Trials and tribulations of COVAX
Reports this week pointed to the multilateral COVAX facility’s high risk of failure, which would delay many African countries’ access to vaccines and the ensuing economic benefits.
South Africa, for its part, missed a deadline to make a down payment to COVAX, reinforcing concerns about the sluggish pace of the administration’s response to the latest coronavirus developments.
Without pre-orders with vaccine manufacturers, most other countries in Sub-Saharan Africa are reliant on the COVAX scheme too, which appears to be facing supply chain and financial pressures. The facility’s current portfolio includes yet-to-be-approved vaccines that are cheaper and easier to distribute, but are facing delays. Securing higher cost jabs that could be delivered more quickly would raise the funding needs of COVAX, which has yet to reach its initial target, let alone an even higher one.
The unravelling of the COVAX facility would set back the roll-out of vaccines in Sub-Saharan Africa, delaying any “vaccine bounce” in recoveries. While we think that the size of the boost to activity may be modest, continued restrictions and precautionary behaviour would weigh on output. Even so, indirect benefits from vaccines should start to trickle down as global demand rebounds, risk appetite improves and inflows of tourists and remittances pick up.
Eskom debt proposals the start of a long journey
South African officials are coalescing around a debt-to-equity swap to reduce the debt burden of state electricity firm Eskom, but other steps will be needed to put the firm and its operations on a sound footing.
Reports this week suggest that the Public Investment Corporation (PIC), South Africa’s largest public pension fund, has approached the Treasury to convert ZAR95bn (1.9% of GDP) of Eskom debt held by PIC into equity. The move would be a positive step on the road to resolving Eskom’s debt issues –total debt amounts to around 9.5% of GDP and debt servicing accounts for more than 40% of spending.
That said, reducing Eskom’s debt burden would not be sufficient to put the firm on a sustainable footing. Plans to split Eskom’s operations into generation, transmission and distribution are a step in the right direction. But more needs to be done. Large investment is needed to replace ageing power plants and carry out maintenance. Funding this will require either an imposition of steep tariff hikes, directing more state funds to Eskom or attracting more private investment (or a combination of all three). Failure to address these issues would not only cause debt problems to re-emerge further ahead but also mean that power cuts would weigh on activity for longer.
Zambia: One step forward, two steps back
Plans announced by the Zambian authorities this week to take a bigger role in the mining sector may prove popular with voters, but will probably raise concerns among investors and the IMF.
The government will seek to acquire majority stakes in selected mines, but has not provided much more detail. President Edgar Lungu might be courting voters ahead of elections scheduled for August 2021. But the plans are unlikely to play well with investors due to concerns about nationalisation of the key mining sector, which makes up about 10% of GDP.
The developments are a step back following Zambia’s official request last week for an IMF deal. Negotiations with the Fund may be delayed, which could make a debt restructuring deal following last month’s default more difficult to reach. Mixed messages by the government about its commitment to a pro-business environment and fiscal consolidation will do little to build creditors’ trust.
The weeks ahead
This is our last Weekly of 2020. The next edition will be published on 8th January. Merry Christmas and Happy New Year to our readers who are celebrating.
Economic Diary & Forecasts
Date | Country | Release/Indicator/Event | Time (GMT) | Previous* | Median* | CE Forecasts* | |
22nd Dec |  | SA | Budget Balance (Nov., SAAR) | (12.00) | -49.7bn | – | – |
23rd Dec |  | Bot | GDP (Q3, q/q(y/y)) | – | (-24.0%) | – | – |
Also expected during this period: | |||||||
14th – 26th |  | Nga | Current Account (Q3, USD) | – | -3.2bn | – | – |
21st – 4th |  | Ken | GDP (Q3, q/q(y/y)) | – | (-5.7%) | – | (-1.1%) |
Selected future data releases and events | |||||||
31st Dec |  | Uga | CPI (Dec.) | – | (+3.7%) | – | – |
| Ken | CPI (Dec.) | – | +1.2%(_5.5%) | – | – | |
 | Zam | CPI (Dec.) | – | (+17.4%) | – | – | |
| SA | Trade Balance (Nov., SAAR) | (12.00) | +36.1bn | – | – | |
6th Jan | | Ken | Markit/Stanbic Bank PMI (dec.) | (07.30) | 51.3 | – | – |
7th Jan | | SA | Electricity Production (Nov.) | (11.00) | (-2.8%) | – | – |
8th Jan |  | Tan | CPI (Dec.) | – | (+3.0%) | – | – |
 | Mau | CPI (Dec.) | – | (+3.1%) | – | – | |
| SA | Absa Manufacturing PMI (Dec.) | (09.00) | 52.6 | – | – | |
12th Jan | | SA | Manufacturing Production (Nov.) | (11.00) | +2.6%(-3.4%) | – | – |
13th Jan |  | Gha | CPI (Dec.) | – | (+9.8%) | – | – |
| SA | Retail Sales (Nov.) | (11.00) | -0.2%(-1.8%) | – | – | |
15th Jan |  | Nam | CPI (Dec.) | – | – | – | – |
| Bot | CPI (Dec.) | – | – | – | – | |
Also expected during this period: | |||||||
4th – 11th | | SA | SACCI Business Confidence (Dec.) | – | 93.4 | – | – |
11th – 18th | | Nga | CPI (Dec.) | – | (+14.9%) | – | – |
15th – 22nd |  | Ang | CPI (Dec.) | – | (+24.9%) | – | – |
*m/m(y/y) unless otherwise stated Sources: Bloomberg, Capital Economics | |||||||
Main Economic & Market Forecasts
Table 1: GDP & Consumer Prices (% y/y) | ||||||||||
Share of World (1) | 2009-18 Ave. | GDP | Inflation | |||||||
2019 | 2020f | 2021f | 2022f | 2019 | 2020f | 2021f | 2022f | |||
Nigeria | 0.80 | 4.4 | 2.2 | -2.0 | 3.5 | 3.0 | 11.4 | 13.0 | 13.5 | 12.0 |
South Africa | 0.57 | 1.5 | 0.2 | -8.0 | 5.0 | 4.0 | 4.1 | 3.2 | 3.8 | 3.5 |
Ethiopia2 | 0.20 | 9.7 | 9.0 | 6.1 | 3.0 | 9.0 | 15.7 | 20.5 | 15.5 | 12.0 |
Kenya | 0.18 | 5.6 | 5.4 | -0.5 | 7.0 | 7.0 | 5.2 | 5.0 | 5.0 | 4.5 |
Angola | 0.17 | 2.4 | -0.9 | -5.0 | 3.5 | 2.5 | 17.1 | 22.0 | 18.5 | 16.0 |
Ghana | 0.13 | 7.0 | 6.5 | 3.0 | 7.0 | 6.5 | 8.7 | 10.0 | 9.5 | 8.5 |
Tanzania | 0.12 | 6.5 | 5.8 | 1.5 | 6.5 | 6.5 | 3.4 | 3.5 | 4.0 | 4.5 |
Côte d’Ivoire | 0.10 | 6.1 | 6.5 | 2.5 | 7.5 | 7.5 | 0.8 | 2.3 | 0.5 | 1.0 |
Uganda | 0.08 | 5.3 | 6.7 | -1.5 | 7.0 | 6.0 | 2.9 | 4.0 | 4.5 | 5.5 |
Zambia | 0.05 | 5.6 | 1.4 | -4.5 | 3.5 | 4.5 | 9.1 | 15.5 | 13.0 | 10.0 |
Botswana | 0.03 | 3.7 | 3.0 | -10.5 | 8.5 | 5.5 | 2.8 | 2.0 | 3.5 | 3.0 |
Mozambique | 0.03 | 3.7 | 2.3 | -0.5 | 4.0 | 5.0 | 2.8 | 3.0 | 3.0 | 3.5 |
Rwanda | 0.02 | 7.2 | 9.4 | -4.0 | 11.5 | 11.0 | 2.4 | 8.5 | 5.5 | 4.5 |
Mauritius | 0.02 | 3.7 | 3.0 | -15.0 | 12.5 | 6.5 | 0.4 | 2.5 | 3.0 | 3.0 |
Namibia | 0.02 | 3.4 | -1.0 | -5.5 | 5.0 | 4.5 | 3.7 | 2.5 | 3.5 | 3.5 |
Sub-Saharan Africa | 2.5 | 4.2 | 3.0 | -2.5 | 4.9 | 4.8 | 8.4 | 9.7 | 9.2 | 8.1 |
Sources: Refinitiv, National Sources, Capital Economics. (1) % of GDP, 2019, PPP terms (IMF estimates); (2) Fiscal Years. | ||||||||||
Policy Rate | Latest (18th Dec.) | Last Change | Next Change | Forecasts | ||
End | End 2022 | |||||
Nigeria | MPR | 11.50 | Down 100bp (Sep. ’20) | Down 100bp (Jan. ’21) | 10.00 | 10.00 |
South Africa | Repo Rate | 3.50 | Down 25bp (Jul. ’20) | None on horizon | 3.50 | 3.50 |
Angola | BNA Rate | 15.50 | Down 25bp (May ’19) | Down 75bp (Q3 ’21) | 14.00 | 13.00 |
Kenya | Central Bank Rate | 7.00 | Down 25bp (Apr. ’20) | None on horizon | 7.00 | 7.00 |
Ghana | Policy Rate | 14.50 | Down 150bp (Mar. ‘20) | Down 100bp (Q2 ’21) | 13.50 | 13.50 |
Uganda | Central Bank Rate | 7.00 | Down 100bp (Jun. ’20) | None on horizon | 7.00 | 7.00 |
Sources: National Sources, Capital Economics | ||||||
Table 3: Key Market Forecasts | ||||||||
Forecasts | Forecasts | |||||||
Currency | Latest | End 2021 | End 2022 | Stock Market | Latest (18th Dec.) | End | End 2022 | |
Nigeria | NGN (Official) | 381 | 400 | 400 | NGSE | 36,805 | 43,000 | 48,000 |
NGN (Nafex) | 392 | 425 | 425 | |||||
South Africa | ZAR | 14.6 | 14.5 | 15.0 | JALSH | 59,980 | 73,750 | 89,225 |
Angola | AOA | 650 | 700 | 750 | – | – | – | |
Kenya | KES | 111 | 115 | 120 | NSE 20 | 1,797 | 2,250 | 2,600 |
Ghana | GHS | 5.82 | 5.90 | 6.00 | GSECI | 1,893 | 2,300 | 2,600 |
Uganda | UGX | 3,649 | 3,850 | 3,850 | UGSE | 1,254 | 1,650 | 1,900 |
Sources: Refinitiv, Capital Economics | ||||||||
Virág Fórizs, Africa Economist, virag.forizs@capitaleconomics.com