Due to the magnitude of the pandemic (4.5 million cases including more than 3 million active cases) and especially
the rapid expansion of the virus, we have witnessed since the beginning of the year a progressive containment
economies globally. This has a direct impact on international trade and commerce and
therefore gives us a glimpse of a huge economic impact with a drop in global GDP of 7%
during the first quarter of 2020 and 3% over the year 2020 according to some experts, i.e. three times more than
when the global financial crisis of 2008.
According to the World Bank, growth in sub-Saharan Africa is expected to contract sharply between 2019
and 2020 from +2.4% to -5.1%, plunging the region into its first recession in over 25 years.
Production losses linked to the Covid-19 pandemic are estimated at between 37 and 79 billion dollars in
2020, under the combined effect of several factors: the disorganization of trade and value chains
that penalizes commodity exporters and countries that are highly integrated into global value chains;
the reduction of foreign financing flows (remittances from migrants, tourist receipts,
foreign direct investment, foreign aid) and capital flight; the direct impact of the pandemic on
health systems; and the disruptions resulting from containment measures and the reaction of the
population.
African countries are also significantly impacted by the fall in commodity prices, including
in particular, oil, the price of which has fallen by nearly 54% in the last three months and which affects
both directly and indirectly our economies. Another challenge at the level of Africa is linked to the fragility of
our entrepreneurial fabric which is still mostly informal and which is not so financially equipped
only operationally to be disrupted by shocks of this nature. The real impact on the economy remains
uncertain and will depend on the speed of the return to normality
Let us first analyze globally. The Covid-19 has led since the beginning of the year to a fall in the markets
financial assets overall of more than 16,000 billion US dollars, i.e. nearly 120 times the GDP of the zone
Uemoa. A logical fall in view of the rise in investor pessimism in connection with the
short and medium term economic outlook.
The MSCI World Index (measuring the stock market performance of economically
developed) experienced a fall of 21.44% in the first quarter of 2020 after an increase of more than 25% on
the year 2019. 30 countries have seen a drop of more than 20%, including in particular Russia and Australia with
more than 30%, the United States 19% and the UK 26%.
All the main European indices are in the red by more than 25%. Now about the area
Africa. At the regional level, our main stock exchanges recorded sharp declines in
their indexes (stock exchanges in South Africa, Nigeria, Casablanca and Egypt all fell more
about 20%). Paradoxically, the sub-regional financial market (the Brvm which brings together the eight countries of
UEMOA) is doing relatively well.
Indeed, the technical indicators for the first quarter of 2020, compared to those for the same period of the year
last, are on the rise. The same is true for securities traded in volume and value. This factor is
in particular due to a certain lack of informational efficiency at the level of the Brvm and that the evolution of the
market is not directly correlated to the evolution of GDP in the area.

However, we must be prepared for drops in the coming months as the
companies will adjust their forecasts in line with the impact of Covid-19. We should therefore attend a
growing risk aversion among investors which will cause a fall in prices which will
could create opportunities for sophisticated investors.
We have seen strong positions taken by our regional financial institutions and
international organizations which very quickly put in place substantial funds with a view to stemming the impact of the
crisis in our economies. The AfDB has notably mobilized social bonds to the tune of three billion
dollars on the international financial markets, a record for social bonds.
The operation was a huge success with subscription intentions exceeding more than one and a half times
the objective of mobilization, and this in record time. Similar initiatives have been undertaken by the Ifc
(International finance corporation) and Inter American Development Bank with similar success. Those "
success stories” show us the role of financial markets in mobilizing resources
funds in the service of both social and economic causes. Our regional market is no exception.
The UEMOA States have set up a public securities issuance program of 846 billion F Cfa
since April 27.
The success of the first tranches issued suggests another clear success. The financial markets have
therefore a key role to play in structuring operations capable of financing high-impact projects
able to minimize the economic and social impact of such a crisis. The BCEAO has implemented measures
to stimulate the participation of institutional investors in issues of public and private securities in
the occurrence of refinancing at floor rates.
Excellent question! First of all, it should be noted that the debt situation in Africa is
contrasted with a debt of less than 40% of GDP in West Africa and nearly 75% of GDP in
North Africa. It is undeniable that the measures mentioned above as well as the important lines of
financing granted on favorable terms by the IMF and the World Bank will have an impact
directly on the level of indebtedness of African countries and even more directly on the capacity of States to
in the face of debt service in a context of falling budgetary revenues and growth in
expenses related to the fight against Covid-19.
The decline in oil export revenues is estimated at $100 billion in 2020 and
the increase in public spending on health is estimated at 11 billion dollars over the
continent in 2020. Thus, several States will face the risk of default on their maturities
repayment of sovereign debts. As a result, several Heads of State have advocated either cancellations of
debt, i.e. moratoriums on the service of the bilateral public debt of African countries in order to release the
necessary resources.
Indeed, these are measures that may prove necessary in the short term for some States. Each
year, Africa devotes more than 365 billion dollars to the repayment of its debt. Moratoriums and
debt cancellations will therefore release a substantial and immediate financial windfall to enable
Africa to face the pandemic and reconnect with growth.
However, these measures risk tarnishing the image and credit quality of countries in the zone as perceived
by international donors. The resulting interest rate increases could thereby
be detrimental to the growth of our States in the medium term. I believe that a solution
sustainable is a responsible indebtedness ideally in resources at concessional rates.
We are witnessing not only a slowdown in foreign direct investment but also a
unprecedented capital flight. Indeed, IMF indicators show that 83 billion dollars have
already been withdrawn from emerging markets by investors since the onset of the crisis. The evolution of
fundraising transactions and mergers and acquisitions is directly linked to the outlook
of businesses in the area and will most certainly be negatively impacted by the uncertainty
caused by Covid-19.
Indeed, financing institutions are less likely to grant financing to
companies whose economic prospects are difficult to anticipate. After a record year 2019 which
seen more than 1.3 billion investment by investment funds in more than 400 transactions, we
are very pessimistic regarding our expectations for the year 2020. Some sectors are
more impacted than others, including infrastructure, trading and tourism.
On the other hand, certain sectors such as health and public services have a growing need for
funding in the implementation of emergency plans to deal with the pandemic. What offers
fundraising opportunities for investment banks who will be able to identify priority projects and
put in place rapid and effective strategies for resource mobilization.

In the medium term, during the recovery, we will however be able to observe a strong increase in transactions
of mergers and acquisitions linked to a wave of restructuring and consolidation of companies weakened by the
global situation, including in particular in the financial sector or several banks and institutions
financial institutions will have to recapitalize to cope with the deterioration of their portfolio.
First of all, it will be necessary to support the banking system by strengthening bank liquidity and setting up
refinancing schemes that will allow them to extend maturities and restructure credit lines
financing granted to companies in difficulty. We also need an economic counter-offensive without
precedent if we want to avoid lasting damage to our economies and our social safety net.
Admittedly, the massive investments in infrastructure will enable the economy to restart, but this
will not be enough, we must seize this opportunity to accelerate the structural transformation of our
savings. We need to move towards the massive transformation of our raw materials, particularly with regard to
concerns agriculture by ensuring that the added values generated directly impact the base of
the population, starting with the producers who represent more than 70% of our working population. He
must also seize this opportunity to accelerate the operationalization of the Free Trade Area
African continent by stimulating intra-regional trade and promoting intra-regional value chains
to increase the resilience of our economies.
It is at this level that investment banks like Sirius Capital must more than ever play their role in
structuring financial instruments that will facilitate access to financing for both actors
public than private. At the level of the public sector, we are already engaged with States in
their efforts to raise capital on regional and international markets both in the form
bond issues than in the form of bilateral loans.
We can also cite, for example, “blended finance” type structures which consist of the
mobilization of capital jointly at the level of development institutions and the private sector,
relying on the funds made available by development partners to limit the risks
related to investments at a level acceptable to private lenders.
This type of financing could have a multiplier effect on the resources allocated by DFIs
(Finance and Development Institutions: Editor's note), and make it possible to fill the financing gap at
short term estimated at several hundred billion dollars.