Top African markets to look out for


Global bond traders who ventured into Africa this year have reaped rich rewards.

The continent’s sovereign dollar debt has generated total returns of 20% since the start of 2019, more than any other region in emerging markets.

Local bonds have also performed strongly. Egyptian pound and Nigerian naira bonds each returned more than 30% in dollar terms.

Africa is a “land of opportunity” and could be one of the main beneficiaries if the U.S. and China make more progress on trade talks, said Bank of America strategists including London-based David Hauner.tHE

But investors face plenty of potential risks in 2020. South Africa could lose its last investment-grade rating, Ghana’s government might ramp up spending ahead of elections, Zambia’s debt crisis could spiral out of control and Nigeria may be forced to devalue its currency.

Here’s what to watch for in 5 key markets.


Africa’s second-biggest oil producer is still reeling from a crash in crude prices five years ago. The economy will contract for a fourth straight year in 2019, IMF said this week.

Still, investors have been impressed by the central bank’s reforms, including the devaluation of the kwanza.

Its fall of 32% this year against the dollar — only Argentina’s peso has weakened more — has increased inflationary pressure. But it’s also eased a shortage of foreign exchange that was crippling businesses.


Egypt remains a favorite among portfolio investors. Carry traders, attracted by yields of around 14% on pound bonds, have flocked to the Arab nation.

The currency has rallied 12% this year, its best performance in at least 25 years — and Societe Generale SA forecasts it will gain another 4.5% to 15.35 per dollar in 2020.

But the reforms of President Abdel-Fattah El-Sisi are yet to translate into the foreign direct investment and jobs that Egypt badly needs.


The Horn-of-Africa nation remains one of the fastest-growing economies in the world. But that masks deep problems: inflation has accelerated to more than 20% and shortages of foreign exchange are acute.

Prime Minister Abiy Ahmed, this year’s Nobel Peace Prize winner, recently turned to the IMF for a $2.9 billion, three-year loan.

Investors welcomed the move, which should speed up plans to open up and modernize the state-controlled economy.

The central bank has already started to weaken the overvalued birr, which had been largely pegged to the dollar.

“This IMF deal is one of the biggest ideological shifts I’ve seen in Africa this decade,” said Charlie Robertson, Renaissance Capital’s London-based chief economist.


West Africa’s second-biggest economy holds general elections in late 2020, with President Nana Akufo-Addo probably seeking a second term.

The country has a history of fiscal profligacy in the run-up to polls and investors will watch whether the government is more cautious this time.

The cedi has been under pressure and fell to a record low this month.

But Renaissance Capital, which recommends that clients buy Ghana’s Eurobonds, says it is now one of Africa’s most undervalued currencies.


Nigeria’s status as one of the world’s best carry trades will probably last as long as central bank Governor Godwin Emefiele keeps the naira stable.

That’s becoming harder, with Nigerian foreign reserves having dropped 14% to $39 billion since July.

Emefiele’s signalled he’ll let them fall a lot further before loosening his grip on the currency, which barely budges.

Fiscal authorities, meanwhile, will try to boost an economy that’s been growing more slowly than the population for the past five years.

In short, If the world’s major central banks remain dovish in 2020, that should sustain a dash for higher yields in emerging markets and mean that African bonds remain in hot demand.

Suzan O


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