Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Africa's development banks remain locked in a dispute over plans
Speaker 2: to restructure debt from countries such as Ghana, Zombia and Malawi.
Speaker 3: That's stump that we used to carry on the back
Speaker 3: of our shirts. Zambia as a devoter, Zambias a devoter,
Speaker 3: Zambia's devoter. Therefore, don't go into investigator devoting country. That
Speaker 3: stump is getting washed off.
Speaker 2: While the countries do deals with foreign governments. The African
Speaker 2: banks worn being forced to take losses sets a dangerous
Speaker 2: precedent for the continent.
Speaker 4: We Africans are now muscling in on teletreyaders to be
Speaker 4: held by others. That's right, you know they were the
Speaker 4: all is coming around to save Africa. Now Africans are
Speaker 4: saving themselves. I'm drinking much better job. This is the
Speaker 4: syndrome of the thread. These are the last kicks off.
Speaker 2: On this week's Next Africa podcast, we look at why
Speaker 2: African lenders are being asked to take big losses and
Speaker 2: whether the whole process of debt restructuring could end up
Speaker 2: making the situation worse for African investment. I'm Jennifer's abasajab
Speaker 2: and this is the Next Africa Podcast, bringing you one
Speaker 2: story each week from the continent driving the future of
Speaker 2: global growth with the context only Bloomberg can provide. Joining
Speaker 2: me to discuss this today is Bloomberg reporter Matthew Hill,
Speaker 2: who has been following the story very closely. Matthew, thank
Speaker 2: you so much for joining us. This is a topic
Speaker 2: that you and I frequently speak about. The newsroom is
Speaker 2: talking about, and it's really on the minds of many
Speaker 2: leaders across the continent when it comes to debt and
Speaker 2: a lot of these countries handling the debt loads that
Speaker 2: they have had. Before we get into the heart of
Speaker 2: the current dispute, maybe you can explain to us what
Speaker 2: countries like Ghana, Zambia and most recently Malawi are needing
Speaker 2: to do about their unsustainable debt levels.
Speaker 5: So let's dial it back to twenty twenty. Right after
Speaker 5: the pandemic. We had a number of African countries that
Speaker 5: had already built up pretty high debt levels that some
Speaker 5: were struggling to repay, and then the pandemic came along
Speaker 5: and knocked out big chunks of their government revenues and
Speaker 5: made it even more difficult. So we had the Group
Speaker 5: of twenty or the G twenty coming up with a
Speaker 5: plan to help poor countries deal with unsustainable debts. It's
Speaker 5: called the Common Framework. So in February twenty twenty one,
Speaker 5: Zambia applied to its creditors for what's known as a
Speaker 5: debt treatment basically debt relief, using the Common Framework. Ghana
Speaker 5: followed in December twenty twenty two, and Malawi also is
Speaker 5: having to restraint its debts, although it's not following the
Speaker 5: Common Framework process. We saw this just this week how
Speaker 5: big its problem is. Where the International Monetary Fund pointed
Speaker 5: out that if you strip out the money that it
Speaker 5: needs to pay creditors and other aspects, Malawi is essentially
Speaker 5: sitting with this year negative international reserves, negative net international
Speaker 5: reserves of about two billion dollars, and if you compare
Speaker 5: that to the size of its economy, which is only
Speaker 5: about eleven billion dollars, it just shows the scale of
Speaker 5: the problem that it's facing. Two.
Speaker 1: You've been following this very closely for years.
Speaker 2: You mentioned dating back to Zambia and the foreign investors
Speaker 2: that we know of the Paris Club, right, but now
Speaker 2: there's a lot more talk about African development banks and
Speaker 2: the raw that they're playing in this restructuring. It's a
Speaker 2: topic of heart debate right now. Can you talk about
Speaker 2: where a frection bank and TDB fit into this picture?
Speaker 5: This is really the crux of where we are at
Speaker 5: at the moment. There is a massive amount of controversy,
Speaker 5: a lot of tension, and emotions are already running quite
Speaker 5: high because, as you point out, we've got lenders like
Speaker 5: the Africa Export Import Bank that has provided money to
Speaker 5: countries like Ghana and Zambia, and of course the Trade
Speaker 5: and Development Bank too, And while pretty much all the
Speaker 5: other creditors to these countries have agreed to restructure their debts,
Speaker 5: a FRECSM Bank and to an extent, Trade and Development
Speaker 5: Bank or TDB have not. And this has now turned
Speaker 5: into a really really big point of contention. Just to
Speaker 5: give a very broad overview of the situation at the moment,
Speaker 5: AFRECSM Bank, which has the African sovereigns African States among
Speaker 5: its shareholders, it also has private creditors too, and that
Speaker 5: bank is arguing that it is a multilateral development bank,
Speaker 5: it's providing money to help these countries to help its
Speaker 5: members develop, and it says it's often lending money to
Speaker 5: these countries where others won't. On the other hand, we've
Speaker 5: got the other side of the equation where creditors, including
Speaker 5: the Paris Club and others are saying AFFRECSM Bank isn't
Speaker 5: a pure multilateral development bank because it's not lending money
Speaker 5: the same way that the International Monetary Fund does or
Speaker 5: the World Bank does at concessional rates. It's lending money
Speaker 5: at commercial rates mostly and often these are pretty high.
Speaker 5: So we've now got a situation where countries like Ghana
Speaker 5: and Zambia have at the request of their other creditors,
Speaker 5: really told Afresen Bank and TDB that they need to
Speaker 5: restructure their loans to these countries and offer what's known
Speaker 5: as comparability of treatment. So essentially, at once Affrecsen Bank
Speaker 5: and TDB to provide as much debt relief as the
Speaker 5: bilateral creditors have. Those are the ones from the Paris Club,
Speaker 5: plus of course China, India, Saudi Arabia and the bondholders.
Speaker 5: The eurobondholders have also agreed to provide significant debt relief,
Speaker 5: and they are also saying that AFFRESM Bank must come
Speaker 5: to the table likewise.
Speaker 2: And matt I recently spoke with Amasu Today say. He's
Speaker 2: the president and managing director of TDB, which you're speaking about.
Speaker 2: They're one of the banks that are involved in the negotiations.
Speaker 2: He told me he's unhappy about the current situation right now.
Speaker 1: Let's take a listen really quick.
Speaker 6: I think the one thing that that's very problematic is
Speaker 6: is the way that some of these processes have been handled.
Speaker 6: And I think the reason it's been messy and it's
Speaker 6: been generating a lot of noise is because you know,
Speaker 6: the global financial process has not taken adequate consideration of
Speaker 6: African lenders in the process, and some of these restructurings
Speaker 6: happen and we're not consulted, We're not in the picture,
Speaker 6: and it happens as an afterthought. Assumptions are made and
Speaker 6: those assumptions are wrong.
Speaker 2: So, Matt, what did you make of what mister today
Speaker 2: Say had to say. Why is it that the African
Speaker 2: Development Banks are so opposed to taking losses on some
Speaker 2: of these loans compared to some of the other bigger
Speaker 2: creditors out there.
Speaker 5: I mean, that really hits the nail on the head
Speaker 5: where we are at the moment. I mean, TADESA has
Speaker 5: complained that they are only being brought into the process
Speaker 5: kind of as an afterthought. And to be clear, TDB
Speaker 5: has been more constructive and shown that it is willing
Speaker 5: to engage. It is willing to talk about restructuring its debts,
Speaker 5: whereas Affresen Bank has pretty much said that it won't.
Speaker 5: That it has something that's known as preferred creditor status
Speaker 5: built into its establishment treaty when it was founded back
Speaker 5: in the nineties and that precludes it from restructuring any
Speaker 5: of its debt. Now, these banks, TDB, Affrecsen Bank and
Speaker 5: others have formed what they are calling or referring to
Speaker 5: the Africa Club. That's a group of African development banks
Speaker 5: that they've set up to basically protect their rights and
Speaker 5: make sure that their voices are being heard that they
Speaker 5: do get a set at the table.
Speaker 2: Hold that thought, Matthew, We're going to take a quick
Speaker 2: break and when we come back, we'll talk about what's
Speaker 2: at stake in these negotiations and what they could mean
Speaker 2: for future investment on the continent.
Speaker 1: We'll be right back. Welcome back.
Speaker 2: Today we're talking about the ongoing dispute between Africa's development
Speaker 2: banks and African governments looking to restructure their debt Matthew
Speaker 2: Hill is joining us and has been following the story
Speaker 2: very closely. So, Matt you were talking before the break
Speaker 2: about these African development banks wanting to have a seat
Speaker 2: at the table, wanting to be treated similarly to other
Speaker 2: creditors out there.
Speaker 1: Maybe we take a look at some of the other.
Speaker 2: Creditors like the IMF and the Paris Club here, how
Speaker 2: do these banks differ from the role that these international
Speaker 2: institutions are playing for these countries, going back to.
Speaker 5: The G twenty's Common Framework that was created with significant
Speaker 5: input from the International Monetary Fund, And of course when
Speaker 5: we're talking about sovereign debt restructurings, it's very difficult to
Speaker 5: avoid mentioning or talking about the Paris Club, which is
Speaker 5: an informal group set up to help bring debt relief
Speaker 5: to countries that can't afford to pay their debts. They
Speaker 5: have played a very very central role in the creditor committees,
Speaker 5: the official creditor committees of all of these countries that
Speaker 5: are using the Common Framework to try sort out their debts,
Speaker 5: and the International Monetary Fund has too. They provide the
Speaker 5: economic statistics and the estimates of exactly how much debt
Speaker 5: relief countries like Garner and Zambia require to reach a
Speaker 5: sustainable path and that's where the club comes into play
Speaker 5: again too. This has been formed after the Common Framework
Speaker 5: was set up and the debt restructuring processes of Ghana
Speaker 5: and Zambia and others began to kind of retrospectively make
Speaker 5: sure that their voices are being heard.
Speaker 2: What would taking losses for these banks mean, Matt and
Speaker 2: therefore many people if they haven't seen your reporting, we've
Speaker 2: seen some of these banks actually get raided by ratings
Speaker 2: agencies and taken a hit recently, just given some of
Speaker 2: these negotiations around debt restructuring. Would a loss mean lower
Speaker 2: credit ratings and potentially affecting Africa's development down the road?
Speaker 1: Is that sort of how we can shape all of
Speaker 1: this up.
Speaker 5: That's also a very tough question that African lender's like
Speaker 5: Afrexent Bank are grappling with right now. As you point out,
Speaker 5: we've already seen Pitch cut its assessment of affrecs and
Speaker 5: Bank to one level above what's known as junk. If
Speaker 5: it does make another cut, that would mean that many
Speaker 5: investors would be forced to sell the bonds of affrecs
Speaker 5: and Bank, and I mean economics one oh one. When
Speaker 5: you've got more sellers than buyers, that means the price
Speaker 5: is going to go down. And it also means that
Speaker 5: affrecs and banks own borrowing, so the money that it
Speaker 5: raises from international investors will become more expensive. And then
Speaker 5: you can say, if it's financing is becoming more expensive,
Speaker 5: it's going to have to charge more when it lends
Speaker 5: that money on to African countries, African governments and to
Speaker 5: African development. So the outcome of this, if it does
Speaker 5: get cut again by the railings agencies, Yeah, it means
Speaker 5: more expensive financing for Africa, which is already grappling with
Speaker 5: lending costs that have gone up quite significantly in recent years.
Speaker 5: And also just like the places where African governments can
Speaker 5: access financing from full stop is becoming smaller and smaller too,
Speaker 5: so it's a real problem.
Speaker 1: Yeah.
Speaker 2: And even you know, some of these governments spend more
Speaker 2: on debt servicing than you know, taking care of their constituents,
Speaker 2: and so it really has become to the forest, so
Speaker 2: much so that South African President Zerro Ramaposa has made
Speaker 2: debt sustainability something that he has prioritized during the G
Speaker 2: twenty presidency as of course, you know, matt how does
Speaker 2: this play out going forward? Do you see some of
Speaker 2: these African banks getting their way?
Speaker 5: Well, I mean Fitch themselves have said that it's more
Speaker 5: likely than not, for example, that Frexim Bank will have
Speaker 5: to restructure its debt with Ghana, and if it does so,
Speaker 5: that could have implications for its credit rating. Afrexim Bank
Speaker 5: has definitely made it clear that it's not going to
Speaker 5: take this line down. What kind of recourse they would
Speaker 5: have we don't yet know, and they haven't yet said
Speaker 5: what kind of approach they will take if they are
Speaker 5: compelled to restructure the debts. We have seen them sue
Speaker 5: South su Done in a court in the UK and
Speaker 5: they actually won what's known as a summary judgment in
Speaker 5: May this year, where the judge said that South Sudan
Speaker 5: has to pay the hundreds of millions of dollars that
Speaker 5: it owes Afrexim Bank. Whether this will ultimately end up
Speaker 5: in a UK court when it comes to the case
Speaker 5: with Ghane or Zambia, we'll have to wait and see.
Speaker 2: And Matthew Hill, thanks again so much for your and
Speaker 2: for joining us this week, and you can read all
Speaker 2: of our coverage on African debt across Bloomberg platforms. Now
Speaker 2: here's some of the other stories in the region that
Speaker 2: we've been following. French broadcaster Canal Plus received South African
Speaker 2: Anti Trust approval to buy Multi Choice Group, which clears
Speaker 2: the way to making it the largest PayTV and streaming
Speaker 2: business on the continent. The deal got the go ahead
Speaker 2: from the Anti Trust watchdog this week, enabling a transaction
Speaker 2: that values Multi Choice at about three billion dollars. And
Speaker 2: Nigeria's Central Bank said about a third of lenders have
Speaker 2: met its new capital requirements threshold ahead of a March deadline.
Speaker 2: The Abuja based Central Bank of Nigeria last year increased
Speaker 2: the minimum capital requirement for lenders tenfold to strengthen the
Speaker 2: industry against risks from high inflation, a week economy and
Speaker 2: a steep Nayrad evaluation. Can follow these stories across Bloomberg,
Speaker 2: including the Next African Newsletter.
Speaker 1: Will put a link to that in the show notes.
Speaker 2: This program was produced by Adrian Bradley and tiwa Adebayo.
Speaker 2: Don't forget to follow and review this show wherever you
Speaker 2: usually get your podcasts, But for now I'm Jennifer's Abasaja.
Speaker 1: Thanks as always for listening,