By AUDE GENET | Wednesday, October 9
2013 at
10:57
Kenya hopes to raise close to $1.5 billion in an
ambitious international bond issue aimed at revamping crumbling
colonial-era infrastructure and accelerating East Africa's largest
economy.
The hunt for liquidity from the global capital
markets is central to government efforts to close an unhappy chapter
marked by political instability, drought and the fall-out from the
international financial crisis that conspired to push economic growth
down to 1.5 per cent.
Kenya's economy has since recovered from the
2007-2008 election-related violence, and is projected to expand 5.6 per
cent in 2013. The government has now set its sights on double-digit
growth within five years and middle-income status by 2030.
"We are optimistic the issuance will be overly
subscribed," Haron Sirima, deputy governor of Kenya's Central Bank said
last week on the sidelines of a International Monetary Fund conference
on Kenya's economic prospects.
The bond issue, planned for late November, would
be the largest debut by a sub-Saharan African nation, and follows
successful moves by Ghana, Rwanda and Zambia.
"African countries are taking advantage of these
historically low rates," said Kitili Mbathi, managing director for CfC
Stanbic Holdings.
Carmen Altenkirch, an analyst for Fitch Ratings,
said African nations also wanted to tap into renewed investor interest
in Africa.
Pay off debt
What started out as interest in natural resources
"...over the past five years, this had muted also into Africa's
financial assets," she said.
Antoinette Monsio Sayeh, Africa director at the
International Monetary Fund, said she understood that the cash raised
would go to paying off more expensive debt and "addressing
infrastructure challenges".
Kenya's main port of Mombasa, congested roads and
century-old railway link -- which dates back to a time when Nairobi was
little more than a railway depot -- are all major bottlenecks to trade.
"We think Kenya is in a very good place," Ms Sayeh told reporters, describing investors as "very gung-ho on Kenya these days".
She praised Kenya's "sound monetary and fiscal
policies" including steps to bring inflation down from 14 per cent in
2011 to around 5 per cent this year.
In a keynote speech, Kenyan President Uhuru
Kenyatta admitted that a timid reduction in poverty rates, from 52 per
cent in 1997 to 46 per cent in 2006, was "neither satisfactory nor
compatible with our stated aim to become a middle-income country by
2030."
He also said he wanted to see Kenya undergo an
"industrial revolution to power our ambition of becoming a middle income
country by 2030" -- a formidable challenge for a mostly agrarian
economy with a burgeoning youth population.
Cautious sentiment
At the Nairobi conference, which carried the
optimistic title 'Ready for Take Off', there was nevertheless some
cautious sentiment.
The meeting coincided with the second week of the
trial of Kenya's Vice President William Ruto, who is accused of
masterminding some of the 2007-2008 ethnic unrest that left at least
1,100 dead and more than 600,000 homeless.
President Kenyatta is also facing charges of
stoking the violence, and his own trial begins at the Hague-based
International Criminal Court on November 12. He also denies the
accusations.
The IMF's Sayeh asserted that both politicians
were cooperating with the ICC and that investors did not appear to have
been put off.
However, a Western source said the ICC trials
added "a degree of political instability" to Kenya's outlook --
especially if either takes the course of non-cooperation and arrest
warrants are issued.
Examined
Ms Sayeh said Kenya's fiscal conduct "will be more
closely scrutinised", noting that the conditions of its other fresh
debt -- $5 billion of infrastructure deals with China signed last month
-- would also have to be examined.
"It will be very important to continue the efforts
on the fiscal side that are underway to have a medium-term fiscal
policy that is seen to be well crafted," she said. "Kenya will have to
continue to be prudent over what it borrows and what it borrows for."
Charles Robertson, global chief economist at
Renaissance Capital and an emerging markets specialist, warned that
banks, which get paid to organise bond placements, encourage Kenya to
borrow too much.
"The risk is that they borrow too much, that the
budget deficit, the current account deficit get too large and that the
economy overheats." (AFP)
SOURCE: AFRICA REVIEW
SOURCE: AFRICA REVIEW
