Ramaphosa Ramps Up the War of Words with Credit Rating Agencies


Yesterday, in Paris, President Macron hosted a Summit on the Financing of African Economies post-Covid. As part of that Summit, South African President Cyril Ramaphosa took aim at the credit rating agencies, focusing on their impact on growth on the Continent.

 

In his speech, Ramaphosa labelled the international rating agencies as a ‘deterrent to countries who seek to take advantage of credible and transparent credit relief measures’, adding that in addition to allowing for economic growth, one of the most important factors was to allow the flow of resources to head towards the healthcare infrastructures, and not the servicing of debts in the first instance – this is what I have been calling the ‘credit rating impasse’. He also spoke about the need for equitable vaccination programmes to continue and be developed, as well as the importance of allowing for a vulnerable-nation-focused issuing of Special Drawing Rights (in particular, the idea of developed nations, who have a higher share of SDRs, foregoing their shares for vulnerable countries – some which has been shown can be done without any direct cost to the taxpayers of the developed countries).

 

On the same day, Moody’s took aim at South Africa. While acknowledging that the country has a balanced credit profile, a low foreign currency debt burden, and a strong core of institutions, ‘a number of growing fiscal and employment issues could lead to trouble’. Moody’s recently decided to push its credit rating decision for South Africa back, but this research report reads like a reminder. However, S&P’s credit rating decision is due on the 21st May, with analysts suggesting that the country’s BB-rating will be maintained.

 

What Ramaphosa speaks of is not fiction; the credit rating impasse is actively impeding development on the Continent and it is vital that the rating agencies take the lead on developing a novel, innovative, and developmental approach to finding a solution; allowing for the continuation of the vicious cycle that is applied to the Continent by high finance, particularly in times of crisis, is no longer sustainable. If the world of finance wants to move, holistically, into the world of sustainability, it must start with its core infrastructure.

 

Keywords – South Africa, credit rating impasse, @C_R_R_I

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