COVID-19 Africa Watch talks to Megan McDonald of Standard Bank about the ongoing economic impacts of the pandemic, recent market developments, and the priorities for a robust recovery.

Key Takeaways

Below are a few of the main takeaways from COVID-19 Africa Watch’s conversation with Megan McDonald, who is the Head of Client Coverage, Wholesale Clients, at the Standard Bank Group.

• Although the South African economy has been hard hit by multiple waves of COVID-19 and particularly the Delta variant, a more positive trajectory is now starting to emerge as its vaccine program (although delayed) gathers speed, and as the economy benefits from commodity price increases.
• The economic effects of the pandemic have further increased African countries’ interest in developing their local capital markets, together with greater focus on ESG. As part of the recovery, several African countries such as Ghana are now looking to issue green and social bonds to raise finance. These countries need to make sure that the bond framework and the related processes adhere to international environmental, social and governance (ESG) standards. Meanwhile, investors interested in these instruments need to engage with issuers to ensure that bond proceeds are transparently deployed towards the ESG initiatives that were originally suggested, and to work with regulators to create the necessary regulatory framework that incentivizes issuance of these types of instruments.
• Local currency markets are increasingly vibrant in Nigeria, Kenya, and Ghana, both from a sovereign and a corporate perspective. In Malawi, Standard Bank is currently working on a local currency, ESG-related bond. It is also partnering with the governments of Ghana, Angola, and Rwanda, in developing a robust local currency government bond framework and issuance program that can help accelerate and finance economic recovery.
• African sovereigns are now re-entering the Eurobond market, following a dearth of issuance in 2020. The continent’s Eurobond issuance has grown by over 300% in 2021 compared to 2020.
• There is still a need for much stronger international collaboration to overcome the effects of the pandemic: the world doesn’t recover until Africa recovers. Although Africa is helping itself and proving to be resilient, the global response urgently needs to turn its attention towards assisting developing countries. There is otherwise a risk of seeing a two-tier economy (and a widening gap between the developing and developed world). That gap could be narrowed, though, by creating a more cohesive and streamlined global response to COVID-19 that doesn’t leave anybody behind.

The interview was conducted by the Esi Monney with the Securities and Exchange Commission of Ghana, who is also an IFC-Milken Institute Capital Market Scholar.