Eurobond issuance in Sub-Saharan Africa was relatively quiet in the second half of 2016, owing partially to the demand by the market for higher yields, according to S&P Global Ratings.

Ravi Bhatia, Primary Credit Analyst at S&P Global Ratings, said: “Bond issuances remained tilted toward domestic markets in 2016. Of the countries we rate, only South Africa, Mozambique, and Ghana tapped the international bond market, and only South Africa and Ghana did so in the second half of the year.” 

South Africa issued two Eurobonds for a total $3bn in October - a 4.3% $2bn issue maturing in 2028 and a 5% $1bn issue maturing in 2046 - after an issue of $1.25bn earlier in April. 

Meanwhile, Ghana has been issuing Eurobonds on an annual basis and has issued $3.75bn over the last four years, including that in September 2016 of a 9.25% $750m bond maturing in September 2022.

According to S&P Global Ratings, Mozambique’s external financing (a 10.5% $727m issue in April, maturing in January 2023), was related specifically to restructuring efforts on the state-guaranteed debt sold by Ematum, a state-owned tuna-fishing company.

“However, the government revealed the existence of two other guarantees provided on the external debt of several enterprises in May, which led us to lower the ratings to 'CCC' and place all ratings on CreditWatch negative,” said Bhatia.

“In November, the government announced its intention to undertake further debt restructuring and is currently in talks with creditors, which led us to lower the rating to 'CC'. We think that slow growth, combined with low foreign exchange reserves, will likely hamper Mozambique's ability to service debt obligations on time and in full. The first debt service payment is due on January 18, 2017, and amounts to nearly $60m,” he added.

S&P Global Ratings expects that the uncertainty surrounding Brexit, politics in Europe, and the tightening of monetary policy in the US will contribute to heightened international market volatility and, as a consequence, may lead investors to move into safer assets and demand a higher return from frontier markets like SSA. 

Bhatia stressed that these elements may reduce borrowing opportunities in international capital markets for the region in the near term.

“Nevertheless, we do not exclude Sub-Saharan Africa Eurobonds issuances over the next year, considering the pressures asserted by weak economic growth and refinancing needs in region,” he said. 

“Nigeria, for instance, already announced its intention to fund its fiscal deficit by tapping both the international and domestic market in 2017,  and we may see Eurobond issuances from some others, including Ghana,” he added.