kenya and Angola all kept their benchmark rates unchanged. The backdrop of rising US Treasury yields might have contributed to the emergence of a hawkish minority in Nigeria and the disappearance of a dovish contingent on South Africa’s MPC. But we suspect that central banks in Africa will be keen to retain an accommodative policy stance in the coming months as recoveries prove sluggish. Rate hikes are probably a long way off in South Africa and weak economic activity could even tilt the balance towards more loosening in Nigeria and Angola later this year. Kenya’s central bank governor has also left the door open to further rate cuts.

30 March 2021

Africa Chart Book

Commodity price rally no panacea for Africa

The recent rally across almost all commodity prices is good news for resource-rich economies in Sub-Saharan Africa. Balance sheets in oil producing countries like Nigeria and Angola will get a boost from the pick-up in oil prices. And a surge in industrial metals prices will prop up mining revenues in South Africa and Zambia. But alas, it’s not quite that straightforward. While we think that oil prices will rise further in the coming quarters, this is unlikely to be sufficient to fully alleviate balance of payments strains of key producers in the region. What’s more, most other African countries are facing higher oil import bills and inflation pressures. Meanwhile, we suspect that industrial metals prices will drop back later in the year as China’s economy cools, turning a tailwind into a headwind for Zambia and South Africa among others.

26 February 2021
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