According to Moody’s, the countries most able to adapt to a fall in revenue and therefore the most flexible in cutting their expenditures are Rwanda, Cameroon and Côte d’Ivoire. By Alain Faujas

Moody's are more glass half empty on the continent's prospects © Mark Lennihan/AP/SIPA



Despite a slight recovery in growth, the Moody's agency considers sub-Saharan Africa to be too indebted to cope with possible external commercial, financial or climatic shocks.

Moody’s forecasts for sub-Saharan Africa in 2020 are “negative”. While it acknowledges that growth in the region will pick up from 3.1% in 2019 to 3.5% this year, that the average budget deficit will fall from 3.3% to 3% and that the median debt of sub-Saharan countries relative to their gross domestic product (GDP) will fall from 54.5% to 51%.

But the agency says these improvements are too small to enable the region to weather any turbulence, as it suffers from three ills:

“too much dependence of commodity-exporting countries on global demand,”
“too modest growth” to increase per capita incomes and thus the ability of governments to raise revenue, and
“greater dependence” than in the past on expensive commercial debt.

According to Moody’s, the countries most able to adapt to a fall in revenue and therefore the most flexible in cutting their expenditures are Rwanda, Cameroon and Côte d’Ivoire.

The least adaptable are Ghana and Namibia. Given its low level of reserves, Zambia has “no chance” of being able to repay its debts in the near future.

A debt with a worrying structure

The countries with the strongest growth will continue to be commodity importing countries, such as Côte d’Ivoire, Ethiopia and Rwanda, which in 2020 will have a growth rate of more than 7%. The large economies of Nigeria and South Africa will remain sluggish with +2.5% and 1% respectively. The oil countries will improve their accounts, but modestly.

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The rating agency is particularly concerned about the change in debt structure.

Loans to sub-Saharan Africa are increasingly commercial loans, much more expensive than concessional loans from the World Bank or the African Development Bank.

In 2013, 65% of Kenya’s external debt was made up of concessional loans; by 2018, this proportion had fallen to 39%.

Many loans are fast maturing and, from 2022 onwards, repayments promise to be heavy: Zambia will have to pay $750 million in that year, then $1 billion in 2024 – as will Ethiopia – while Kenya will have to pay $2 billion.

New technologies, an impact limited to a few countries

Adding to this growing burden is the fact that seventeen countries are highly vulnerable to natural disasters, in particular Kenya, Mali, Ethiopia, Niger and Mozambique.

Could the establishment of the African Continental Free Trade Area (ACFTA) improve Africa’s resilience to external shocks? South Africa and Kenya have an industrial sector and infrastructure that will enable them to benefit from this large market, but other countries not so much, the report says.

Will new technologies be a significant growth accelerator? Yes, but mostly in Kenya and Mauritius, according to the authors.

In the end, Moody’s pessimism is based on the observation that many sub-Saharan governments are not managing their budget deficits and debts.

As a result, they do not have the financial and managerial capacity to cope with an external shock arising from a trade war, a collapse in commodity prices, a surge in oil prices, a sharp decline in demand in advanced economies, a rapid rise in interest rates or a deterioration in the exchange rates of their currencies against the dollar or the euro.