Despite a surge in international bond sales from Africa, reaching approximately 18 billion dollars this year, nations on the continent continue to face the world's highest borrowing costs. Daniel Lebetkin of Citigroup, who helped steer these sales, acknowledged a persistent structural difference in yields compared to other regions. This disparity exists even for countries with fiscal metrics similar to non-African nations.
Some analysts attribute the premium to factors like default history and governance. However, South African Finance Minister Enoch Godongwana and others perceive a systemic bias, with the Africa Finance Corp. estimating an annual 75 billion dollar penalty in extra interest. An International Monetary Fund study found that sub-Saharan nations pay about half a percentage point more than similarly rated peers, though it noted this gap could relate to governance transparency. For instance, Kenya recently paid a higher yield on its bonds than Bahrain, which has a comparable credit rating.
While borrowing costs for Africa have recently declined and bond sales are heavily oversubscribed, the yield premium remains. Analysts from Moody's and Gemcorp Capital suggest that this cannot be fully explained by default risk alone, pointing to a potential perception deficit and a lack of allocated resources for data collection. Some advisors argue that African sovereigns must collectively present a stronger, data-driven case to international investors and institutions to address these soft biases.
Some analysts attribute the premium to factors like default history and governance. However, South African Finance Minister Enoch Godongwana and others perceive a systemic bias, with the Africa Finance Corp. estimating an annual 75 billion dollar penalty in extra interest. An International Monetary Fund study found that sub-Saharan nations pay about half a percentage point more than similarly rated peers, though it noted this gap could relate to governance transparency. For instance, Kenya recently paid a higher yield on its bonds than Bahrain, which has a comparable credit rating.
While borrowing costs for Africa have recently declined and bond sales are heavily oversubscribed, the yield premium remains. Analysts from Moody's and Gemcorp Capital suggest that this cannot be fully explained by default risk alone, pointing to a potential perception deficit and a lack of allocated resources for data collection. Some advisors argue that African sovereigns must collectively present a stronger, data-driven case to international investors and institutions to address these soft biases.
