Sub-Saharan Africa is particularly sensitive to the combination of weak commodity prices and rising US interest rates, Tom Elliott, deVere Group’s International Investment Strategist, has warned.

“The region is a huge exporter of commodities, and is dependent on overseas capital to fund investment,” he told Africa Global Funds.

Elliott said that investors in emerging stock markets have underperformed developed markets in recent years and this is likely to persist as the US looks to raise interest rates in December, for the first time since 2006.

“The principal reason is the weight of dollar-denominated debt, too much of which was acquired by governments and companies from global investors as a consequence of the Fed’s quantitative easing (QE) policies. This is estimated to be just shy of 200% of GDP, up from 150% of GDP in 2009 when emerging economies were growing much faster than the developed world,” he explained.

Elliott added that repayment of capital and interest has become harder with weaker commodity prices since 2011, slower domestic economic growth and –in many large emerging markets- political crisis or the emergence of authoritarian governments.

“Furthermore, the strong dollar has made repayment of the debt more expensive in local currency terms, leading to reduced corporate profits and to higher tax/lower public spending by governments,” he said.

The Federal Reserve will most likely hike interest rates for the first time in nine years in December.

Nigel Green, deVere CEO and founder, added that the probability of a 2015 rate hike has been the source of much rumor and speculation for more than a year.

“But most of that is now over, thanks to the recent robust job numbers and a reported 2.5% increase in wage growth in the previous 12 months. We’re as confident as we can be that the Fed will tighten policy on December 17,” said the boss of one of the world’s largest independent financial advisory organizations.

A rise in US interest rates would not only feed through into higher borrowing rates for new loans, it would also put further downward pressure on local currencies in emerging markets, according to Elliott.

“From a global investor’s standpoint, South Africa is the country that matters. Its large current account deficit, equivalent to 4.3% of GDP, makes it a hostage to the ongoing willingness of foreign investors to supply capital should US rates rise,” he said.

“Higher interest rates from the Reserve Bank and /or a currency devaluation must follow if foreign capital inflows halter, contributing to weaker domestic growth,” he added.