The European Business Council for Africa

Welcome to Next Africa, a weekly newsletter of where the continent stands now — and where it's going next.

Zambia is in the global spotlight for all the wrong reasons.

The southern African nation skipped a coupon instalment on its Eurobonds this week, increasing the likelihood of a debt default. The government has called on private creditors to agree to a deferral of payments at an Oct. 20 meeting, but many are reluctant to comply. 

The country is now a test case for how the international community will treat nations that can’t meet their commercial debt obligations, even if it's a result of the Covid-19 pandemic. Countries from Africa to Latin America and beyond are facing similar struggles, leaving them at the mercy of lenders trying to get their money back. […]

Bien que le continent ait été moins touché que d’autres par la pandémie de Covid-19, les cas et les décès sont de nouveau en hausse après l’allègement des restrictions.

L’Afrique est à un « moment charnière » dans son combat contre le Covid-19, au moment où les cas et les décès sont en hausse après l’allégement des restrictions, a averti, jeudi 15 octobre, la directrice de l’Organisation mondiale de la santé (OMS) pour le continent. Au cours des 30 derniers jours, les contaminations hebdomadaires y ont augmenté en moyenne de 7 % et les décès de 8 %, selon le Centre africain de prévention et de lutte contre les maladies (Africa CDC), agence spécialisée de l’Union africaine (UA).

« Nous sommes réellement à un moment charnière de la pandémie en Afrique. Alors que les courbes de l’épidémie sur le continent avaient connu une tendance à la baisse au cours des trois derniers mois, ce déclin s’est stabilisé », a expliqué Matshidiso Moeti, directrice de l’OMS pour l’Afrique, lors d’une conférence de presse. En dépit d’inquiétudes initiales sur les conséquences potentiellement dévastatrices de l’épidémie sur un continent pauvre et largement dépourvu de structures sanitaires, les 55 Etats de l’UA ont enregistré jusqu’ici environ 1,6 million de cas, soit 4,2 % du total mondial, selon le CDC Africa. Les 39 000 décès recensés en Afrique représentent 3,6 % du total mondial, alors que le continent compte 17 % de la population de la planète. […] 

Kenya’s economy contracted for the first time in almost 12 years in the second quarter as the impact of the coronavirus pandemic battered key sectors.

Gross domestic product fell 5.7%, compared with growth of 4.9% in the three months through March and expansion of 5.3% in the same period a year earlier, the Kenya National Bureau of Statistics said Thursday on its website. The median of six economists’ estimates in a Bloomberg survey was for a contraction of 2.3%.

Kenya confirmed its first COVID-19 inflection in mid-March and later imposed a partial shutdown. Key foreign-income earners including tourism and exports, such as tea, flowers, fruits and vegetables bore the brunt of these measures due to lockdowns in key markets and global travel restrictions.

“The poor performance in the quarter was characterized by substantial contractions in accommodation and food services, education, taxes on products, and transportation and storage, which consequently occasioned the significant downturn,” the KNBS said. […] 

Covid-19 has proved to be a game-changer for East African businesses. Among the hardest hit is the region’s alternative energy sector. The sector, responsible for providing many remote communities with off-grid energy services, started the year on a high. However, the pandemic, and the recession it motivated, quickly reversed fortunes. FORBES AFRICA examines how the sector is responding, and coping, to some of these shocks. 

Over the last decade, East Africa’s off-grid energy companies have been the unsung heroes of the region’s wider energy industry. According to GOGLA, the global association for the off-grid solar energy sector, these businesses have collectively provided at least 470 million people, many of them in remote communities, and cut off from the national grid, with alternative energy access.

The industry, working to reduce energy poverty across East Africa, was arguably on a high at the start of 2020 but the onset of Covid-19, and the reactionary public policies that followed, have worked to reverse a lot of growth that the sector was previously experiencing. […] 

After seven months of lockdown, South African President Cyril Ramaphosa tabled an “economic reconstruction and recovery plan” on Thursday in response to the staggering effects of Covid-19 on the country’s economy.

The president’s plans respond to the immediate economic impact of the pandemic by driving job creation and expanding support for vulnerable households.

“We aim to do this primarily through a major infrastructure program and a large-scale employment stimulus, coupled with an intensive localization drive and industrial expansion,” Ramaphosa said in his address.

Some of Ramaphosa’s economic reconstruction and recovery plan highlighted in Parliament: […] 

South Sudan said it has reversed its plans to introduce a new currency as the pound continues to depreciate against the U. S. dollar and other major currencies due to the economic crisis.

Michael Makuei Lueth, minister of Information and Broadcasting, said the move to change the local currency was only a mere proposal by the economic crisis management committee as a means to salvage the economy from further collapse but was not agreed and passed by the cabinet.

“The change of national currency (South Sudanese Pounds) was brought in the discussion of previous cabinet meeting as one of the long-term economic measures, but it was not agreed and passed by the council that time,” Makuei told the reporters in Juba on Wednesday evening.

In September, President Salva Kiir established an economic cluster committee to investigate mismanagement of non-oil revenue and also to come up with recommendations to revive the falling economy. […] 

Sales of off-grid solar products in developing economies have fallen by 26% in 2020 due to the impact of the coronavirus pandemic, according to new data from the global association for the off-grid solar energy (GOGLA).

The organization warns that the drop threatens the sector’s progress in recent years, averaging about 10% growth  annually,  and seeing investment rise sixteen-fold from $21m in 2012 to $352m in 2018.

It’s been a particular hit in Africa, home to 600m people without reliable power access. More than $1.1bn was invested in off-grid solar projects in sub-Saharan Africa between 2012 - 2019. According to the World Bank there are currently 4,000 mini-grid projects in the works across Africa, and the lender estimates that 500m people could be connected this way by 2030.

It’s a good story, with some important gaps.

Just ten companies have received 78% of all capital invested in the sector from 2012 - 2019. These are mostly in East Africa, which also accounts for 76% of all investment on the continent. […]

The World Bank has warned African countries, Ghana inclusive to spend wisely and implement innovative strategies which will broaden the tax net to capture every income-generating activity in order to close the vast fiscal gap induced by the pandemic – adding that the situation has further heightened the country’s risk of debt distress.

While official data from the Bank of Ghana put Ghana’s public debt at 68.3 percent of Gross Domestic Product – which is just below the generally accepted debt sustainability threshold of 70 percent, this has been computed based on an assumed 6.8 percent growth rate for 2020. Based on the revised growth rate of between 0.9 percent and 2.5 percent – depending on whose forecasts are being used – the public debt to GDP ratio is already above that threshold. […]

Countries and institutions must do more to help African states weather the global pandemic and its economic impact, the International Monetary Fund said on Friday, noting the region faced a projected financing gap of $345 billion through 2023.

IMF Managing Director Kristalina Georgieva told a conference that African states had spent an additional 2.5% of gross domestic product on average to help their populations, and institutions like the IMF had also stepped up, but more aid was needed. Private lending also remained subdued, she said.

“The pandemic will not be over anywhere until it is over everywhere,” Georgieva said. “All of us, countries and institutions, must do more to support Africa to cope with the next phase of this crisis.”

Despite sizeable domestic adjustments, African states still need $1.2 trillion in financing through 2023, she said, adding that some heavily indebted countries were being forced to choose between debt service and additional health and social spending. […]

Djibouti is capitalizing on its strategic location on one of the world’s busiest trade routes to build Africa’s largest free trade zone area. The Horn of Africa nation controls the Bab el-Mandeb (“Gate of Tears” in Arabic) which is a crucial chokepoint at the entrance to the Red Sea and the Suez Canal from the Indian Ocean.

The Bab el-Mandeb is the world’s fourth most frequented maritime route used by some 30,000 ships every year. Also, after the Ethiopia–Eritrea war, Djibouti has become a gateway for 90% of Ethiopia’s imports, a trading volume that accounts for 90% of Djibouti’s port traffic.

In 2018, lowly-populated Djibouti launched the first phase of the project comprising a 240-hectare (593-acre) site. The year before, it had unveiled three new ports and a railway linking it to landlocked Ethiopia, as part of its bid to become a global trade and logistics hub. […]