African debt remains attractive, even though many investors are sitting on the sidelines and waiting for clarity in light of the current global uncertainty, according to Standard Bank.

Zoya Sisulu, Standard Bank’s Head of debt primary markets South Africa, said that spreads paid by Africa to access the international market were historically 50-70 basis points above their emerging market peers, but that has since dropped to around 20 basis points as the region is placed on a more even footing with other emerging markets.

“Africa only accounts for around 4% of overall emerging market volumes, this number is expected to grow in the future. The collapse of that high premium bodes very well for African debt issuance going forward,” she said.

Sisulu added that the maturity of debt capital markets in some African countries remains impressive.

“In West Africa, Nigeria is seeing increasing issuance and Ghana has a number of issues in the pipeline. Kenya is fairly well developed and activity in Tanzania and Uganda is growing,” she said.

“Initially issuance was focused on state companies and utilities, we are starting see corporates and financial institutions looking to raise funding in the local capital markets. This is a very positive development,” she added.

When commenting on South Africa, Sisulu said that the country’s debt primary market has remained resilient in light of the negative sentiment impacting both local and global markets.

“Issuance volumes have remained strong with R67.5bn issued for H1:15, marginally lower than the R68.8bn issued in H1:14. This is against the backdrop of increased risk sentiment in the local market following the ABIL curatorship, on-going volatility around the Grexit discussions and decreasing EM appetite with expectation of the Fed hiking cycle,” she said.

Issuance volumes in South Africa have remained steady due to robust issuance from the big banks, even as market prices deter corporate issuance.

“Corporate issuance stands at R8bn for the half year mark, significantly lower than expectation and 2014 issuance which was R15bn for the comparable period. While corporates are seeking more cost efficient sources of capital for projects that will run for five years or more, there is a lack of desire to pay the prices currently on offer in the 5-10 year area of the market,” said Sisulu.

“State-owned companies continue to roll out their extensive build programmes, with the local capital market remaining a critical source of funding. Eskom and Transnet, who have the largest capex programmes, have accessed the market and raised R6.5bn and R2.9bn respectively. Total volume of issuance for the sector stands at over R15bn and includes the likes of Rand Water, Sanral and IDC,” she added.