Sovereign Africa Rating (SAR) agency has officially launched in Midrand, north of Johannesburg. The agency says while it uses some of the same economic variables as the three globally dominant rating agencies, its focus is confined to African market sovereign credit rating.
In its first-ever rating report, the agency has placed South Africa at investment grade with a stable outlook.
The Financial Sector Conduct Authority approved the licence application of Sovereign Africa Ratings to operate as a credit rating agency from March this year.
Chief Executive Officer of Sovereign Africa Rating (SAR), Sfiso Falala says the three dominant rating agencies which have all assigned a junk status grading to South Africa tend to serve international interests more than they do African interests. He says there is a need for an African alternative in the market.
“The one-size-fits-all approach does not work. Different African economies are at different levels of digitisation, some even industrialisation, and because of that, a one-size-fits-all and evaluation of that cannot be applied. It is our obligation as credit rating agencies to note that we cannot as we did in the late 1800s or 1900s say that we serve the interest only of the issuers because we are affecting business, we are affecting sovereigns, we are affecting individuals. Therefore the broader accountability of sovereigns needs to be explored,” says Falala.
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SAR Chief Rating Officer, David Mosaka says the variables used by the agency to assess emerging African markets makes use of qualitative and statistical data.
“We have definitely tried to break away from the norms and from the tradition by factoring in our rating and our modelling as I’ve indicated, climate change variables, wealth natural resource variables because we believe that they do have a bearing,” says Mosaka.
Professor of Political Studies at the University of Johannesburg, Steven Friedman says there is a colonial dynamic which underpins the way rating agencies operate.
He says the challenge for new entrants like Sovereign Africa Rating will be to overcome the scepticism around black people’s abilities to run countries with sophisticated market economies.
“Behind that colonial thinking is the idea that the big sovereign rating agencies are somehow repositories of big intellectual ability, of great analytical skills, that these are people who know how to rate economies, and that if you want to compete with them and be at their level, you have to do a great level of proving yourself to show that you are as smart as they are and that your methods are as sophisticated as theirs. I want to convey that both on the basis of academic study and on the basis of personal knowledge that this claim is totally and utterly false,” says Friedman.
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