{"id":783514,"date":"2024-07-21T07:35:00","date_gmt":"2024-07-21T05:35:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=783514"},"modified":"2024-07-21T07:59:47","modified_gmt":"2024-07-21T05:59:47","slug":"new-african-credit-ratings-agency-to-curb-unfair-treatment-coming-next-year","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/783514\/new-african-credit-ratings-agency-to-curb-unfair-treatment-coming-next-year\/","title":{"rendered":"New African credit ratings agency to curb ‘unfair treatment’ coming next year"},"content":{"rendered":"\n

A credit ratings company is being established to meet the unique needs of Africa’s developing countries, a project that stemmed from complaints of unfair treatment by international credit ratings firms.<\/p>\n\n\n\n

An African Union official said Saturday that this new agency for Africa\u2019s sovereign borrowers will be ready by next year.<\/p>\n\n\n\n

Albert Muchanga, the regional bloc’s commissioner for development, trade, tourism, industry, and minerals, told reporters in Ghana\u2019s capital, Accra, that the institution would not be owned by the regional bloc. <\/p>\n\n\n\n

He said it would be independent and professional.<\/p>\n\n\n\n

\u201cWe feel that we\u2019ve not been treated very well when it comes to ratings and the cost of borrowing,\u201d Muchanga said. <\/p>\n\n\n\n

\u201cWe want an institution developed by Africans to contribute to the process of de-risking the African capital market so that in the end, we are able to have a situation where we can borrow competitively at home and abroad.\u201d<\/p>\n\n\n\n

African finance ministers first considered setting up such a body in 2021 amid complaints of unfair treatment by international credit ratings firms that they said lead to higher interest rates relative to what other emerging-market borrowers and developed countries pay.<\/p>\n\n\n

\n
\"\"<\/a>
Albert\u00a0M.\u00a0Muchanga, Commissioner for Trade and Industry of the African Union Commission<\/em>.<\/figcaption><\/figure><\/div>\n\n\n

Muchanga said the African Peer Review Mechanism, African Development Bank, African Export-Import Bank, and the AU Commission are Undertaking the task. <\/p>\n\n\n\n

The project is at its next operationalisation phase, which entails \u201ccoming up with the final work plan to ensure that we are able to roll it out,\u201d he said.<\/p>\n\n\n\n

Today, three agencies, Fitch Ratings, Moody\u2019s Investors Service, and S&P Global Ratings, are regarded as the most significant. <\/p>\n\n\n\n

Rating scales vary among firms, with the top three agencies using alphabetical scales, where AAA represents the highest level and C or D represents the lowest. <\/p>\n\n\n\n

Additionally, pluses, minuses, and numbers are used to indicate sub-levels of creditworthiness.<\/p>\n\n\n\n

Sovereign credit ratings are vital for developing countries like South Africa as they significantly impact economic stability and growth prospects. <\/p>\n\n\n\n

These ratings, provided by agencies such as Standard & Poor’s, Moody’s, and Fitch, assess a country’s creditworthiness and its ability to meet debt obligations. <\/p>\n\n\n\n

A favourable rating can attract foreign investment by signalling a stable economic environment, thereby providing essential capital for infrastructure and development projects.<\/p>\n\n\n\n

A positive rating reduces borrowing costs for African countries, including South Africa, making it cheaper for the government to finance public services and development initiatives. <\/p>\n\n\n\n

Conversely, a downgrade can lead to higher interest rates and reduced investor confidence, exacerbating financial strain and potentially leading to currency depreciation. <\/p>\n\n\n\n

This can hinder economic progress and increase the cost of imports, affecting the overall economy.<\/p>\n\n\n\n

The United Nations Economic Commission for Africa report<\/a> found that in the first half of 2023, the top rating agencies issued 13 negative decisions to 11 African countries. <\/p>\n\n\n\n

The negative assessments included rating downgrades and negative outlook analyses.<\/p>\n\n\n\n

\u201cThese developments have reversed the optimism amongst investors on the international financial markets that African countries are recovering from the devastating Covid-19 economic shocks,\u201d the report states.<\/p>\n\n\n\n

\n\n\n\n

Reported with Bloomberg. <\/em><\/p>\n\n\n\n

\n\n\n\n

Read: Ramaphosa taps the brakes on the NHI<\/a><\/strong><\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

A new credit ratings company is being created to meet the needs of Africa’s developing countries.<\/p>\n","protected":false},"author":10,"featured_media":747328,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[853],"class_list":["post-783514","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-south-africa"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/783514","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=783514"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/783514\/revisions"}],"predecessor-version":[{"id":783526,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/783514\/revisions\/783526"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/747328"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=783514"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=783514"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=783514"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}