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Africa Business in Brief

 

issue 349 | 26 Apr 2020

Coronavirus (COVID-19) updates

A non-exhaustive list of recent measures aimed at curbing the spread of coronavirus (COVID-19)

Africa: The African Development Bank Group (AfDB) is ready to provide fast, flexible and effective responses to lessen the severe economic and social impact of the COVID-19 on its regional member countries including the private sector. As the primary channel for its efforts to combat the crisis, the Bank is proposing a COVID-19 Rapid Response Facility that will provide a flexible range of support within the UA7.4-billion envelope.

Source: African Development Bank Group

Africa: The 26th Commonwealth Heads of Government Meeting (CHOGM) which was scheduled to take place in Kigali, Rwanda from 22-27 June 2020 has been indefinitely postponed due to the COVID-19 pandemic.

Source: Xinhua

Africa / Rwanda: Rwanda has donated USD1-million to continental efforts to combat the COVID-19 outbreak. President Paul Kagame made the pledge on Wednesday, 22 April 2020 during a Teleconference Meeting of the Extended African Union (AU) Bureau chaired by President Cyril Ramaphosa. During the meeting which, brought together Heads of State and Governments of Democratic Republic of Congo (DRC), Ethiopia, Kenya, Mali, Senegal, Zimbabwe, AU Commission Chair and members of the African Business Leaders Coalition, President Kagame said the pledge will boost joint continental efforts. The AU COVID-19 Fund and the African Centre for Disease Control (CDC) will receive USD500,000 each as the continent cases crossed the 25,000 mark and deaths exceeded 1,200 on Wednesday.

Source: KT Press

Angola: The Government simplified procurement procedures for public contracts for goods, services and works related to mitigating the COVID-19 pandemic.

Source: IHS Markit

Djibouti / Ethiopia: Ethiopian Prime Minister Abiy Ahmed announced on 14 April that the port of Djibouti had agreed to cut tariffs on Ethiopian exports by 82.5% to help limit the economic implications of the COVID-19 outbreak. The Djibouti Ports and Free Zones Authority subsequently confirmed that terminal handling charges would be lifted for two months.

Source: IHS Markit

Eswatini: The Central Bank of Eswatini, in consultation with the Monetary Policy Consultative Committee (MPCC), lowered the bank rate by a further 100 basis points to 4.5% effective from 16 April 2020. The decision was driven by volatile economic developments owing to the COVID-19 pandemic.

Source: IHS Markit

Ethiopia: Ethiopian has been deploying its massive cargo capacity to facilitate the flow of essential cargo such as medical supplies wherever they are needed. The deployment of the state-of-the-art Pharma Wing of Ethiopian Cargo & Logistics Services is in response to the growing demand for air cargo services following the spread of COVID-19.

Source: Fana Broadcasting Corporate

Ethiopia: The Ministry of Trade and Industry said it has taken measures against 25,068 entities that disrupted business operations following the outbreak of COVID-19. According to Melaku Alebel, Minister of Trade and Industry, the measures range from issuing warning letters to closure of the businesses. The Ministry sealed 13,350 businesses for unfairly taking advantage of the outbreak of the virus, while suspending licenses of 404 entities, Melaku said.

Source: Fana Broadcasting Corporate

Ghana: The Director of the Institute of Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, says President Akufo-Addo’s decision to lift the ban on partial lockdown will save the Ghanaian economy from potential recession. He noted that allowing businesses to re-open would eventually boost the economy, considering the fact that the informal sector made up 80% of the economy.

Source: Ghana Business News

Kenya: A second locally made medical ventilator has hit the market, boosting the capacity of public and private healthcare centres to handle Covid-19 cases. The ventilator, PUMUAISHI 2.0, was unveiled by Trade Secretary Betty Maina after the Kenya Bureau of Standards (KEBS) said it met globally set requirements for ventilators.

Source: Business Daily

Kenya: Employers will be barred from sacking their workers or forcing them to take pay cuts during the COVID-19 pandemic as Parliament moves to protect the livelihoods of millions of Kenyans. The National Assembly’s Finance and National Planning Committee has recommended that employers who are struggling to pay salaries due to drastic drops in revenue streams can only grant unpaid leave days to their staff during the period of the pandemic.

Source: Business Daily

Kenya: Insurance policy holders facing financial difficulties due to the COVID-19 pandemic will now get a relief after the industry regulator granted them a grace period for payment and renewal of premiums. “Insurers should avail policy holders a three-month grace period. The grace period may be over and above any contractual premium holidays already in place for existing policies,” Insurance Regulatory Authority chief executive Godfrey Kiptum said in a statement.

Source: Business Daily

Kenya: Interior Cabinet Secretary Fred Matiang’i on Wednesday, April 22, ordered for a partial lockdown of Mandera County following the rise in confirmed COVID-19 cases in the region. "There [is to] be cessation of movement by air and road into and out of Mandera County for an initial period of 21 days, commencing 7p.m. today, 22nd April 2020," Matiang’i stated in a statement.

Source: Kenyans.co.ke

Lesotho: The Central Bank of Lesotho lowered its key interest rate by a further 100 basis points to 4.25% during an extraordinary monetary policy committee meeting on 14 April. The decision was based on the latest international, regional, and domestic economic developments and financial markets’ conditions in the wake the COVID-19 outbreak.

Source: IHS Markit

Malawi: The Malawi Revenue Authority (MRA) will give tax defaulters an opportunity to pay their taxes under the Voluntary Compliance Window (VCW) for a period of six months targeting business operators and all members of the community. The VCW is meant to allow taxpayers with arrears and those who have not been tax compliant to settle their tax obligations without paying a penalty, interest or any charges. MRA's Corporate Affairs Manager, Steven Kapoloma said the VCW started from 8 April 2020 and will run up to 31 October 2020.

Source: Nyasa Times

Mauritius: Air Mauritius has become the latest victim of COVID-19, entering voluntary administration, or business rescue, after travel disruptions from the coronavirus pandemic made it impossible for the airline to meet its financial obligations. “Unfortunately, travel restrictions and the closure of borders in all our markets and cessation of international and domestic flights in this unprecedented crisis, has led to a complete erosion of the company’s revenue base,” the board of Air Mauritius said in a statement.

Source: BusinessDay

Mauritius: The monetary policy committee (MPC) of the Bank of Mauritius unanimously resolved to reduce its main policy rate, the key repo rate (KRR), by a further 100 basis points to 1.85% at a meeting held on 16 April. In making the rate-cut decision, the MPC “reviewed the disruptive effects of COVID-19 on the Mauritian economy and its ensuing implications”. In addition to factoring in its own economic growth forecast, the Bank of Mauritius also considered the International Monetary Fund’s (IMF) latest growth forecast for Mauritius in its April 2020 World Economic Outlook.

Source: IHS Markit

Mozambique: The Ministry of Labour and Social Security, employers and employees in Mozambique decided to suspend tripartite negotiations to adjust national minimum wages, due to the COVID-19 outbreak. The announcement was made in Maputo by the Minister of Labour and Social Security, Margarida Talapa. “The social partners meeting on 13 April 2020, assessed the situation and decided to suspend immediately the process of negotiations of the national minimum wages for this year,” said Talapa.

Source: Macauhub

Mozambique: The National Institute of Communications of Mozambique (INCM) – Communications Regulatory Authority [RECOM], has suspended the cancellation of any postal and telecommunications licenses which expire during the state of emergency. It also states that telecommunications operators in Mozambique must make Internet access available free of charge to health authorities, educational platforms and websites of national educational institutions.

Source: Club of Mozambique

Nigeria: In efforts to curtail food shortages and ensure 2020 crop production season is not hampered as a result of the lockdown, the Federal Government, unfolded new strategies to facilitate free movement of food and agricultural produce nationwide.

Source: The  Guardian

Nigeria: The members of Nigeria Governors’ Forum (NGF) at a meeting held on Wednesday, 22 April 2020 agreed to implement inter-state lockdown to stem the spread of COVID-19 in the country. The press statement released by the Forum which consists of the 36 states governors stated; “Governors unanimously agreed to the implementation of an inter-state lockdown in the country over the next two weeks to mitigate the spread of the virus from state to state. Only essential services will be permitted.”

Source: Vanguard

Rwanda: A cabinet meeting has resolved that the ongoing lockdown to contain COVID-19 in the country be extended for another 11 days, meaning it will now end on 30 April 2020.

Source: The New Times

Rwanda: RwandAir has resumed cargo flights to Guangzhou, China, as the airline embarks on a recovery path following suspension of passenger flights in March to stop the spread of COVID-19. The airline had suspended cargo flights to China in February.

Source: Rwanda Today

Rwanda: Rwanda Revenue Authority will by Friday, 24 April 2020, have disbursed RWF13-billion in value-added tax (VAT) refunds to businesses in response to capital challenges amidst the COVID-19 pandemic. This is one of the mitigation measures by the government to improve the local business ecosystem for local operators in an attempt to cushion them from the pandemic’s effects. A statement released by The Ministry of Trade and Industry noted that the government is mulling ways to enable the trade and manufacturing sectors ride out the crisis. The two sectors are among the most severely impacted. The measures include fast-tracking VAT refunds owed to businesses especially Small and Medium Enterprises.

Source: The New Times

Seychelles: The cabinet of ministers in Seychelles has endorsed a new regulation for the processing and trade of unprocessed coco de mer kernel. The endorsement comes after the cabinet approved the repeal of the Coco De Mer (Restriction on the Processing, Trade and Export of the unprocessed kernel of Mature Nut) Regulations of 2019.

Source: Seychelles News Agency

Uganda: The Bank of Uganda (BoU) decided to reduce the central bank rate (CBR) by 1 percentage point to 8%. The band on the CBR will remain at plus or minus 3 percentage points and the margin on the rediscount rate and bank rate will remain at 4 and 5 percentage points on the CBR, respectively. The rediscount rate and the bank rate are set at 12% and 13%, respectively. The BoU has also directed supervised financial institutions (SFIs) to defer the payments of all discretionary distributions such as dividends and bonus payments for at least 90 days, effective March 2020. In addition, the central bank aims to provide liquidity assistance to commercial banks that are in liquidity distress for a period of up to one year, through providing liquidity to commercial banks for a longer period through issuance of reverse repos of up to 60 days at the CBR, with the opportunity to roll over. The key credit relief measures introduced by the MPC include already existing debt restructuring, repayment holidays for a maximum of 12 months, and loan tenor extensions. Borrowers are encouraged to request and may be offered credit relief, for which the borrower must consent to any credit relief granted. Furthermore, the official document published by the BoU on these relief measures states that the prepayment of arrears as a condition for restructuring a credit facility is suspended for 12 months with effect from 1 April 2020.

Source: IHS Markit

Angola

Angolan GDP contracts by 0.9% in 2019

Output in Angola’s oil and natural gas industry contracted by 6.6% during 2019. Non-oil output was more resilient and increased by 2.0% during the year. Latest data released by the National Statistics Office (Instituto Nacional de Estatísticas: INE) show that Angolan GDP contracted by 0.9% during 2019. This rate of contraction is deeper than the 0.5% fall in GDP previously reported by the United Nations. Output in Angola’s oil and natural gas sector contracted by 6.6% during 2019, while non-oil-sector growth averaged 2.0% during the year. Sectors that recorded the strongest growth included diamonds and mineral extraction (12.3%), electricity and water (5.3%), construction (5.0%), and transport and warehousing (11.6%). The growth rate for output in the trade sector, which accounts for 12.8% of total real GDP, making it the second largest sector in the economy after oil and natural gas with 29.4%, remained lacklustre at 1.8% during 2019, up from 1.3% in the previous year. Angola’s fishing, postal services, and financial services sectors recorded contractions during 2019.

Source: IHS Markit

Angola

Bank of Angola restates that banks should cover the value of import operations

Commercial banks must undertake to sell currency at the exchange rate established on the day of the settlement of foreign transactions, as well as to grant credit in kwanzas without indexation, in the settlement of letters of credit, as importers do not have enough funds in their account to cover the settlement, said the National Bank of Angola (BNA). These procedures were restated to banks in a circular from the BNA, issued recently to strengthen mechanisms for the settlement of letters of credit established in Notices No. 11/2014 and No. 5/2018, as well as by Instruction No. 4/2019. The document urges banks to sell foreign currency to importers on the settlement date of the foreign liability, regardless of whether they have used their currency position for the settlement of this liability or have purchased currency specifically for this purpose. If the importer does not have sufficient funds in their account to cover the settlement, the financial institution must grant a loan in national currency, in the amount of the shortfall recorded in the client’s account in national currency, and this amount may not be indexed to any foreign currency.
 
Source: Macauhub

Angola

Angola suspends all contracts without guaranteed funding

The implementation of contracts signed under the Public Investment Programme whose source of funding has not been secured has been suspended in Angola, the country’s minister of finance, Vera Daves de Sousa ruled. The minister also suspended the execution of contracts of a non-priority or structural nature as part of Expenditure to Support Development without guaranteed funding. In the document, Daves directs the budget units to set aside available funding in the “Goods and Services” category for the payment of current priority and essential contracts and the suspension of “all others”. As part of these measures, the budget units should communicate to their suppliers and competitors the decision to suspend contracts and ongoing procedures, based on the low price of oil and the impact of the COVID-19 pandemic on public finances. This circular does not apply to contracts and procedures in the health, education and social action sectors, or to those related to logistical supply, sanitation and others whose source of funding has been previously secured. The transitional measures in response to the fall in the price of oil and the impact of the COVID-19 pandemic, are legally based on Presidential Decree No. 96/20 of 9 April 2020, and, in the framework of public procurement, the declaration of a state of emergency, as a result of COVID-19, is considered a case of force majeure, thus allowing a temporary cessation of obligations in the execution of contracts.

Source: Macauhub

Angola

Government of Angola submits draft bill on the tax system to parliament

The Parliament of Angola was due to start discussing proposals for a review of three diplomas to structure the tax system, with a view of simplifying procedures, facilitating the business climate and improving the collection of revenue, said the Ministry of Finance. The statement also said the government had submitted a change to the Industrial Tax Code to parliament, which essentially reduces the tax burden by reducing the industrial tax rate to 25%, adapting it to the level practiced in the Southern African region, where the average corporate taxation rate is 27%. The Ministry of Finance recognises that this measure will entail a loss of tax revenue for the state, but will allow companies to improve their finances in order to reinvest their capital. The statement also noted the reduction of the rate of the agricultural and related sectors, and this proposal will reduce the current 15% rate to 10%, as a way of promoting this sector, thus aligning taxation policy with the Angolan Government’s strategy to promote and increase domestic production. The National Assembly will also analyse the draft bill to amend the Income Tax Code (IRT), seeking to respond to the fiscal policy objectives set out in the National Development Plan (NDP) for 2018-2022, the government’s measures for fiscal consolidation and the general government lines for tax reform. This package also includes discussion of a proposal to revise the General Tax Code.

Source: Macauhub

Angola

Angolan National Bank sets deadlines for credit applications

Banking institutions operating in Angola have a maximum period of 40 working days from when a loan application is made to communicate their final decision to customers, regardless of whether the outcome is positive or negative, the National Bank of Angola has said. The maximum period of 40 days applies to clients who apply for loans for agricultural and industrial and other investment projects exceeding AOA600-million (USD1-million), with banking institutions in these cases having a period of 15 working days to request additional information from the client. In the case of housing loans, the deadlines set by the Angolan central bank are five working days and 30 working days, for requesting additional information and for communicating the decision, and the deadlines for non-mortgage loans to individuals are of five and 15 days, respectively. Instruction No. 07/2020 of 20 April, arose from the need to establish minimum levels of services provided to consumers by setting a maximum period for response, formalisation and provision of credit to these customers. The Instruction also includes the deadlines for the signing of documentation and providing the credit, once approved, which varies between five working days for signing contracts that do not require a public deed and 20 days for those that do require it, as well as a period of 40 days for registration of mortgages with the land registry.

Source: Macauhub

Angola

Angolan Minister of State calls for the need to increase national production

The Angolan Ministry of Industry and Trade and Ministry of Agriculture and Fisheries will have a great responsibility in the process of revitalising the country’s production base, with a view of reviving Angola’s economic growth, the Minister of State for Economic Coordination said on Monday in Luanda. Manuel Nunes Júnior, speaking at the ceremony to pass on the portfolios of the outgoing Ministers of Industry and Trade, said that an increase in national production would also provide an increase in jobs in the country, and was, therefore, a national imperative. The Minister of State stressed that after the most recent change in the government’s organic structure, Angola’s productive activity was practically concentrated in two ministries: industry and trade and agriculture and fisheries. The Minister of State called for the need to work with entrepreneurs to achieve domestic self-sufficiency in the 54 products selected by the Programme to Support Production, Diversification of Exports and Import Substitution (Prodesi), particularly those included in the basic basket.

Source: Macauhub

Benin

Fitch revises Benin’s outlook to Stable, confirms long-term rating at B

Credit ratings agency Fitch Ratings has affirmed Benin’s sovereign rating at B for its long-term debt, but has revised the rating outlook to Stable from Positive. The ratings agency sees its assessment as valid amid the anticipated significant economic and fiscal impact of the global COVID-19 pandemic, in addition to border closure issues with Nigeria. The outlook on Fitch's rating is Stable, indicating that the agency anticipates no rating upgrade within the coming 12-18 months. However, weaker medium-term economic growth and a rise in liquidity pressure could imply a further rating outlook change in the 12-month outlook. Conversely, the rating would be supported by evidence of sustained fiscal consolidation putting the debt-to-GDP ratio on a declining trajectory in the medium term, such as through a structural improvement of public finances. Fitch’s B rating and Stable outlook are based on an assessment that Benin’s heightened macroeconomic and fiscal risks associated with economic shocks imposed by the COVID-19 pandemic offset improvements in public and external finance metrics. The ratings agency expects Benin’s fiscal deficit to widen to 4.4% of GDP in 2020, from 2.3% in 2019. Furthermore, Fitch expects government trade revenues, which accounted for around 33% of total revenues in 2019, and tax receipts to fall significantly. Fitch expects that a recession in Nigeria in 2020 will also have adverse effects on Benin’s growth beyond the closure of the border, given the Beninese economy’s high reliance on Nigerian demand, which will increase indirectly Benin’s general government debt to 44.3% of GDP in 2020, from 41% in 2019, due to higher deficits and a contraction in nominal GDP.

Source: IHS Markit

Ethiopia

S&P revises Ethiopia’s outlook to Negative, confirms B ratings

Credit ratings agency S&P Global Ratings has changed its rating outlook to Negative for Ethiopia amid rising pressure on debt and external positions, while reaffirming its ratings at B/B. The ratings agency stated that high public-sector external debt and limited fiscal and monetary reserves leave Ethiopia's economy vulnerable to a newly volatile global backdrop amid the COVID-19 pandemic. S&P's outlook revision suggests an upgrade is less likely to Ethiopia's investment grade rating, as economic growth prospects are downbeat in 2020 and could potentially moderate in 2021 due to the dampening effect of the COVID-19 pandemic. The effects of foreign-exchange (forex) shortages on domestic consumption and private investment are expected to hinder growth further. Furthermore, low forex reserves in tandem with increasing external financing needs will keep public-debt service costs elevated. The ratings agency states that the Ethiopian authorities have restructured some public-sector external loan facilities and are seeking additional relief from bilateral creditors. However, high debt at public-sector entities could expose the government to more sizeable fiscal and external risks.

Source: IHS Markit

Guinea

33MW power plant to be constructed in Guinea to power Lefa mine

A new 33 MW power plant is set to be constructed in Guinea to power Lefa mine, one of the world’s largest gold mines owned by Nordgold Group, in a bid to reduce greenhouse gas emissions and provide sustainable power generation for the mine. The plant will be designed and constructed by China manufacturing service group SUMEC, a member of China National Machinery Industry Corporation (SINOMACH), following an engineering, procurement and construction agreement signed with the gold producer. The new heavy fuel oil facility is expected to be delivered by the end of 2021 at a cost of around USD23-million. Hyundai Heavy Industries Co., Ltd, one of the world’s leading manufacturers of heavy industry machinery and the largest shipbuilding company based in Ulsan, South Korea, will supply the power plant’s main generating equipment. Other essential construction materials such as sand, cement, and gravel amongst others will be sourced locally from Guinean suppliers. Upon completion, the new power plant will replace the existing power plant, consequently reducing both fuel consumption for electricity production by 15% and engine oil by 30%. “The power plant will enable a significant reduction in operating costs, enhance the stability of the electricity supply for over 15 years of Lefa’s life of mine and furthermore, increase employee safety with the installation of the latest fire detection systems,” stated the Nordgold Group.

Source: Construction Review Online

Kenya

Transmara Sugar plans KES4.7-billion electricity plant

Transmara Sugar Company plans to produce 25 MW of electricity at its Kilgoris factory for which it is negotiating approval to generate and supply with regulators. The miller, a subsidiary of Mauritian sugar producer Alteo, plans to invest KES4.7-billion (USD45-million) in the bagasse – the crushed cane stalks left after the sugar is extracted – plant. The plant is scheduled for completion in two years, Transmara Sugar chief executive said in interview. Mr Bhargava said the company plans to consume about 8MW of the electricity and sell the rest, about 17MW, to power distributor Kenya Power. "Our expression of interest for development of the biomass power plant has been approved by Ministry of Energy," Mr Bhargava said. Transmara will join troubled Mumias Sugar Company among other millers that use sugar cane waste to produce own electricity.

Source: Business Daily

Kenya

Transport agency seeks bidders for its e-stickers

Kenya has stepped up the bid to introduce digital motor-vehicle stickers after several false starts in the past five years. In an international tender that was posted, the National Transport and Safety Authority (NTSA) said it requires four million self-adhesive labels containing vehicle data “as part of modernisation and reforms.” “The computerised windshield e-sticker with anti-counterfeit features will enable enforcement officers to identify vehicles involved in illegal actions and traffic violations,” said NTSA director-general George Njao. “Authorities, police and other agencies require quick and reliable information on vehicles and their corresponding owner.” To make it cost-effective, he said the e-sticker would combine radio frequency identification (RFID) and near field communication, enabling automatic mass data acquisition. The contractor will formulate the software and train 50 core NTSA staff managing the platform.

Source: Business Daily

Namibia

Monthly Trade Statistics Bulletin: February 2020

In February 2020, Namibia’s total merchandise trade amounted to NAD13,084-million which is 9.8% lower than NAD14,503-million recorded during the same month of 2019. This decline is mainly attributed to value of exports which fell by 29.8% as opposed to an increase of 8.7% in imports. This resulted in Namibia to record a trade deficit of NAD3,317-million compared to NAD588-million recorded during February 2019. Namibia trade continues to be concentrated to a few trading partners and key commodities. In February 2020, South Africa emerged as both Namibia’s top export destination and the main source of imports. The country exports basket remains to be dominated by minerals such as diamonds, gold, copper cathodes, ores (mainly uranium) with the exception of fish which is the only non-mineral product in the top five list of products exported. Similarly, copper cathodes and ores have been recurring on the top five list of import products into the country. This is followed by mineral fuels and oils, industrial machinery along with motor vehicles and parts. In terms of trade with economic region, SACU remains the overall major economic region for the country exports as well as imports.

Source: Namibia Statistics Agency

Tanzania

State contract renegotiations and tax penalties likely in Tanzania despite global economic slowdown caused by COVID-19

Tanzanian Controller and Auditor General (CAG) Adelardus Kilangi says that the contract review process for mineral development agreements (MDAs) with mining companies and production sharing agreements (PSAs) in the oil and gas sector was completed in January, and associated contract renegotiations are likely before the end of 2020, according to statements to the local press during the week beginning 13 April. The MDA and PSA contract review process began in 2018. Now complete, PSA and MDA reviews come under the prime minister’s office and contract renegotiations are likely to happen in 2020. PSA reviews of Blocks 1, 2 and 4 will likely not negatively affect investors, but deep-sea contracts where the state-owned Tanzania Petroleum Development Corporation (TPDC) stake falls below the mandated 25% will probably be renegotiated to meet that threshold. PSAs at the Songo gas field will likely be renegotiated in favour of the government to include a TPDC stake and reduce state power company Tanzania Electric Supply Company Limited’s (TANESCO) offtake charges. MDAs in the gold, tanzanite, and diamond sectors are also likely to be renegotiated to increase the government’s stake and encourage domestic mineral processing. During 2020, private companies face a high likelihood of fines, delayed value-added tax refunds and back-tax claims from revenue authorities, as they aim to reach collection targets ahead of the October 2020 general election.

Source: IHS Markit

Zambia

Fitch downgrades Zambia’s credit risk rating to CC

International ratings agency Fitch has downgraded Zambia’s long-term foreign-currency issuer default rating to CC. The recent shock from the COVID-19 pandemic on Zambia’s external liquidity position, combined with the authorities’ request for tenders outlining a proposal for a potential liability management exercise, increases the risk of an external default event, Fitch warns. Furthermore, Fitch sees “the liability management exercise as a probable precursor to a support programme from the IMF [International Monetary Fund] or other international financial institutions”. Fitch’s estimates place the government’s 2020 external-debt-servicing obligation (principal plus interest) at USD1.5-billion, approximately 115% of GDP of foreign reserves at the end of January. Access to new financing sources remain limited, with current external borrowing tied to pre-approved project financing and, therefore, not readily available for debt servicing. Zambia’s current account is expected to swing back to a deficit of 2% of GDP in 2020, adding to the country’s external liquidity needs. Zambia’s medium-term solvency ratio has also deteriorated. The government deficit is expected to expand to 10% of GDP in 2020, while government debt could reach 113% of GDP over the period. The sharp depreciation of the Zambian kwacha’s exchange rate increases debt servicing costs in local currency terms, while the government’s domestic debt issuance is already routinely undersubscribed. Zambia’s yield curve has moved up consequently. Fitch expects Zambia’s GDP to contract by 0.7% in 2020 and GDP to grow by 1.0% in 2021. The combination of lower copper production, power outages, and variable agricultural production due to poor rain add to the weak growth prospects.

Source: IHS Markit