— Macky Sall had a bone to pick with creditors. Sitting before the head of the International Monetary Fund , investors and diplomats during a conference on African debt in December, the Senegalese president complained that Western prejudice keeps borrowing costs unfairly high on his continent.
To some, the “Africa premium” stems from racial prejudice and lazy analysis that taints all countries on the continent with the same brush — one of political instability, corruption and financial mismanagement. “Black Lives Matter raises a broader question about the history of systemic racism and maltreatment of people of colour in the world,” said Howard Stein, a professor at the University of Michigan. “Has this spilt over into the perception of Africa in these markets? It’s a possibility.”
Inconsistent data on finances and reserves in many of these countries makes analysis difficult, said Jan Friederich, head of Middle East and Africa sovereign ratings with Fitch Ratings. Low tax collection and high reliance on raw materials also makes the region vulnerable, but weak governance hurts ratings the most, he said.
But some efforts to help African economies may be doing more harm than good. A G20 initiative during the coronavirus outbreak to delay debt service payments from poor countries until next year have kept African yields high, said Kevin Daly, investment director at Aberdeen Standard Investments.