00:00Hello and welcome to another episode of Business Africa.
00:14I'm your host Afolake, only lawyer to top stories this week.
00:18After years and default, Zambia secures CCC plus upgrade from S&P, a major step toward economic stability.
00:30At the Yawande summit, 41 central bank governors advance an ambitious vision for an African IMF and central bank amid growing climate risks.
00:42Festive season under pressure in Ghana as inflation and a weakening currency hit holidays pending.
00:52Zambia has secured its first credit rating upgrade from S&P Global Ratings since August 2019.
00:58A milestone that signals a cautious return of investor confidence after years of debt distress.
01:06Zambia is finally shedding its status as an international defaulter after defaulting on its euro bonds debt in 2020.
01:15After years of painful negotiations, S&P Global Ratings has upgraded the country's long-term foreign currency credit rating from selective default to CCC plus.
01:26This significant bump signals that Lusaka is committed to honouring its financial obligations.
01:33The upgrade comes after the government finalised most of its debt rescheduling negotiations.
01:38As of December 2022, Zambia had debt of up to $20.9 billion owed to official bilateral creditors like China,
01:47external private commercial creditors like euro bond holders,
01:51and multilateral institutions, including the IMF and World Bank.
01:57Zambia's experience offers a crucial lesson for debt-stressed countries like Ghana and Ethiopia.
02:03The key takeaway is the vital importance of fixing creditworthiness.
02:07This requires improving governance, managing public finances,
02:11and transforming the economy to boost foreign reserves.
02:14While this is a positive step, analysts caution that the CCC plus rating still places the country in the red zone,
02:22meaning its credit profile remains vulnerable.
02:25To help us unpack the significance of this development, we're joined by Stanislas Zeze,
02:31credit ratings expert and CEO of Bloomfield Investment Corporation.
02:36Thank you for joining us on the show.
02:38Now tell us, how would this upgrade affect Zambia's ability to attract foreign investments,
02:43especially in areas like energy and infrastructure?
02:46You have to understand that a triple C plus is probable default,
02:51which means that they're still in a zone that is very critical.
02:54They have done a little bit of effort, but they're still in a zone that are very critical.
02:58They have to do more.
03:00They have to perhaps continue to discuss with the people that are at the O2
03:05and then finalize the 3% left.
03:08And the other thing is they have to rethink their revenue sources.
03:13The good thing about an economy like that of Zambia, they're mostly informal,
03:19which means that they have a good margin of maneuvering to reform the fiscality
03:24in order to have a larger place so that they can collect more revenues.
03:29And in order to be able to increase the grade, they have to also improve the foreign reserve.
03:38And to be able to improve the foreign reserve, you have to transform the economy.
03:41So this is the reason why most African countries have low grade,
03:45because their economy are not transformed.
03:48So they don't collect that much of foreign currency to boost up the reserve,
03:53because they're using the same reserve to import most of the finished goods that they need,
03:58and they don't produce.
03:59Now, what is the single most important lesson that countries like Ghana and Ethiopia
04:04can learn from Zambia to accelerate their own debt restructuring?
04:09This is extremely important.
04:12And improving your credit worthiness is a matter of fixing your governance,
04:18your governance in your administration,
04:21your governance in your political approach or political landscape,
04:24because obviously this country has some political tension,
04:28and all this is taking into consideration to establish your credit worthiness.
04:33Your social political environment, the management of public finance,
04:39the financing of the economy, the business environment,
04:43all these parameters have to be worked on by this country to improve the credit worthiness year on year.
04:50It's extremely important.
04:52You see other countries that have done that have moved forward.
04:55Look at countries like Cote d'Ivoire, for instance,
04:58who have been working on the credit worthiness for quite some time now.
05:02They're double B now, and they're probably going to be double B plus soon.
05:07They understood the importance of being credit worthy.
05:10And this is what we actually advise all African countries to understand,
05:16that their credit worthiness will be the passport to access finance in a good condition,
05:21because you have to access finance, but in a good condition.
05:25And if you want to attract FDI,
05:27you also have to throw to these people that are incapable of absorbing data
05:34and are incapable of organizing to finance your own economy.
05:37Why is it essential for African countries to secure credit rating in local currencies?
05:42What difference does it make?
05:45I saw in an S&P report that the credit quality of Zambia in local currency
05:51is at the same level of hard currency.
05:54I mean, it's hard to believe,
05:55because basically, usually, your credit worthiness in your local currencies is usually higher.
06:01Obviously, you can have coincidences where you can be at the low on both currencies,
06:06but most of the time, your credit worthiness in your own currencies is higher.
06:11This is the reason why we're asking all African countries to get the rating in local currency
06:16and the rating in hard currency,
06:18so the investor will have a better visibility
06:21and be able to distinguish between their credit worthiness
06:26and their capacity to repay in hard currency,
06:30which are two different things.
06:32Your credit worthiness is established in your own currency,
06:35because this is your currency of operation,
06:37and your capacity to pay in another hard currency is established
06:40based on the fact that you have a certain level of fund reserve
06:44and that you're capable to produce fund reserve.
06:46Thanks for those insights. It's been a pleasure having you on the show.
06:52Africa is pushing forward with plans for a continental central bank by 2026.
06:58This follows a major gathering in Yawande,
07:00where 41 central bank governors met to address climate-related financial risks
07:06and revive long-standing ambitions for deeper monetary integration.
07:11A meeting on Africa's economic and financial system in the face of climate change,
07:1941 central bank governors gathered to discuss the threat that climate change poses to Africa's
07:26economic and financial stability in Yawande, Cameroon's capital.
07:30Climate shifts and environmental damage are major risks for the economy
07:35and the financial system, especially in Africa.
07:40Their impact on economic growth should push central banks to adjust their strategies.
07:46But the lack of information on climate trends remains a worrying issue for bankers.
07:52We discussed the role of climate change in facilitating the transition to a low-carbon economy,
07:59including the lack of data on climate change and the effects.
08:04And in terms of what is next, a key priority coming here
08:08will be to operationalize the monetary institute for Africa.
08:13African economies contribute the least to climate change,
08:16but are affected disproportionately.
08:18For the governor of the Bank of Central African States,
08:23the goal is to now lay the groundwork for an African IMF and an African central bank.
08:28It is a transitional institution tasked with monitoring the macroeconomic convergence criteria
08:43of all African countries in order to prepare the creation of the African central bank
08:50and the continent-wide monetary union.
08:58If created, an African monetary union would be a game-changer,
09:03just as the free trade area has been.
09:08With Christmas approaching, markets across Ghana are noticeably quieter.
09:14Rising prices and a weakening CD are forcing shoppers to cut back,
09:18leaving traders increasingly worried.
09:21Take a look.
09:22The sights of Christmas season are beginning to appear in Madina Market,
09:27a suburb of Accra.
09:29But behind the colorful displays of clothing and Christmas decorations,
09:34traders tell a different story.
09:36By now, customers should be meaning.
09:41But this year, people come and ask about the prices and then leave.
09:45They complain that the items are expensive and can't afford it.
09:50For shoppers, the festive spirit is tempered by tight budgets.
09:55Everything is expensive.
09:58Clothing, food, and even transport fares.
10:01So this year, Christmas shopping is not their priority.
10:06I'm only buying what is necessary.
10:09Economists say the situation reflects wider economic pressures facing households,
10:14including currency instability and rising cost of living,
10:18that continue to squeeze disposable income.
10:21We can also look at the port levels on some of these high-demand in-season products.
10:26And if we can, at least, for the time being, for this period,
10:31we can even lift up the levies.
10:33Maybe we'll reduce the VAT on these products.
10:35Of course, that could be a very key game-changer.
10:38Back at the markets, traders are adjusting their expectations.
10:42For many, this Christmas will be less about record profits
10:45and more about simply sustaining their businesses through challenging economic times.
10:50That brings us to the end of this edition of Business Africa.
10:59For more business stories and the latest updates,
11:01stay tuned to African News or visit us online at africanews.com.
11:06See you soon.
11:14Business Africa was presented by Turkish Airlines.
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