The first quarter of this year has seen a significant amount of new issuance from African sovereigns. Moreover, much of this has come at longer maturities, with, for example, Egypt, Kenya, Nigeria and Senegal all issuing 30-year paper in the past few months.
Some commentators have seen this as some of sort of market top or overreach. And while undoubtedly ambitious, our view on the continent remains a constructive one. Here’s why we are investing in a wide range of attractive opportunities in Africa:
- Limited supply: in emerging markets high yield (EM HY), the sum of outstanding dollar issuance at $79bn remains well shy of other regions, such as Latin America ($368bn) and Europe ($211bn)
- Diversity: 16 African countries are represented in EM HY, more than in all the other EM regions except Latin America
- Resilient commodities: we have seen widespread strength across the commodities complex over the past year, such as in oil and copper, supporting many African economies
- Politics: generalisations should be avoided, but we see supportive political developments afoot in South Africa, Kenya and Angola currently, to name a few geographies
- Manageable indebtedness: while the pace of bond issuance has been significant in the past five years, overall debt levels are still manageable, and are significantly below levels of the last major debt restructuring
- Staying out of East-West tensions: as the US begins to challenge its traditional partners, such as Mexico and China, African credit arguably represents a ‘place to hide’