Absa is starting to see green shoots in its Ghana business after a few tough years in the gold-rich West African country, while sovereign headwinds persist in Mozambique.
The lender on Friday said it had ceased applying hyperinflationary accounting to Absa Bank Ghana for the first half, given significantly lower inflation in this market.
Absa CFO Deon Raju said customer growth in Ghana had been strong, alongside net interest revenue and revenue in the first half of the year.
“Ghana has been tough for us over the last few years. We are pleased to see that market turn around. They [government] have completed the debt restructure and a lot of their bilaterals. Their reserves in foreign currency are looking a lot better,” Raju said, updating the market on the group’s first-half performance.
“I think that is based on a lot of factors. Gold production has been fairly strong. The gold price is high so they are able to get out gold, boosting foreign reserves. The cocoa market as well is supportive. The risk we saw in Ghana is starting to turn,” he said.
“That has reflected in the currency, with lots of comments about it being the best performing currency in the world. It’s not like there is no risk there, but certainly given where we are coming from, it certainly feels like it has turned the corner.”
Absa in 2023 absorbed a R2.7bn impairment related to Ghana’s sovereign debt woes. This after Ghana in December of 2022 suspended most external debt payments.
The Ghanaian government last week gave the green light to a $2.8bn debt restructuring agreement with 25 creditor nations, including the US and China, with the key to unlocking further disbursements from a $3bn (R53.6bn) IMF-backed bailout programme initiated just more than a year ago.
Ghana, which displaced SA as Africa’s top gold producer years ago, is also benefiting from the surge in the metal’s price.
Despite the recent dip, gold remains up about 25% so far this year, supported by strong central bank buying and anticipation of US Fed monetary policy easing.
While it is seeing a turnaround in Ghana, the same cannot be said of Absa’s Mozambique business, with Raju saying, “there is lots of macro and geopolitical uncertainty out there, including sovereign risk in Mozambique”.
Banking major Standard Bank said two weeks ago it had downgraded Mozambique’s sovereign debt.
“We have some pressure in Mozambique, where we have downgraded the Mozambique sovereign [debt]. It is not a default but a downgrade and we have provided for that,” CFO Arno Daehnke said.
Financial services group Old Mutual has reduced its exposure to government bonds in its Africa portfolio as many sovereigns on the continent come under mounting fiscal pressure.
Absa is present in several countries in Africa, including Botswana, Zambia, Namibia, Seychelles, Mauritius, Kenya, Tanzania, Uganda and Nigeria.
Geographically, SA is expected to drive group earnings growth in the first half of its 2025 year, mostly due to lower credit impairments since net interest income growth remains muted.
It expects strong preprovision profit growth in African regions, partially offset by higher credit impairments.
“GDP growth expectations for 2025 have declined in all our countries besides Ghana. Contrary to our expectation, the average exchange rates in our Africa regions did not depreciate against the rand and have not been a drag on our group earnings during the first half of 2025,” Absa said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.