(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: Sub-Saharan African Sovereigns: Higher Ratings
Depend on Continued Reforms
LONDON, May 22 (Fitch) Fitch Ratings says in a newly-published report that
targeted reforms and policy initiatives could see Sub-Saharan Africa's (SSA)
sub-investment grade ratings gradually upgraded, despite per capita income
falling well short of peers.
The challenge for Africa from a rating perspective is the low level of GDP per
capita - most SSA countries fall well below even the 'B' median. Extrapolating
current growth trends, only Ghana, Kenya, Nigeria and Zambia will cross the 'BB'
median by early in the next decade. However, investment grade countries such as
India, Indonesia and the Philippines all have per capita incomes below current
'B' category medians.
Sub-Saharan Africa's sub-investment grade ratings could therefore still rise,
despite low per capita income, if reforms focus on enhancing the business
environment and expanding domestic financial markets. Medium-term fiscal
planning - still quite rare on the continent - would also bring greater
confidence that deficits are to finance capital rather than current spending.
Efforts to improve governance standards could also materially affect ratings.
Mitigating the impact of commodity dependence, which is above 'B' rated peers
for most SSA countries, would also be positive for ratings. This increases the
importance of building up reserve buffers, ideally through stabilisation funds,
improving external debt management and creating an enabling environment for FDI
and other long-term investment, in order to strengthen external accounts.
Economic diversification and developing local credit and debt markets would
reduce external vulnerability and improve resilience to external shocks.
Fitch has categorised SSA into three broad groups to help assess which countries
have the most upward rating potential: income-constrained, fiscally-constrained,
and oil producing countries.
Income-constrained countries have the biggest challenge to raise their ratings,
as even sustained above-peer growth will take many years to raise per capita
income to the constantly rising peer group median. Among this group, Mozambique,
Zambia, Kenya and Rwanda could have the most dynamic ratings, reflecting strong
growth track-records and prospects. Most countries in this group would also
benefit from enhanced external buffers and financial market development.
Ghana, Seychelles and Cape Verde are fiscally constrained, reflecting high
public debt and/or budget deficits. Ghana and Cape Verde's ratings are on
Negative Outlook, reflecting recent and prospective deterioration in public
finances. However, weak public finances are more susceptible to short-term
improvement through government policy action. By contrast, structural reforms to
raise growth and per capita incomes take time.
In Ghana, government debt is lower than in both Seychelles and Cape Verde and
the budget deficit tends to be election related rather than structural. Action
to reduce the deficit and maintain it at a low level through the election cycle
would be positive for Ghana's rating. Seychelles and Cape Verde's debt ratios
are much higher and will take time to reduce closer to peer group levels.
However, with good governance and relatively high per capita income, lower debt
could feed through quickly to positive rating action. Seychelles rating is
already on Positive Outlook.
The oil producers (Angola, Nigeria and Gabon) benefit from current account and
fiscal surpluses, generally low debt, strong international reserves and rapid
GDP growth. However, weak governance poses a particular challenge for Angola and
Nigeria. In addition, diversification is key for upward rating momentum, in
order to reduce commodity dependence and the volatility of GDP.
Angola has the most dynamic rating in this group and currently has a Positive
Outlook, reflecting strong growth potential, comparatively high per capita
income, sound government finances, a low interest burden and a steadily
improving external position.
The report, entitled 'Sub-Saharan African Sovereigns: Higher Ratings Depend on
Continued Reforms' is available at www.fitchratings.com
+44 20 3530 1511
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
+44 20 3530 1444
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email:
Additional information is available at www.fitchratings.com.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
Copyright Thomson Reuters 2013. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.