Image credit: eNCA
The dawn of 2017 seems to have pried open a can of worms in Southern Africa. In just about four months, Mozambique, not too long ago displaying strong economic growth and bullish investor sentiment, has defaulted in servicing a $60 million coupon payment for its ‘Tuna Bond’. The plunge in oil prices has sent banks in Angola clutching at the government for a bailout package. Namibia is wrestling with a surge in fiscal deficit, which stood at 9.2 per cent of GDP in 2016, and the country has since slashed the 2017/18 budget by 10.9 per cent.
The elephant in the room, however, has been South Africa’s credit rating downgrade to junk status last month, a move that has piled pressure on the rand, signalling that investors, rattled by fears of deteriorating economic conditions, could be gearing for a stampede out of one of Africa’s most attractive markets. The downgrade implies that the risk premium attached to the economy has risen. This could not have come at a time more inauspicious than now.