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Africa's development banks remain locked in a dispute over plans to restructure debt from countries such as Ghana, Zombia and Malawi.

That's stump that we used to carry on the back of our shirts.

Zambia as a devoter, Zambias a devoter, Zambia's devoter.

Therefore, don't go into investigator devoting country.

That stump is getting washed off.

While the countries do deals with foreign governments.

The African banks worn being forced to take losses sets a dangerous precedent for the continent.

We Africans are now muscling in on teletreyaders to be held by others.

That's right, you know they were the all is coming around to save Africa.

Now Africans are saving themselves.

I'm drinking much better job.

This is the syndrome of the thread.

These are the last kicks off.

On this week's Next Africa podcast, we look at why African lenders are being asked to take big losses and whether the whole process of debt restructuring could end up making the situation worse for African investment.

I'm Jennifer's abasajab and this is the Next Africa Podcast, bringing you one story each week from the continent driving the future of global growth with the context only Bloomberg can provide.

Joining me to discuss this today is Bloomberg reporter Matthew Hill, who has been following the story very closely.

Matthew, thank you so much for joining us.

This is a topic that you and I frequently speak about.

The newsroom is talking about, and it's really on the minds of many leaders across the continent when it comes to debt and a lot of these countries handling the debt loads that they have had.

Before we get into the heart of the current dispute, maybe you can explain to us what countries like Ghana, Zambia and most recently Malawi are needing to do about their unsustainable debt levels.

So let's dial it back to twenty twenty.

Right after the pandemic.

We had a number of African countries that had already built up pretty high debt levels that some were struggling to repay, and then the pandemic came along and knocked out big chunks of their government revenues and made it even more difficult.

So we had the Group of twenty or the G twenty coming up with a plan to help poor countries deal with unsustainable debts.

It's called the Common Framework.

So in February twenty twenty one, Zambia applied to its creditors for what's known as a debt treatment basically debt relief, using the Common Framework.

Ghana followed in December twenty twenty two, and Malawi also is having to restraint its debts, although it's not following the Common Framework process.

We saw this just this week how big its problem is.

Where the International Monetary Fund pointed out that if you strip out the money that it needs to pay creditors and other aspects, Malawi is essentially sitting with this year negative international reserves, negative net international reserves of about two billion dollars, and if you compare that to the size of its economy, which is only about eleven billion dollars, it just shows the scale of the problem that it's facing.

Two.

You've been following this very closely for years.

You mentioned dating back to Zambia and the foreign investors that we know of the Paris Club, right, but now there's a lot more talk about African development banks and the raw that they're playing in this restructuring.

It's a topic of heart debate right now.

Can you talk about where a frection bank and TDB fit into this picture?

This is really the crux of where we are at at the moment.

There is a massive amount of controversy, a lot of tension, and emotions are already running quite high because, as you point out, we've got lenders like the Africa Export Import Bank that has provided money to countries like Ghana and Zambia, and of course the Trade and Development Bank too, And while pretty much all the other creditors to these countries have agreed to restructure their debts, a FRECSM Bank and to an extent, Trade and Development Bank or TDB have not.

And this has now turned into a really really big point of contention.

Just to give a very broad overview of the situation at the moment, AFRECSM Bank, which has the African sovereigns African States among its shareholders, it also has private creditors too, and that bank is arguing that it is a multilateral development bank, it's providing money to help these countries to help its members develop, and it says it's often lending money to these countries where others won't.

On the other hand, we've got the other side of the equation where creditors, including the Paris Club and others are saying AFFRECSM Bank isn't a pure multilateral development bank because it's not lending money the same way that the International Monetary Fund does or the World Bank does at concessional rates.

It's lending money at commercial rates mostly and often these are pretty high.

So we've now got a situation where countries like Ghana and Zambia have at the request of their other creditors, really told Afresen Bank and TDB that they need to restructure their loans to these countries and offer what's known as comparability of treatment.

So essentially, at once Affrecsen Bank and TDB to provide as much debt relief as the bilateral creditors have.

Those are the ones from the Paris Club, plus of course China, India, Saudi Arabia and the bondholders.

The eurobondholders have also agreed to provide significant debt relief, and they are also saying that AFFRESM Bank must come to the table likewise.

And matt I recently spoke with Amasu Today say.

He's the president and managing director of TDB, which you're speaking about.

They're one of the banks that are involved in the negotiations.

He told me he's unhappy about the current situation right now.

Let's take a listen really quick.

I think the one thing that that's very problematic is is the way that some of these processes have been handled.

And I think the reason it's been messy and it's been generating a lot of noise is because you know, the global financial process has not taken adequate consideration of African lenders in the process, and some of these restructurings happen and we're not consulted, We're not in the picture, and it happens as an afterthought.

Assumptions are made and those assumptions are wrong.

So, Matt, what did you make of what mister today Say had to say.

Why is it that the African Development Banks are so opposed to taking losses on some of these loans compared to some of the other bigger creditors out there.

I mean, that really hits the nail on the head where we are at the moment.

I mean, TADESA has complained that they are only being brought into the process kind of as an afterthought.

And to be clear, TDB has been more constructive and shown that it is willing to engage.

It is willing to talk about restructuring its debts, whereas Affresen Bank has pretty much said that it won't.

That it has something that's known as preferred creditor status built into its establishment treaty when it was founded back in the nineties and that precludes it from restructuring any of its debt.

Now, these banks, TDB, Affrecsen Bank and others have formed what they are calling or referring to the Africa Club.

That's a group of African development banks that they've set up to basically protect their rights and make sure that their voices are being heard that they do get a set at the table.

Hold that thought, Matthew, We're going to take a quick break and when we come back, we'll talk about what's at stake in these negotiations and what they could mean for future investment on the continent.

We'll be right back.

Welcome back.

Today we're talking about the ongoing dispute between Africa's development banks and African governments looking to restructure their debt Matthew Hill is joining us and has been following the story very closely.

So, Matt you were talking before the break about these African development banks wanting to have a seat at the table, wanting to be treated similarly to other creditors out there.

Maybe we take a look at some of the other.

Creditors like the IMF and the Paris Club here, how do these banks differ from the role that these international institutions are playing for these countries, going back to.

The G twenty's Common Framework that was created with significant input from the International Monetary Fund, And of course when we're talking about sovereign debt restructurings, it's very difficult to avoid mentioning or talking about the Paris Club, which is an informal group set up to help bring debt relief to countries that can't afford to pay their debts.

They have played a very very central role in the creditor committees, the official creditor committees of all of these countries that are using the Common Framework to try sort out their debts, and the International Monetary Fund has too.

They provide the economic statistics and the estimates of exactly how much debt relief countries like Garner and Zambia require to reach a sustainable path and that's where the club comes into play again too.

This has been formed after the Common Framework was set up and the debt restructuring processes of Ghana and Zambia and others began to kind of retrospectively make sure that their voices are being heard.

What would taking losses for these banks mean, Matt and therefore many people if they haven't seen your reporting, we've seen some of these banks actually get raided by ratings agencies and taken a hit recently, just given some of these negotiations around debt restructuring.

Would a loss mean lower credit ratings and potentially affecting Africa's development down the road?

Is that sort of how we can shape all of this up.

That's also a very tough question that African lender's like Afrexent Bank are grappling with right now.

As you point out, we've already seen Pitch cut its assessment of affrecs and Bank to one level above what's known as junk.

If it does make another cut, that would mean that many investors would be forced to sell the bonds of affrecs and Bank, and I mean economics one oh one.

When you've got more sellers than buyers, that means the price is going to go down.

And it also means that affrecs and banks own borrowing, so the money that it raises from international investors will become more expensive.

And then you can say, if it's financing is becoming more expensive, it's going to have to charge more when it lends that money on to African countries, African governments and to African development.

So the outcome of this, if it does get cut again by the railings agencies, Yeah, it means more expensive financing for Africa, which is already grappling with lending costs that have gone up quite significantly in recent years.

And also just like the places where African governments can access financing from full stop is becoming smaller and smaller too, so it's a real problem.

Yeah.

And even you know, some of these governments spend more on debt servicing than you know, taking care of their constituents, and so it really has become to the forest, so much so that South African President Zerro Ramaposa has made debt sustainability something that he has prioritized during the G twenty presidency as of course, you know, matt how does this play out going forward?

Do you see some of these African banks getting their way?

Well, I mean Fitch themselves have said that it's more likely than not, for example, that Frexim Bank will have to restructure its debt with Ghana, and if it does so, that could have implications for its credit rating.

Afrexim Bank has definitely made it clear that it's not going to take this line down.

What kind of recourse they would have we don't yet know, and they haven't yet said what kind of approach they will take if they are compelled to restructure the debts.

We have seen them sue South su Done in a court in the UK and they actually won what's known as a summary judgment in May this year, where the judge said that South Sudan has to pay the hundreds of millions of dollars that it owes Afrexim Bank.

Whether this will ultimately end up in a UK court when it comes to the case with Ghane or Zambia, we'll have to wait and see.

And Matthew Hill, thanks again so much for your and for joining us this week, and you can read all of our coverage on African debt across Bloomberg platforms.

Now here's some of the other stories in the region that we've been following.

French broadcaster Canal Plus received South African Anti Trust approval to buy Multi Choice Group, which clears the way to making it the largest PayTV and streaming business on the continent.

The deal got the go ahead from the Anti Trust watchdog this week, enabling a transaction that values Multi Choice at about three billion dollars.

And Nigeria's Central Bank said about a third of lenders have met its new capital requirements threshold ahead of a March deadline.

The Abuja based Central Bank of Nigeria last year increased the minimum capital requirement for lenders tenfold to strengthen the industry against risks from high inflation, a week economy and a steep Nayrad evaluation.

Can follow these stories across Bloomberg, including the Next African Newsletter.

Will put a link to that in the show notes.

This program was produced by Adrian Bradley and tiwa Adebayo.

Don't forget to follow and review this show wherever you usually get your podcasts, But for now I'm Jennifer's Abasaja.

Thanks as always for listening,