{"id":6600,"date":"2026-08-18T15:12:35","date_gmt":"2026-08-18T12:12:35","guid":{"rendered":"https:\/\/theledgerafrica.media\/?p=6600"},"modified":"2026-08-18T15:12:36","modified_gmt":"2026-08-18T12:12:36","slug":"what-global-investors-still-get-wrong-about-africa","status":"publish","type":"post","link":"https:\/\/theledgerafrica.media\/?p=6600","title":{"rendered":"What global investors still get wrong about Africa"},"content":{"rendered":"\n

Challenge simplistic risk narratives<\/strong><\/p>\n\n\n\n

By Our Staff Writer<\/em><\/p>\n\n\n\n

In 2023 Ghana defaulted on $13 billion of external debt; Zambia had done the same in 2020; and somewhere in a London trading room, a portfolio manager marked down every sovereign bond from Dakar to Dar es Salaam by the same few basis points, regardless of which had actually missed a payment. That reflex, treating fifty-four countries as a single credit event waiting to happen, is the risk narrative this piece exists to unpick.<\/p>\n\n\n\n

The numbers underlying that reflex are, on inspection, chary of supporting it. Moody’s Analytics found that infrastructure loans across Africa recorded a loss rate of just 1.7 per cent over fourteen years, lower than comparable portfolios in Latin America and Eastern Europe. Default rates on the continent, by most measured accounts, sit below where investors price them. None of which stops African governments paying a spread over US Treasuries that Citigroup’s Daniel Lebetkin, who has arranged much of the continent’s recent Eurobond issuance, calls “certainly unfortunate.” He would know; his desk has steered nearly all of the $18 billion in African bond sales this year, and watched the premium persist regardless.<\/p>\n\n\n\n

Enoch Godongwana, South Africa’s finance minister, is blunter still. “There is already a bias against the African continent,” he told reporters in Cape Town in November, one shared, he added, by rating agencies, multinational institutions and investors alike. His country’s case is instructive: S&P holds South Africa three notches below investment grade despite a budget that, by the Treasury’s own account, has stabilised debt as a share of GDP for the first time in years. Whether the agencies move before the fiscal arithmetic forces their hand remains, characteristically, an open question.<\/p>\n\n\n\n

Ahunna Eziakonwa, the UNDP’s regional director for Africa, puts a figure on the resulting distortion. “Africa loses an estimated $74.5bn in additional debt service costs,” she argues, money that funds neither hospitals nor grids nor the teachers a fast-growing population will need in worrying quantities. Whether that precise number survives peer review is a separate question from whether the underlying mechanism is real; on that point the IMF’s own research agrees, at least directionally, finding that sub-Saharan sovereigns pay a persistent premium over similarly rated peers, one that widens further whenever global markets grow nervous (nervousness, conveniently, always seems to originate elsewhere and land hardest in Accra).<\/p>\n\n\n\n

Three specific misreadings do most of the damage.<\/p>\n\n\n\n

The first is treating the continent as a single risk unit. Nigeria’s macro troubles, a naira devalued repeatedly and an oil dependency inherited from the 1970s, tell an investor almost nothing useful about Rwanda’s fiscal discipline or Kenya’s services-led growth model. Fifty-four sovereign credits, forty-plus currencies, legal systems ranging from Napoleonic code to English common law: the variance within “Africa” as an asset class exceeds the variance within most single-country portfolios elsewhere. South Africa has at points paid borrowing costs meaningfully above Brazil’s or India’s despite broadly comparable fiscal metrics. As Godongwana puts it, countries with the same fiscal metrics get a better rating than Africans do. That is not risk pricing. It is geography pricing.<\/p>\n\n\n\n

The habit has precedent, and the precedent should embarrass the industry that keeps repeating it. South Korea, Taiwan and Thailand were bundled into a single “Asian risk” category through much of the 1980s, priced as a bloc despite wildly divergent fiscal positions, until investors who bothered to differentiate found themselves considerably richer than those who didn’t. Latin America underwent something similar in the 1990s, shedding its blanket “emerging market basket case” label only once enough capital had been left on the table to make the mispricing embarrassing rather than merely regrettable. Africa is, on current evidence, roughly where those regions stood two decades before the market corrected itself. The correction, when it eventually comes, will not be gentle on the funds that waited for consensus before moving.<\/p>\n\n\n\n

The second misreading concerns data itself, or rather its absence. Credit committees calibrated on decades of granular US or European data encounter, in African markets, thinner data series, less frequent audits, and statistical agencies that revise GDP estimates by margins that would cause a small scandal in Frankfurt. Analysts, trained to treat uncertainty as risk, default to the most conservative assumption available. This is defensible modelling practice and terrible pricing practice simultaneously, a distinction risk committees rarely have the incentive to draw. It is also, not incidentally, a self-perpetuating problem: thin data begets conservative pricing, conservative pricing begets less foreign capital, and less foreign capital means fewer resources for the statistical agencies that might close the data gap in the first place.<\/p>\n\n\n\n

The third, and most stubborn, is a failure to update. Rating agencies and the investors who lean on them move slowly by design, a feature when it comes to preventing panic and a bug when it comes to recognising improvement. Kenya and Nigeria both drew strong demand in recent Eurobond sales, at tighter spreads than in years; Ivory Coast’s most recent issuance was oversubscribed within hours. The continent’s average spread over Treasuries has fallen to roughly 3.7 percentage points, its narrowest since 2018. Progress, evidently, is legible to the market when the market bothers to look; it has simply been looking elsewhere, chasing yield in markets whose narratives are more hitherto familiar.<\/p>\n\n\n\n

None of this amounts to a claim that African risk is fictional. Currency volatility is real, and the naira, the cedi and the kwacha have each delivered investors punishing years. Governance failures are real too; corruption indices tell an ugly story in more capitals than any pan-African advocate would like to admit. The argument is narrower and more precise: the premium exceeds the risk it purports to price, and the gap between the two is a market inefficiency, not a moral judgment about the continent’s creditworthiness.<\/p>\n\n\n\n

There are early signs the mispricing is being arbitraged away, slowly. The African Development Bank, alongside UNDP and a coalition of public and private actors, adopted what they call the New African Financial Architecture in April, an attempt to build homegrown rating capacity and reduce reliance on the big three agencies whose African coverage has, historically, been thin on the ground and heavy on priors. Whether a continental rating agency can command the trust of a New York pension fund is, bluntly, unresolved, and probably will be for some years yet; institutional trust, unlike a bond coupon, cannot simply be priced in.<\/p>\n\n\n\n

For investors willing to do the granular work, the asymmetry cuts the other way. A fund manager who prices Rwandan sovereign risk on Rwandan fundamentals, rather than on a regional average dragged down by Mozambican debt distress, is picking up yield that reflects genuine mispricing rather than genuine danger. That is, in essence, what active management is meant to do; it has simply been easier, and more career-safe, to apply a continental discount and move on to the next meeting. Career risk and credit risk, in this instance, point in opposite directions, and the industry has for years chosen the former.<\/p>\n\n\n\n

The broader lesson, gouged out over two decades of underpriced opportunity and overpriced risk in roughly equal measure, is that “Africa” is not a coherent unit of analysis, however convenient the label. Investors who continue treating it as one, bundling Botswana’s fiscal conservatism with Sudan’s civil war under a single spread, will keep leaving returns on the table that their better-informed competitors are already collecting. The continent does not need investors to like it more. It needs them to look closer, which is a considerably cheaper thing to ask for and, so far, a much rarer one to get.<\/p>\n","protected":false},"excerpt":{"rendered":"

Challenge simplistic risk narratives By Our Staff Writer In 2023 Ghana defaulted on $13 billion of external debt; Zambia had done the same in 2020; and somewhere in […]<\/p>\n","protected":false},"author":1,"featured_media":6601,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[174],"tags":[],"ledger_sector":[],"class_list":["post-6600","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis"],"_links":{"self":[{"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=\/wp\/v2\/posts\/6600","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6600"}],"version-history":[{"count":1,"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=\/wp\/v2\/posts\/6600\/revisions"}],"predecessor-version":[{"id":6602,"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=\/wp\/v2\/posts\/6600\/revisions\/6602"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=\/wp\/v2\/media\/6601"}],"wp:attachment":[{"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6600"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6600"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6600"},{"taxonomy":"ledger_sector","embeddable":true,"href":"https:\/\/theledgerafrica.media\/index.php?rest_route=%2Fwp%2Fv2%2Fledger_sector&post=6600"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}