The demographic and macroeconomic backdrop in sub-Saharan Africa resembles that of East Asia in the early 1980s, says Arnold Dubin-Green. How many astute investors among us would love to say they invested in Asia when the Tigers were cubs? … “The hopeless continent.” This was the Economist’s front-page reference to Africa in May 2000. Hopeless Africa; asphyxiated by civil war, corruption and political instability. … Investors ran a mile at the mere mention of Ghana, Kenya or Rwanda. Today, returns in more expensive developed markets threaten to be low for years to come. Slow global growth and low yields are the norm. Jumping off the US fiscal cliff and euro crisis, these headlines motivate investors to seek markets with higher yields and stronger fundamentals. … Fundamentals are better placed than in many developed markets. Africa is now the continent on their lips; a market that is a significant and growing part of the global economy with plenty of room for productivity gains, favourable demographics, commodity richness and recent history of fiscal and monetary reforms.
In recent years, a growing number of African governments have issued Eurobonds, diversifying away from traditional sources of finance such as concessional debt and foreign direct investment. Taking the lead in October 2007, when it issued a $750 million Eurobond with an 8.5% coupon rate, Ghana earned the distinction of being the first Sub-Saharan country – other than South Africa – to issue bonds in 30 years. ... This debut Sub-Saharan issue, which was four times oversubscribed, sparked a sovereign borrowing spree in the region. Nine other countries – Gabon, the Democratic Republic of the Congo, Côte d’Ivoire, Senegal, Angola, Nigeria, Namibia, Zambia, and Tanzania – followed suit. By February 2013, these ten African economies had collectively raised $8.1 billion from their maiden sovereign-bond issues, with an average maturity of 11.2 years and an average coupon rate of 6.2%.