Sales of African corporate and sovereign bonds in 2014 are set to beat last year’s record amount of $16.6 billion, according to Standard Bank Group Ltd., the continent’s biggest lender.
“There’s still a huge amount of interest and appetite,” Megan McDonald, the lender’s head of debt primary markets, told reporters in Johannesburg today. “Issuance will no longer be dominated by sovereigns” as increased debt sales are expected from companies and state-owned corporations, she said.
African issuers are tapping debt markets as borrowing costs from Nigeria to Rwanda drop to record lows. This year, yields on the continent’s debt retreated 89 basis points, or 0.89 percentage point, according to a JPMorgan Chase & Co. index.
“We see continued growth in issuance of Eurobonds from sub-Saharan Africa and continued appetite from international investors for African risk,” McDonald said. While most of the continent’s sales this year have been government dollar bonds, that may be changing, she said.
“We also see a diversification in terms of the dominance of the sovereign sector,” she said. There may be more sales from companies, financial institutions and state-owned entities across Africa, particularly from West and East Africa, according to McDonald.
Sub-Saharan corporates have issued $4.13 billion of debt this year, compared with $6.95 billion for all of 2013, while sovereigns have sold $6.39 billion in 2014 from $9.7 billion last year, according to Standard Bank. Nigerian lenders including Access Bank Plc and FCMB Group Plc have discussed Eurobond plans.
Sales from Africa account for currently only 4 percent of the volume of emerging-market Eurobond issues, according to the bank.