15 May 2014

Southern Africa: Stable Outlooks for Sub Saharan Sovereigns

ACCORDING to Moody's Investors Service, the stable outlooks assigned to most Moody's-rated sovereign ratings in Sub-Saharan Africa reflect the rating agency's expectation of minimal ratings movement in the near term.

The majority of Moody's sovereign ratings in Sub-Sahara reside at the lower end of its rating spectrum, reflecting common challenges such as low economic diversification, chronic infrastructure bottlenecks and underdeveloped institutions that constrain credit quality.

The exceptions include Botswana, Mauritius, South Africa and Namibia, where more developed institutions supporting sovereign credit quality attract investment grade ratings, the agency said in a report yesterday.

"While favourable growth drivers remain largely intact and ongoing institutional reform efforts across the continent support creditworthiness, the stable outlooks assigned to 12 of the 15 Moody's-rated sovereign ratings reflects the rating agency's expectation of minimal ratings movement in the near term, as persistent structural credit challenges constrain scope for higher ratings in the region," Moody's said.

The agency said the negative outlooks on Ghana's B1 rating and South Africa's Baa1 rating in part reflect this downside risk to credit quality in the region.

"Meanwhile, tightening global credit conditions threaten to dampen the region's budding international issuance prospects, while commodity exporters are increasingly exposed to uncertainty generated by waning emerging market demand and commodity price volatility," it said.

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