Sub-Saharan Africa debt issuance down 10% so far this year
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 US 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 $6.9bn in the first six months of the year, down 10% 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 $4.1bn in bond proceeds which accounted for 59bn of market activity, followed by South Africa with 31% market share worth $2.1bn in proceeds.
The value of merger and acquisitions (M&A) targeting sub-Saharan African firms fell 27% to $12.8bn during the period. Equity and equity linked issuance rose 18% to $4bn – 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% to $173.9m during the period.
Japan’s Sumitomo Mitsui Financial Group Inc earned the most investment banking fees during the period with $22.09m, or a 12.7% share of the total fee pool.