Next Africa: Ethiopia Faces a New Crisis

Next Africa: Ethiopia Faces a New Crisis

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Welcome to Next Africa, a weekly newsletter of where the continent stands now — and where it’s going next. 

(bloomberg)—First there was a war, now Ethiopia faces a debt crisis.

The nation’s request to restructure its external debt under a Group-of-20 program highlights how much circumstances have changed for the country and Prime Minister Abiy Ahmed in just over a year.

In 2019, Abiy won the Nobel Peace Prize for ending two decades of conflict with Eritrea. After coming to power in 2018, he was hailed for pledging to open up the economy and create more space for democratic expression.

Banner besides a block of new residential buildings in Addis Ababa.

The coronavirus outbreak and a war with the rebellious Tigray region, have stifled that. Little progress has been made on privatization, and civilian casualties and displacement in Tigray has seen the leader of one of Africa’s fastest growing economies condemned internationally.

Now the country is worried about meeting its debt obligations and its announcement that it’s discussing liabilities with official lenders has sparked panic among private creditors. The country’s Eurobonds plunged the most on record last week.

“The World Bank has stepped in to fill the gap” in the past, said Mark Bohlund, a senior credit research analyst at REDD Intelligence. That’s “become more politically challenging in the wake of alleged human-rights abuses committed during the war in Tigray,” he said.

For now, there isn’t an immediate way out for Abiy.

The coronavirus has slashed demand for the country’s horticulture and textile exports and tourism has ground to a halt.

The war, which threatens to drag on in the form of guerrilla resistance, hasn’t helped.

News & Opinion

Africa Inoculation | Covax, the program striving for equitable access to coronavirus vaccines, has allocated millions of AstraZeneca’s shots to African countries, with first deliveries seen by end-February. Meanwhile, Moderna offered to supply its vaccine to South Africa, in what would be its first such deal with an African nation. South Africa’s biggest companies are in talks with government to help facilitate national vaccination in an estimated $802 million program.

Auto Boost | Ford Motor Co. will plow $1.05 billion into South Africa, its biggest investment yet in the country. The carmaker, which is scaling back in other regions including Brazil and Europe, will upgrade the Silverton plant near the capital, Pretoria, to an annual capacity of 200,000 units and create about 1,200 direct jobs. Separately, Rolls-Royce plans to expand in Africa to grow the power-systems division after its main business of wide-body jet engines was derailed by the coronavirus.

A Ford Ranger pick-up truck on display at the Sandton Convention Center in Johannesburg, South Africa, in August 2015.

Sanctions Conundrum | Several Democratic House lawmakers are urging Treasury Secretary Janet Yellen to reverse the Trump administration’s decision to ease sanctions on Israeli billionaire Dan Gertler. The U.S. sanctioned Gertler and his companies in 2017 for allegedly corrupt mining and oil deals in the Democratic Republic of Congo. But in his final days in office, President Donald Trump’s Treasury Secretary Steven Mnuchin issued a license allowing Gertler and his companies to resume business through January 2022.

WTO Job | Former Nigerian Finance Minister Ngozi Okonjo-Iweala is left as the only candidate for the World Trade Organization’s top job, after South Korea’s Trade Minister dropped her bid to lead the institution. Yoo Myung-hee’s withdrawal comes after some former U.S. government officials urged President Joe Biden to endorse Okonjo-Iweala after the Trump administration blocked her selection. The opposition halted the selection process because WTO decisions are made on the basis of consensus.

Okonjo-Iweala in Geneva, following her hearing at the WTO in July 2020.

State Takeover | After acquiring Glencore’s and Vedanta’s local operations in the past two years, Zambia isn’t looking to take over more mining companies nor is it planning to nationalize the industry, according to Finance Minister Bwalya Ng’andu. There’s been fear of a fresh wave of government takeovers following President Edgar Lungu’s remarks in December that Africa’s second-biggest copper producer wanted “significant stakes” in unspecified mines. Other miners operating in Zambia include First Quantum Minerals and Barrick Gold.

Past & Prologue 

Data Watch

  • Absa’s South Africa Purchasing Managers’ Index rose to 50.9% in January from 50.3% in December. It was the best January registered by the index since 2015.
  • Ghana’s central bank left its key interest rate unchanged at 14.5%. The rate was held at an almost a nine-year low for a fifth straight meeting as inflation moved back above the target range.

Coming Up

  • February 8 Mauritius January inflation, Djibouti presidential elections, Central African Republic holds second round of parliamentary elections
  • February 10 South Africa business confidence index and Ghana inflation for January
  • February 11 South African president delivers state-of-the-nation address, South Africa mining output and manufacturing production data for December

Last Word

The number of rhinos killed by poachers in South Africa, which has the world’s biggest population of the animals, fell by 33% last year — partly because coronavirus lockdowns reduced incursions into game reserves. Some 394 rhinos were killed for their horns, which are smuggled to East Asia where they are believed to cure cancer. South Africa has about 20,000 white rhinos and some black rhinos. Most of the animals live in the Kruger National Park, a reserve the size of Israel that sits on the border with Mozambique. Of the rhinos killed, 245 were in the park.

White Rhinos at Kapama Private Game Reserve, Kruger National Park.