Sovereign Africa Ratings licensed to issue credit ratings on African countries
South Africa-based credit rating agency, Sovereign Africa Ratings, has been issued a license to operate as a credit rating agency to African countries.
The approval of Sovereign Africa Ratings as a credit rating agency was made pursuant to Section 5 of the Credit Rating Services Act, 2012 (CRS Act) by the Financial Sector Conduct Authority (FSCA).
“The FSCA has approved the license application of Sovereign Africa Ratings to operate as a credit rating agency from March 8, 2022.
“Sovereign Africa Ratings is authorised to issue sovereign ratings only,” said the FSCA in a statement.
According to FSCA, sovereign credit ratings mean a credit rating where:
(a) The entity rated is a state or a provincial or local authority of the state; or
(b) the issuer of the debt or financial obligation, debt security; or other financial instrument is a state, or a provincial or a local authority of the state; or
(c) a special purpose vehicle of a state or a provincial or a local authority of a state
The Financial Sector Conduct Authority (FSCA) is a financial institutions market conduct regulator and a successor agency to the Financial Services Board (South Africa) in South Africa.
The license of Sovereign Africa Ratings as a credit rating agency comes on the back of calls by African governments for an African credit rating agency.
Over the past two decades, many countries on the continent have witnessed a deterioration in credit ratings.
The whole continent of Africa has been grappling with what the AU has described as unjustified negative rating actions at different times.
For instance, the record number of sovereign rating downgrades of African countries since the outbreak of COVID-19 on the continent in March 2020 has pushed countries such as Tanzania, Nigeria, Namibia and Mozambique to raise concerns on the non-consultative nature of foreign rating agencies.
According to Professor Eddy Maloka, Chief Executive of the African Peer Review Mechanism (APRM), such downgrades clearly do not reflect the average improvement of political, economic and social indicators in Africa.
Ghana’s Finance Minister, Ken Ofori Atta, has also said most of these downgrade decisions by foreign rating agencies, which most often are unjustified, have tremendous power to influence market expectations and investors’ portfolio allocations; and consistently undermine macroeconomic fundamentals of African countries.
FSCA Press Release – FSCA Grants Sovereign Africa Ratings (Pty) Ltd Credit Rating Agency Licence 22 March 2… by Fuaad Dodoo on Scribd
