Next Africa: Bad Time for Bank Turmoil - BLOOMBERG

MAY 29, 2020

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Welcome to Next Africa, a weekly newsletter of where the continent stands now — and where it's going next.

Africa’s biggest multilateral lender is facing a major distraction just when the continent needs it most.

U.S. Treasury Secretary Steven Mnuchin is demanding that the board of the African Development Bank, which was established in 1963 in the Sudanese capital of Khartoum, organize an independent probe into allegations that President Akinwumi Adesina gave contracts and jobs to friends and relatives. Mnuchin has support from Nordic countries, which like the U.S. hold stakes in the lender.

The Treasury Secretary says he doubts the integrity of a committee that had previously cleared Adesina, Nigeria’s former minister of agriculture and rural development. The AfDB president is running unopposed for re-election at an annual meeting in August. He has repeatedly denied the claims and described them as an attempt to discredit his bid for a second five-year term. 

The dispute could not have come at a worse time. Africa may require at least $100 billion to stabilize countries reeling from the coronavirus outbreak and associated lockdowns, which are pushing economies into recession and heightening the risk of defaults.

The AfDB is expected to play a major role, and the spat could jeopardize a pledge by the lender's 80 shareholders to more than double its capital base to $208 billion. The Abidjan-based bank's debt is rated triple A, a status that may also be at stake.

While the International Monetary Fund and a group of the world’s largest economies have agreed to suspend debt-servicing payments for many African nations, the Abidjan-based AfDB has yet to say what it will do to help with debt relief.

The AfDB says there is no ongoing governance or constituional crisis. But with the fate of Africa’s most vulnerable economies in the balance, a swift resolution will need to be found.

News & Opinion

Infrastructure Fund | South Africa is seeking investments from multilateral lenders, commercial banks and pension funds for what a senior ruling party official said will be a $20.5 billion infrastructure program. The plan will focus on industries such as rail and ports, energy, broadband connectivity, water, sanitation and human settlements, Paul Mashatile, the treasurer-general of the country's ruling African National Congress, said in London.

Food Effort | The United Nations’ World Food Programme estimates that Africans will make up the majority of new people classed as acutely food insecure this year due to measures to control the coronavirus. Efforts are under way by state authorities, non-government organizations and international agencies to provide food across the continent, yet the enormous demand means the push is showing signs of strain.

Kenya Flowers | Kenya’s flower industry is recovering from a near-collapse as European lockdowns ease and Dutch auctions report a revival in operations. Europe’s biggest supplier of flowers was hit hard by the crash of the global $8.5 billion trade in March as countries closed their borders to curb the spread of the coronavirus. Exports have resumed to reach 60% of daily capacity but the industry is still facing high freight costs and limited space on airlines, according to Clement Tulezi, chief executive officer of the Kenya Flower Council. 

Nigeria Action | Nigeria’s central bank unexpectedly cut its interest rate to the lowest in four years to try to avert a recession in Africa’s most populous country. Only one of the four economists surveyed by Bloomberg expected a reduction in borrowing costs, and even then by less than the 100 basis points of easing. Nigeria also kicked off a new phase of a deal with Siemens to upgrade the nation’s dilapidated power infrastructure.

Job Filled | Africa's biggest fund manager, the Public Investment Corp.,  appointed Abel Sithole as CEO, filling a post vacated 18 months ago by his predecessor over accusations of questionable investment decisions. The PIC, which manages more than $114 billion of mainly South African state-worker pension funds, also said it is willing to convert debt owed by South African utility Eskom into equity to ease the power-provider's borrowings.

Past & Prologue

Data Watch

  • The rand strengthened to levels last seen in March as South Africa began to reopen the economy and the central bank indicated a willingness to make further rate cuts. A lack of obvious domestic risks could see the currency gain to $16.50 from about $17.50 in the short term, according to Credit Suisse.
  • African local-currency bonds have recouped all their Covid-19 losses as oil prices recovered. An AFMI Bloomberg index tracking the debt of seven African nations, excluding South Africa, climbed to 132 this week, the highest since March 6. The gauge plunged more than 9% in March as the spread of the pandemic sparked a selloff of riskier assets.

Coming Up

  • June 1 South Africa manufacturing PMI, vehicle sales
  • June 3 PMIs for Mozambique, South Africa, Zambia, Nigeria, Ghana
  • June 4 PMIs for Uganda and Kenya
  • June 5 South Africa gross and net reserves, data on central bank government bond purchases, Mauritius inflation

Last Word

The mysterious death of more than 500 horses in Thailand was found to have been caused by African horse sickness — a viral disease not known to harm humans but which is widespread among equines in Africa. Evidence points to the disease being carried by zebras imported to Thailand without needing blood samples or quarantine, triggering the first outbreak in Asia in more than 50 years. Researchers had originally feared the illness was caused by another deadly bat-borne virus hot on the heels of the coronavirus. Since 1980, four pandemics or international outbreaks —  SARS, Ebola, AIDS and Covid-19 — have been tied to the wildlife trade. 



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