On the eve of the presidential campaign that opens in his country, former Beninese Prime Minister Lionel Zinsou, welcomes the "historic" nature of the double issuance of Eurobonds carried out by his country at the beginning of January. At the risk of angering the opposition.

No need to try to get him to talk about politics. As Benin prepares to enter the campaign for the presidential election on April 11, during which Patrice Talon will run for a second term, Lionel Zinsou, unfortunate candidate for the 2016 presidential election against the outgoing president, does not want to say a word about it.

The Franco-Beninese, co-founder and partner of the former boss of the African Development Bank Donald Kaberuka within the investment bank Southbridge, is however not stingy with answers when it comes to delivering his analysis of the management of Benin's public finances. In particular, it welcomes the "unprecedented" nature of Benin's double issuance of Eurobonds at the beginning of January.

For the economist, this fundraising on international markets, as well as that carried out in the wake of the West African Development Bank, marks a radical change in the relationship of investors to the continent.

the thirty years of Benin and the twelve years of BOAD, it is unprecedented in this area of the world

Jeune Afrique: Benin has just issued Eurobonds for 1 billion euros. Is this a sign that international markets trust the country?

Lionel Zinsou: It is indeed very striking. This is the first issue of its kind of the year, which was also followed by an issue from the West African Development Bank (BOAD), also spectacular [the official listing of this loan, of 750 million over twelve years, at 2.75% interest, is scheduled for January 22, 2021]. These two shows make history. We do not say it enough, but it is a tipping point.

First, because the price of debt is getting lower and lower. Secondly, because the maturity is long: the thirty years of Benin and the twelve years of BOAD are unprecedented in this part of the world. Third, these issues have been oversubscribed, with investors from all over the world, particularly from Asia, particularly for the BOAD Eurobond. This interest of Asia, too, is completely new.

Finally, fourthly – and even if there is undoubtedly a lot of international liquidity, and not a lot of offers – these successful issues show that investors are revising their positions on Africa, on the perception of risk.

I have always said that African risks are vastly overestimated. This is the first time that international markets have actually begun to admit that there were excessive risk premiums. This education of the market, the arrival of new investors, in this new geography, indicates in my opinion a new and profound trend.

On paper, however, the rates may seem important, especially for the double issue led by Benin...

What is important is the strong trend towards a reduction in the risk premium. At 4.8% for Benin at ten years, we are, compared to the Eurobond of 2019, which is nevertheless very recent, a lower point, while the maturity has been extended by three years.

Normally, rates rise with duration. There, they fall, and make it possible in particular to repay the 2019 issue, and therefore, in retrospect, to lower the rate...C is also something that we had observed at the end of 2020 with Côte d'Ivoire.

Same thing on the thirty-year-old slice. First, no one would have bet that Benin could offer such maturity. We are therefore facing a vote of confidence, a plebiscite of capital. So, it's true, there is a premium for investors who commit for thirty years. But over thirty years, we can amortize infrastructure investments that have double-digit returns.

Finally, and most importantly, Benin's ten-year rate level (4.8%) – and even more so that of BOAD (2.75% !), are to be compared with the gdp growth rate in value (including inflation) which is projected between 7 and 9% in this area: when you have growth above your debt ratio, there is a tipping point: you are then in a situation where you earn more in wealth created than what you pay in debt service.

This means that the debt is sustainable, that we are entering a virtuous circle. On this front, WAEMU is a pioneer, and it is thus joining certain countries, such as Morocco, for which debt servicing is quite sustainable.

These issues, this additional debt, however, come at a time when growth is shrinking, mainly due to the Covid-19 pandemic...

The markets believe in the forecasts of the IMF, which says that Africa will rebound, as early as 2021, and that the WAEMU will bounce back a little better, because it is fortunate not to have depreciated mineral natural resources, and, finally, that within the WAEMU, Benin will probably experience one of the strongest rebounds.

In the case of Benin, should we credit this success of the Eurobond issuance operation to the Minister of Finance and Economy, Romuald Wadagni?

It is true that Benin has a good Minister of Finance, and you will not hear me denigrate him. But what matters is the country's signature. These are the 12 million Beninese...

Investments are power plants, ports, roads...

On the economic situation of Benin, precisely. Growth (2 per cent) is higher than in the subregion. But it is mainly supported by cotton and investment in infrastructure. Is this model sustainable?

First, it must be stressed that cotton is not the only one driving growth. It is agriculture as a whole: cashew nuts, food crops...

The latter, especially maize and cassava, are perhaps the most important, in a way, for the purchasing power of the population. In waeMU, agriculture accounts for between 25 and 30% of GDP. It is the first customer and the first supplier of all other sectors. It is an agrarian model that is sustainable, because it irrigates both services and industry.

As for public investment, to use the formula of Mario Draghi, the former president of the European Central Bank: "There is good public debt only if there are profitable public investments." This is the case in Benin, as in Senegal or Côte d'Ivoire: there are no white elephants. Investments are power plants, ports, roads... Equipment that has effects on the entire economy. This is a big change from The Africa of forty years ago. Public investments are disciplined and profitable.

The general doctrine of austerity is a thing of the past

In terms of public investment, Benin is proposing a recovery plan that will represent 5 to 7% of GDP. This is unprecedented. Côte d'Ivoire will adopt, in February, an exceptional plan, which will also represent a very important share of GDP, with spectacular investments in industry and energy. This is certainly not the "Biden" plan, but for the first time, once we are at the right measure to ensure the rebound of the economy.

Isn't there a risk of a new debt bubble?

The general doctrine of austerity is a thing of the past. I do not believe in a risk of a debt bubble at all. It is true that there were warnings from the World Bank a year ago vis-à-vis the African Development Bank (AfDB). This has caused controversy, governments have reacted strongly to these attacks...

It is true, out of the 55 countries of the African Union, there is a differentiation to be made. Some suffer exogenous shocks, for example due to the fall in the price of copper or oil. But the tree should not hide the forest. And precisely, investors are starting to educate their eyes, to differentiate countries, and they follow those that have very ambitious recovery plans. The reception that the financial markets have given to our Eurobonds confirms this.

But there is another problem, on which solutions are being found: it is the ability to support businesses and households through the expansion of microfinance, through guarantees for SMEs, and, I hope, henceforth, through long-term equity loans. Africa is not over-indebted, it is underfunded.

Do you mean that the funds borrowed by the States do not sufficiently irrigate the real economy?

If States are forced to resort to public debt, it is because companies and households are unable to obtain the credits they need. Great progress is being made on the public debt front, but this project of access to this financing for companies – especially SMEs – and households is fundamental.

The important thing was that States were free to use or not the debt moratorium.

Does this new investor confidence change the terms of the bitter debate that took place in 2020 on the relevance of a moratorium on African debts?

It was very important to propose a moratorium, because it gave fiscal space on bilateral debts – which are not the main share of debt – but it allowed fiscal space for countries that needed it. What was decided within the Paris Club was whether States could use this moratorium or not. The important thing was that States were free to use this facility or not.

Now, the AU is working, very effectively, on two complementary things: to ensure that countries that are highly indebted, such as Zambia, receive special treatment, through the redemption of compromised debts. But, and this is probably the most important, it is also working on an issue that was until now hardly blocked by the US administration: the distribution of Special Drawing Rights (SDRs) to all African countries.

That would give a lot of budget space. This will be at the center of the conference that Emmanuel Macron is preparing on the fairer financing of the African economy. This is the most important project, particularly with the cooperation of European countries, which have proposed, on the initiative of Emmanuel Macron and Angela Merkel, to direct part of the SDRs to The destination of Europe to African countries. If this is achieved by April, it will be a game-changer on the recovery.

Even at the regional level, the borders are a bit artificial... When Morocco says it is a candidate to join ECOWAS, it is not absurd. When Chad also wants it either, because there are border effects. For me, the more global the integration, the better.

Moreover, in a context of globalization, we must have the right scale. Africa is one billion consumers and producers, $7 trillion in GDP. We are in a scale comparable to the addition of the German, French and Spanish economies. This is a perfectly logical scale given globalisation, compared to China, India or the European Union.

However, this remains a distant horizon, for the moment...

Yes, but to go towards the horizon, you must necessarily start from where you are!