African Bond Markets: The time is Ripe

Jerome Booth writes in Yahoo finance:

Africa's lack of globalization is evident in its unbalanced financing structure. State-controlled aid money dominates public finance in Africa in spite of improvements in macroeconomic policies, spreading democracy, and supportive commodity prices. Recent growth in local currency debt issuance is welcome, but foreign demand is rapidly exhausting local capacity to absorb selling, with potential destabilizing macro­economic implications if issuance continues unabated. Meanwhile, Sub-Saharan Africa remains the last great region of the world not to issue external sovereign bonds at all...Potential corporate bond issuance in Africa is maybe 10 times the sovereign (government) financing needs, but – and here is the rub – without a sovereign bond curve, the potential corporate issuers cannot issue as they cannot price sovereign risk. The bond market has far more capacity to finance Africa's development needs than aid, but bond markets need to lend to governments first. A balanced financing structure would replace aid-financed central government budget support with global bonds to sit alongside moderate local currency issuance and conventional aid flows.