South Africa Says Global Rating Agencies Show Bias Against African Economies

By Staff, Agencies

South Africa’s finance minister Enoch Godongwana says major global rating agencies consistently underrate African countries, giving them lower credit scores than peers with similar financial indicators.

His remarks came a day after presenting a budget with an improved fiscal outlook. Despite better debt numbers, he told Bloomberg he does not expect an upgrade soon: “It’s going to be a bonus if they give us a better rating.”

S&P Global currently rates South Africa at BB-, three levels below investment grade, while Moody’s and Fitch also classify its debt as junk.

Godongwana argued the agencies are “behind the curve,” saying Africa’s stronger debt performance over recent years is not reflected in the ratings.

He added that countries with similar fiscal metrics outside Africa receive better scores, suggesting a built-in — even if unconscious — bias at global financial institutions and among investors.

An expert report for next week’s G20 summit in Johannesburg will offer “data to prove that,” he said.

Because of these ratings, African governments face higher borrowing costs. Sub-Saharan African dollar bonds yield 9.1%, far above Latin America’s 6.5% and nearly double emerging Asia’s 4.7%.

Six of the world’s ten highest-spread sovereign issuers are African, including Senegal, Gabon, Mozambique, Cameroon, Angola, and Congo.

Ghana and Zambia have also accused rating agencies of worsening their financial crises, arguing that repeated downgrades scare investors and tighten access to credit.