Africa News blog
African business, politics and lifestyle
Confusion over the names of two similar-sounding African countries may have helped boosted oil prices to near $80 a barrel this week as traders rushed to buy oil after reports of a military coup.
A Reuters reporter received a flustered phone call from a hedge fund partner who had heard animated discussion in the market about an incident in Nigeria, only to realise that traders had muddled up Africa’s biggest oil producer with its neighbour Niger.
“Markets took off at around the same time a Reuters story came out about gunfire erupting in the Niger capital in an apparent coup bid, mistaken by many as being Nigeria,” said Tom Bentz, analyst at BNP Paribas Commodities.
Reuters first broke news of heavy gunfire and a coup in Niger’s capital, Niamey, on Thursday. Prices jumped to a one-month high of $79.29 a barrel during the day.
A few days back, I had the pleasure to moderate a lively debate on investment prospects in Africa involving private sector panellists and representatives of the World Bank and International Monetary Fund.
The tone was upbeat, but discussion turned heated when it came to debt restructuring in Ivory Coast.
While it might sound obscure (and I won’t go into all the details) it raised broader questions about the role of the international financial institutions in Africa and how that may be reinforced by the global financial crisis.
The concern of some in the private sector was that foreign investors with exposure to local debt in Ivory Coast looked set to suffer the same restructuring terms that holders of foreign debt would have to bear – with the approval of the IMF. Their argument was that this would discourage foreign investors from buying local bonds in Africa.
The IMF came back robustly, saying it was only playing by the rules in Ivory Coast and suggesting that investors make closer checks before putting in their money.
But private sector participants were unclear where this might leave them in future, particularly at a time many African states are eyeing bond markets again.
Some voiced broader concern over how the international financial institutions see the private sector’s role.
Before the credit crisis, a number of African countries had begun turning to international capital markets. But Eurobond plans were put on hold when global markets seized up and the institutions stepped back in to provide emergency help to hard-hit countries. Amounts have been substantial even compared to the $10 billion in concessional financing promised by China over three years. The IMF board approved a $1.4 billion standby loan arrangement for Angola this week.
The question now is how this may change the longer term balance in sources of finance for African states.
Is the private sector overly wary of institutions that are simply doing their best to give emergency help now and fend off future debt crises? Or are those institutions muscling back in to impose their dominance in telling African states how they should go about managing their debts and getting the finance they need? How will Chinese money affect the balance?
Pictures: A money dealer counts the Nigerian naira on a machine in his office in the commercial capital of Lagos, January 13, 2009. REUTERS/Akintunde Akinleye; Dominique Strauss-Kahn, managing director, International Monetary Fund (IMF), is introduced at the International Economic Forum of the Americas conference in Montreal, June 8, 2009. REUTERS/Christinne Muschi
Earlier this month, Zambian economist Dambisa Moyo argued that Africa needs Western countries to cut long term aid that has brought dependency, distorted economies and fuelled bureaucracy and corruption. The comments on the blog posting suggested that many readers agreed. In a response, Savio Carvalho, Uganda country director for aid agency Oxfam GB, says that aid can help the continent escape poverty – if done in the right way:
In early January, I travelled to war-ravaged northern Uganda to a dusty village in Pobura and Kal parish in Kitgum District. We were there to see the completion of a 16km dirt road constructed by the community with support from Oxfam under an EU-funded programme.
For those looking to invest in Africa, the best prospects are in Nigeria and Ethiopia according to a new index of potential investment destinations published this week.
But should anybody want to put money into Africa at a time the global financial crisis and falling prices for export commodities, on which the continent is so reliant, have discouraged investors who had begun to see some African countries as promising frontier markets?
Isolation might seem like a good idea when it comes to the storm sweeping global finance and there is no doubt that African countries are among the most isolated in the world economy.
Avoiding the impact seems unlikely, though, particularly at a time when Africa as a whole has been enjoying its fastest growth for decades and the continent has become an increasingly popular investment destination – not only for Asian countries in search of resources but for frontier investors willing to take higher risks for higher returns.
Jacob Zuma, the embattled leader of South Africa’s ruling African National Congress (ANC) launched a big fight for his political life on Aug. 4, asking the Pietermaritzburg High Court to dismiss a graft case against him that could stop him becoming president next year. If his application is rejected, a full corruption trial could follow later this year and South Africa could head into a protracted period of tension and uncertainty. Read the following insights from leading analysts and have your say on how the legal process could affect South Africa:
Keith Gottschalk, the University of the Western Cape (see full analysis)
“Jacob Zuma’s Zuma’s legal team has already proved, year after year that, if you have a bottomless pocket such as taxpayers, you can protract litigation, U.S.-style for the better part of a decade.”
Adenaan Hadien, Cadiz Holdings
Pietermaritzburg may well have been brought to a standstill with the resumed corruption case of Jacob Zuma in the High Court, but I suspect the same would not be true for local markets. Certainly, if last week’s market performances are anything to go by, then reactions are likely to be muted. Last Thursday, the Constitutional Court dismissed all four of Zuma’s appeals to prevent the state from using potentially damaging evidence against him in his corruption trial. On Monday, Zuma’s legal team submitted an application for a permanent stay of prosecution, arguing that his constitutional rights have been violated. This application and the round of appeals which may follow if, as is expected, it was rejected, would again delay things.
On the week, the local currency gained over 4% against South Africa’s trading partners’ currencies and bonds enjoyed gains last seen in the late-1990s. Equities put in a more mixed performance on the week, due to the oscillating woes of resources against financials and industrials. The performances of bonds were even more impressive, given the higher-than-expected consumer inflation figures released on Wednesday. Granted, Thursday’s producer inflation numbers were more encouraging.