Kenya is planning sub-Saharan Africa’s biggest debut sovereign bond issue with a $1.5 billion (€1.14 billion) note, betting that the trial of Kenyan president Uhuru Kenyatta for alleged crimes against humanity will not deter foreign investors.
A string of African countries have recently issued US dollar- denominated sovereign bonds for the first time at remarkably low interest rates in spite of the risk, as investors flock into African frontier markets.
Geoffrey Mwau, economic secretary in the finance ministry, said Kenya was inclined to push for a much larger bond than initially considered. “We think that $1.5 billion is [a] good [size],” he said, adding that the plan was for a 10-year note.
“We are looking at November, but it may spill over to December-January.”
The frontier markets of sub-Saharan Africa have so far weathered the storm that has hit emerging markets as capital flees the region ahead of the US Federal Reserve’s tapering of its bond-buying scheme.
But the timing of the bond is awkward, as Kenya’s appeal to international investors for cash is set to clash with the start of the trial of the country’s head of state. Mr Kenyatta faces weeks at the International Criminal Court (ICC) in The Hague over accusations he marshalled and financed ethnic hit squads following 2007’s disputed elections. More than 1,100 people were killed and close to one million homes torched.
The trial of Kenyan deputy president William Ruto, also indicted for crimes against humanity, will start on September 10th, while Mr Kenyatta’s is set to open on November 12th, coinciding with an international roadshow to drum up support for the bond. Both will plead not guilty.
Far from unsettling investors, Kenya’s policymakers argue the case will prove that Nairobi is a respected member of the international community, so long as the duo co-operate with the court and attend trial in cases likely to run for years.
'Credibility gap'
Kenyan central bank governor Njuguna Ndung'u said attending the trial would "fill" what he said was the west's perception of Kenya's "credibility gap".
“For me, [the ICC case] is going to enhance the credibility of the Kenyan government and the Kenyan leaders. We are there, integrated with the international community,” he said.
“This will be the time to show that we have a credible country, we have credible leaders who are willing to defend themselves internationally.”
Kenya yesterday recalled lawmakers for an emergency session to discuss a proposal that the country withdraw from the ICC. Even if this is approved, the case against Mr Ruto and Mr Kenyatta will go ahead.
Nairobi contemplated a euro bond in mid-2007, but delayed its launch several times due to post-election violence and then the global financial crisis.
The International Monetary Fund, which caps Kenya’s total commercial debt at $2.5 billion as part of its assistance programme, supports the bond issue and will co-host an investment conference with the Kenyan government later this month. – (Copyright The Financial Times Limited 2013)
