• York Investment & Finance

Global Markets Overview: Africa

Updated: Sep 11, 2020

From 27 July to 10 August 2020

Following weeks of speculation, the International Monetary Fund (IMF) last week finally approved a $4.3 billion loan in emergency funding for South Africa.[1] It is the largest Covid-19 emergency loan for any country that has been issued by the IMF – in an attempt to deal with the worldwide pandemic. Furthermore, it is no secret that South Africa, with regards to the rest of the continent, has been the most devastated by the pandemic, with the loan expected to help with the economic recovery and achieve growth again for the struggling nation. In previous years, the IMF has attracted significant criticism with their handling of loans to Greece, Ireland and Ecuador, with critics arguing that the IMF has enabled spending cuts and caused austerity. In South Africa, there have been suggestions that the loan from the IMF may affect the country’s sovereignty and economic decision-making, but the IMF has quickly distanced themselves by declaring that the loan does not have any conditions on how they can spend the loan.[2]

The Zimbabwe Stock Exchange (ZSE) will resume trading next Monday, following a month’s suspension of the exchange.[3] The suspension was due to calls of corruption running rife through the stock exchange, with the Financial Intelligence Unit (FIU) helping to recommend to the Government to suspend three key companies from trading on the ZSE. One of the companies to be suspended is the insurance giant Old Mutual, which is the largest company on the exchange based by market value.[4] The FIU established that Old Mutual were breaking rules in unfair market pricing behaviour and costing of goods. The resumption of the stock markets follows a rising anti-government sentiment across the country, with protests happening nationwide. Zimbabwe is believed to be on the brink on a starvation crisis and amidst nationwide job losses due to the Covid-19 pandemic and government corruption.[5]

Falling oil prices in Nigeria are continuing to affect the economic stability of the country as dire predictions regarding the economy contraction are beginning to affect investor confidence. Oil and gas exports make up 76.1% of Nigeria’s total exports and the revenue is expected to fall from $6.8 billion to $2.38 billion.[6] Seplat, a leading oil company trading on both the Nigerian and London Stock Exchange, suffered a revenue fall of 34.2% in the first six months of the year.[7] As Nigeria relies so heavily on oil exports, the rest of the economy has predictably taken a heavy hit which led to the Bank of Nigeria to devalue the Nigerian currency, Naira, twice already this year.[8] Nigeria is the most populous country in the region and the Government will be hoping that more countries will come out of their respective lockdowns, therefore driving the price of oil up more as citizens try to restart their normal lives again.

By Rory Ellis - Analyst at York IFS Global Market Telegraph

This article was first published in University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 4.1 in early August 2020.

Reference list: [1] https://www.bloomberg.com/news/articles/2020-07-27/imf-approves-4-3-billion-in-emergency-funds-for-south-africa?cmpid=BBD073120_AFRICA&utm_medium=email&utm_source=newsletter&utm_term=200731&utm_campaign=africa [2] https://theconversation.com/the-imfs-4bn-loan-for-south-africa-the-pros-cons-and-potential-pitfalls-143553 [3] https://www.herald.co.zw/stock-exchange-to-resume-trading/ [4] https://www.businesslive.co.za/bd/world/africa/2020-07-31-trade-on-zimbabwes-stock-exchange-to-start-on-monday-but-with-conditions/ [5] https://www.itv.com/news/2020-07-31/soldiers-deployed-in-zimbabwe-as-unrest-continues-amid-growing-food-crisis [6] https://www.weforum.org/agenda/2020/07/what-covid-19-means-for-the-shrinking-fiscal-space-for-education-in-nigeria/ [7] https://www.theafricareport.com/36211/nigeria-major-oil-companies-see-drop-in-revenue/ [8] https://www.ft.com/content/d83b7b18-e0a4-45e5-b66b-0d5e2d0d3feb Interested in writing for us? Check out the 'Opportunities' Tab!


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