President Akufo-Addo has called on colleague African leaders to join forces to fight off the “risk premium tag” that investors and global markets have placed on African countries seeking access to capital.
The risk premium identifier for African countries, the president says, amounts to a structural constraint, imposed on low-income countries by players in the global capital markets.
Taking part in a panel discussion at a forum in Abuja, Nigeria, organised by the Africa Finance Corporation (AFC) to celebrate its 15th anniversary on Thursday (12 May 2022), President Akufo-Addo said it is time for Africa to confront and fight off the perception that African countries are risky for investors compared to their equivalents in other parts of the world.
“We need to address the structural constraints in the global capital market. The most significant is this so-called Africa risk premium,” he said.
“You have a situation where we [Africa] go to the market for money and we pay much more than our equivalents elsewhere. You want to ask yourself the question, why?
“It is because we are perceived as being riskier for investors. How is that defined?” asked President Akufo-Addo, contributing to the panel discussion.
Debt profile
President Akufo-Addo, who was in conversation with the BBC anchor Nancy Kacungira, declared: “Argentina [a South American country] in recent times has defaulted on nine separate occasions on its debt.
“Yet, five or six years ago, I believe it was in 2017, when Argentina went to the market to raise a 100-year bond, it ended up paying a coupon rate of 6.5% to 7%.
“Angola, [an African country] which has not defaulted since the end of the civil war on any of its debt obligations, went to the market at the same time and tried to raise a bond and was asked to pay 2 percentage points more than Argentina.
“So you ask yourself: ‘What is it? What is going on?’ These are the matters that the leaders of the continent need to find a solution for and address,” the president said.
Market gatekeepers
To address such discrimination, President Akufo-Addo argued that immediate discussions must take place “with the credit agencies that are responsible” for these decisions, because they are “the gatekeepers for the international capital market”.
“There is the need for us to engage them very much more, so that we can get a more even playing field.
“That in itself will unlock significant amounts of capital that are available for our [Africa’s] development” President Akufo-Addo said.
The AFC
The Africa Finance Corporation (AFC) is a multilateral financial institution, created by African sovereign states to provide pragmatic solutions to Africa’s infrastructure deficit and challenging operating environment.
The AFC actively pursues these solutions by developing and financing infrastructure, natural resources and industrial assets for the enhanced productivity and economic growth of African states.
The AFC’s vision is to become Africa’s leading infrastructure solutions provider and its mission is to foster the economic growth and industrial development of African countries while delivering a competitive return on investment to shareholders.
Wilberforce Asare
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