Corporate bonds more and more popular in Africa

Aug 08, 2014

Companies in Africa are increasingly using corporate bonds to raise their own debt.

Companies in Africa are increasingly using corporate bonds to raise their own debt.

Helios Towers Nigeria has recently issued a $250 million (€187.2 million) bond to finance the purchase of telecom tower masts, which was Nigeria’s first-ever corporate issuance outside the banking and oil sectors.

Earlier this year, Moroccan company OCP Group issued a debut $1.55 billion corporate bond.

“We are seeing more non-sovereigns across Africa doing deals,” says Nicholas Samara, a debt banker at Citigroup, quoted by the Financial Times.

Corporate bonds are a riskier bet for investors than sovereign bonds, but offer higher yields.

“Africa has gone from a niche to being mainstream in the dollar space,” Antoon de Klerk, a portfolio manager at Investec Asset Management, told the Financial Times. "I like to think the African niche is now local debt, and maybe dollar corporate debt."

South Africa has traditionally dominated international bond issuance in Africa but now accounts for a smaller proportion of deals, with companies in Kenya, Nigeria, Ethiopia, Morocco and Mozambique issuing more and more corporate bonds.

African and international financial experts met at the London Stock Exchange on Monday (4 August) to discuss the current state of the continent’s debt capital markets and how to strengthen them, African Business reports.

Sunil Benimadhu, the chief executive of the Stock Exchange of Mauritius, referred to Africa’s growth story, with market capitalisation on the continent amounting to $1 trillion, and how economic growth and market capitalisation can be expected to continue to prosper and increase.

He noted that the focus on equity markets is now being complemented by sovereign and corporate debt.

However, Francis Nwokedi, a partner at the international law firm Fasken Martineau, argued that it was "unacceptable" that the equity market was double the size of the debt market in Africa. "Just look at the US markets, where the reverse is the case," he said.ADNFCR-2976-ID-801740756-ADNFCR