Sovereign Africa Ratings to have a hard time surviving if… – Joe Jackson
Director of Business Operations at Dalex Finance, Joe Jackson, has cautioned Sovereign Africa Ratings (SAR) against being sympathetic with ratings on African economies and by extension, their sovereign debts.
Speaking in an exclusive interview with norvanreports on Tuesday, Mr Jackson averred the Continent’s newly licensed credit rating agency, will not be of any significance to investors if it is biased in its ratings on African economies.
“SAR is required to give investors an independent view of the sovereign debts and possible likelihood of defaults of African countries, because a lot of investment decisions are based on that.
“Now, if this rating agency is going to be seen as being sympathetic to African sovereign debts, a rating agency that is not truly and fully unbiased and independent, then it will not be a useful rating agency to investors.
“Because, just to setup a credit rating agency to provide favourable credit ratings to African economies just doesn’t make sense to me,” he remarked.
Adding that, the success of the new rating agency, will be based on how independent and unbiased it will be in its operations.
Speaking further in the interview, Mr Jackson averred the South African-based rating agency will have a hard time surviving if its credit ratings differ from that of the widely accepted and trusted credit ratings of Moody’s, Fitch and S&P.
“If SAR starts sending out ratings that differ significantly from the traditional rating agencies, especially in times like these and those ratings are more positive than that of the traditional credit ratings, then they are going have a hard time surviving,” he quipped.
Quizzed if foreign investors will be enthused about using credit rating reports produced by SAR, Mr Jackson noted foreign investors will be happy to use the reports provided they are detailed, unbiased and truly reflect the prevailing economic conditions of African economies.
A popular view held by most African governments, is that, foreign rating agencies – Moody’s, Fitch and S&P – usually give unfavourable credit ratings that affects the creditworthiness of African economies and result in investors pulling out invested funds in African economies.
In view of that, there have been calls for the establishment of an African credit rating agency.
This has led to South Africa-based credit rating agency, Sovereign Africa Ratings, being 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
