Development Reimagined’s Post

Excited to engage in a comprehensive discussion on sovereign debt, interest rates, monetary policy, and their impacts on private markets, venture capital, and private equity in Africa with the managing partner of dbrown consulting and financial modeling wizard who moonlights as my husband.🤣😫😁 With my MSc in Finance and Economics and my ongoing PhD focusing on monetary policy with an emphasis on various econometric modeling techniques, I bring a unique perspective to defining the challenges around sovereign debt and restructuring. My decade-long career navigating through various interest rate regimes in the venture capital market has provided me with first-hand experience on how monetary policies directly affect startups and founders. This blend of academic research and practical market experience allows us to: 1. Analyze how different interest rate environments influence startup valuation, funding rounds, and investor behavior. 2. Explore predictive models to assess how changes in monetary policy might impact specific sectors or companies, providing a strategic edge in investment decisions. 3. Discuss the implications of sovereign debt restructuring on investment opportunities and risk management within Africa's diverse economic landscape. Looking forward to a fruitful exchange of ideas that could potentially shape how we approach investing and consulting in Africa's dynamic private sector. #Finance #Economics #MonetaryPolicy #VentureCapital #PrivateEquity #AfricaInvestment #Innovation

On 12 February, the Kenyan government added momentum to Africa’s return to international debt markets by successfully issuing a USD 1.5 billion Eurobond. The issuance followed similar moves by Côte d’Ivoire and Benin which came to market on 23 January and 6 February respectively, together raising USD 3.35 billion. This ended a two-year hiatus for African issuers, which had seen their borrowing costs spike amid compounding shocks: a global pandemic, conflict between Ukraine and Russia, and policy tightening across developed markets. In this month's insight, Managing Consultant Connor Vasey analyses these pressures going into 2024, and looks into how debt offices and their advisors are anticipating a much more conducive backdrop for African sovereigns.  For further insights on investing in Africa, please email Managing Consultant Connor Vasey on [email protected]. In the coming months, we will be moving our insights to J.S. Held’s corporate communication channels. To continue receiving email updates on Africa-focused insights and news from across the firm with our latest research, white papers, and perspectives, please subscribe here: https://lnkd.in/eJ7H28Hs.

In today's post we update Reinhart and Rogoff's long term external public debt estimates for South Africa. Reinhart and Rogoff show that in countries that have experienced sovereign default have generally had rapid increases in public borrowing and rising private indebtedness. Today's chart shows that South Africa's debt levels are much higher currently than they were when South African authorities renegotiated foreign currency debts in the mid to late1980s. See the post for a link to the original paper: https://lnkd.in/dT-Rs2Fm

A debt-for-development swap operation is enabling Côte d’Ivoire to replace expensive debt with cheaper financing, improving the country’s debt profile and generating significant fiscal savings—most being directed to the country’s education sector. The operation is the first of its kind supported by the World Bank Group. Learn how this innovative transaction is helping to #FundEducation. #EducationForAll Yves Jantzem waly wane

A great explainer on Africa and 'the Credit Ratings problem'. In a bid to facilitate much needed growth, African states decided to move away from the traditional development finance, that many complained was too bureaucratic and demanding, to private capital. This naturally meant getting sovereign Credit Ratings. #Creditratings were meant to help sub-Saharan countries tap global investors to fund much-needed development. But low scores, heavy borrowing and bad luck have left many struggling with crushing bond debt. #Africa #sovereigndebt

https://lnkd.in/dT44pJCh How Africa’s ‘ticket’ to prosperity fueled a debt bomb By Libby George, Tom Bergin, Tom Wilson and Lawrence Delevingne August 1, 20243:25 PM GMT+5:30Updated 8 hours ago In 2002, Africa seemed poised to rise. Wealthy creditor nations were wiping billions of dollars of unsustainable debt off the books of sub-Saharan countries, and global demand was surging for the commodities the region exports, supercharging hopes of a sustained economic boom. The United Nations, backed by the United States, had a plan to fuel the expansion: sovereign credit ratings. These metrics — essentially an informed guess of a nation’s ability to repay lenders — would for the first time allow a wide swath of the poorest region on Earth to tap yield-hungry investors in the global bond market. And the cash borrowed wouldn’t come with strict controls on how it would be spent, as is the case with financing from multilateral institutions like the International Monetary Fund. The U.N. heralded the initiative as “an assault on poverty in Sub-Saharan African countries.”

Banana Republics. The IMF and World Bank are often revered by ineffective leaders. I remember a Malawian minister of Finance celebrating a World Bank loan with a prayer ceremony, complete with medieval dances and drums, which vividly illustrates their ignorance .It just like a household taking loans for consumption. Raising bonds to pay salaries and build overpriced infrastructure executedby foreigners: The African economic dilemma. Cameroon, like many African nations, suffers from corruption and ineffective leadership. Despite continuous complaints, little is done to develop their financial market systems. Africa could potentially have a sovereign fund worth trillions, but progress remains stagnant .Africans lack a modernised capital market. First, let us acknowledge this issue. Sovereign credit ratings are often flaunted by many African leaders who want to set their sovereign rating in a disparate regulatory environment. How do you benchmark? Credit rating is not merely a mathematical economic formula.

"Debt service obligations in Africa shot up in the last decade. In Mozambique, debt service as a share of export revenues rose from 6.6% in 2012 to 64.2% in 2022 — the highest in Africa. Nine African countries are among the 25 developing countries worldwide with the highest proportion of export revenue spent on servicing debt, according to the UN Trade and Development (UNCTAD). Between 2017 and 2023, 81% of developing countries experienced “a median annual increase in debt service costs of 16.3%”, far outstripping growth in exports plus remittances": https://lnkd.in/eaDzqGSk

South Africa faces a tough fiscal path as debt rises despite efforts to cut spending. While the Treasury aims to stabilize debt through spending limits, political resistance to a strict debt cap has created uncertainty. A balanced approach could be to set a flexible expenditure ceiling linked to GDP, rather than a hard debt cap. This would allow responsible spending and crisis flexibility, while prioritizing growth through infrastructure investment. Transparent targets can also increase accountability and build market confidence, helping South Africa achieve sustainable debt management and economic stability. #SouthAfrica #FiscalPolicy #DebtManagement

The systemic bias of the international financial system against African nations on display again. In February of this year, Cameroon paid back the bond it had raised to deal with Covid-19 pandemic. This June, Cameroon is successfully raising 1/4 of US$1bn, a record amount for short term bonds. The bond sale was actually heavily oversubscribed because of the country's 13-year streak of regular debt repayment. In spite of this, Fitch is maintaining its outlook for Cameroon's debt as negative, which it issued in January. Fitch apparently knows something more than and contrary to the people and banks who actually lend money to governments and make money from it. #BetterGovernance #EmergingCameroon #AfricaRising