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  • Matt Spencer

Sovereign Credit Rating: A look at African countries’ 2015 credit ratings

Sovereign Credit rating: A look at African countries


Sovereign Credit rating: Definition

A Sovereign Credit rating is the credit rating of a country or sovereign entity. It provides Investors with insight into the level of risk associated with investing in a particular country (political risk and economic environment is taken into account as well).

[Source]

The table below shows the latest sovereign debt credit ratings for different African countries from different credit rating agencies (S&P, Moody’s and Fitch):Country S&P RatingCommentMoody’s RatingCommentFitch RatingCommentTrading EconomicsCommentBotswanaA-StableA2StableN/AN/A73StableEgyptB-PositiveB3StableBStable28PositiveGhanaB-StableB3NegativeBNegative28StableKenyaB+NegativeB1StableB+Negative20NegativeMauritiusN/AN/ABaa1StableN/AN/A65N/AMoroccoBBB-StableBa1StableBBB-Stable54StableNamibiaN/AN/ABaa3StableBBB-Stable55StableNigeriaB+StableBa3StableBB-Negative22StableSouth AfricaBBB-StableBaa2StableBBBNegative50StableUgandaBStableB1StableB+Stable34StableZambiaBStableB2StableBStable30Stable

Source: Trading Economics 


Why is a good sovereign credit rating essential?

  1. To access funding in international bond markets.

  2. Issuing bonds in external debt markets

  3. To attract foreign direct investment


Where does the credit rating information come from?

To demonstrate credit standing, many countries utilize one of the Big Three credit rating agencies (although there are others) to provide the credit rating information. The Big 3 credit rating agencies are: Standard & Poor’s (S&P)

Based in the US and is a subsidiary McGraw Hill Financial that publishes financial research and analysis on stocks and bonds.

Moody’s Investors Service (Also known as Moody’s)

Based in the US and is the bond credit rating business of Moody’s Corporation, which is the holding company for Moody’s Investors Service (MIS). MIS provides international financial research on bonds issued by commercial and government entities.

Fitch Group

Dual-headquartered in New York City and London and controlled by the France-based FIMALAC. They are a global leader in financial information services with operations in more than 30 countries.

Utilising one of these credit rating agencies provide not only financial transparency but also investor confidence to stakeholders interested in investing in a particular country.

Thoughts?

Why is a good sovereign credit rating essential?

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