Bank of America Corp says African firms are selling hard-currency bonds at their fastest pace in five years and expects this momentum to continue in the years ahead.
In the opening three quarters of the year, issuers placed $13.3 billion in total, including $3.25 billion done through private transactions. That haul is second only to 2021's $17 billion. The update came Monday from Kay Hope, a managing director for global research at BofA.
The roster of borrowers is widening as firms representing 11 countries have come to market this year, up from eight in 2021. Among this year's names: First Quantum Minerals Ltd. of Zambia, Angola's Azule Energy, and South Africa's Sasol Ltd.
Looking ahead, Hope projects $8 billion to $12 billion in new supply each year. She added that narrower spreads could entice stronger and repeat borrowers back, while higher rates may shift some refinancing toward local markets and alternatives such as loans and Gulf markets.
"Credit quality is improving, upgrades outnumber downgrades, and returns by rating tend to beat EM averages," Hope wrote, noting the sector has recorded zero payment defaults since 2020.
Risk is receding at the bottom end, with CCC-rated corporate debt now about $2.1 billion, down from $3.2 billion five years ago. Sovereign rating ceilings can cap corporate scores, though "investors are increasingly looking through these caps to boost returns," she said.
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Near term, the only African corporate maturity this year is a $300 million United Bank for Africa bond due next month. Next year brings $2.2 billion across four issuers.
The bigger wall arrives in 2028 at nearly $7 billion across nine issuers. Eskom Holdings Ltd. tops the list with $1.5 billion maturing, followed by Tullow Oil Plc with $1.2 billion and Transnet with $1 billion. Hope cautioned that sovereign strains could spill over, flagging that "with 7% of the $149 billion sovereign stock rated CCC/CC and Senegal seeking debt treatment, sovereign stress is a key risk to bear in mind."
The bottom line: issuance is strong, credit metrics are improving, and the issuer base is widening. For your portfolio, that points to more choices for yield as spreads tighten, balanced against sovereign risk and a 2028 maturity bulge worth watching.
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