https://newsletter.en.creamermedia.com
Africa|Export
Africa|Export
africa|export

Ratings bias costs Africa billions of dollars, Standard CEO says

28th October 2024

By: Bloomberg

  

Font size: - +

African countries face higher costs of financing because of inflated risk perceptions from credit-ratings companies, the head of the continent’s biggest bank said.

A United Nations Development Programme study last year showed that subjective risk assessments by ratings companies resulted in $75-billion of added costs and foregone revenue by African countries, Standard Bank Group CEO Sim Tshabalala said at a Future Investment Initiative Institute conference in Riyadh on Monday. He described the added costs as “preposterous” and “unconscionable.”

“This perception issue does make a massive difference and needs to be addressed,” he said.

Tshabalala’s remarks echo growing calls in Africa for changes to the way credit-rating companies assess risk on the continent, with leaders including Senegal’s former president and Zimbabwe’s finance minister calling for the creation of a pan-African agency. The African Peer Review Mechanism, African Development Bank, African Export-Import Bank and African Union Commission have announced plans to ensure such an entity is rolled out next year.

Even when African countries have similar ratings to countries elsewhere, they end up paying more for debt, with loans subjected to credit spreads that are much wider than warranted, said former Senegalese Economy Minister Amadou Hott. In some instances, African nations pay as much as 500 basis points more for debt than other sovereigns that have the same rating, he said, citing an unspecified study of 15 countries on the continent.

“When the other country pays 5% on a bond, African governments pay 10% on the bond,” he said. “Five hundred basis points over 20 years on a $1-billion loan is another $1-billion of extra cost,” which can increase countries’ debt vulnerability if left unaddressed, Hott said.

Tshabalala cited the examples of South Africa and Denmark, which he said despite having similar institutions, policies and processes, yet have divergent ratings: while the Nordic country is rated AAA, South Africa has a full house of junk ratings.

“It’s really hard to understand why there’s such a big difference,” he said.

Edited by Bloomberg

Comments

Showroom

Weir Minerals Africa and Middle East
Weir Minerals Africa and Middle East

Weir Minerals Europe, Middle East and Africa is a global supplier of excellent minerals solutions, including pumps, valves, hydrocyclones,...

VISIT SHOWROOM 
Willard
Willard

Rooted in the hearts of South Africans, combining technology and a quest for perfection to bring you a battery of peerless standing. Willard...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Photo of Martin Creamer
On-The-Air (15/11/2024)
15th November 2024 By: Martin Creamer

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:1.205 1.338s - 216pq - 6rq
Subscribe Now