Credit quality across Africa has been declining, according to analysts speaking at a credit ratings event in London. Global rating agency Moody’s says the last 12 months saw 7 downgrades out of its 21 African sovereign ratings. Seven credit ratings are on negative outlook and only Morocco and Egypt are on positive outlook.
Several countries including South Africa stayed with high Baa3 ratings. South Africa has a Moody’s sovereign release date (updated on rating) on 12 October. Other rating agencies S&P and Fitch downgraded its local currency bonds to “junk” status, meaning below investment-grade, according to this story from Bloomberg. Namibia has Ba1 status, with a negative watch following an August review.
Zambia’s long-term issuer rating has been downgraded to Caa1 stable in July, below Democratic Republic of Congo (DRC) which was rated B3 negative in June. Mozambique is rated Caa3 negative. Other countries which have seen rating downgrades are Angola and Kenya, while Tanzania and Cameroon are on negative outlook.
The bad news comes despite good growth in some parts of Africa. Key concerns are the ways governments manage fiscal policy, with elevated budget deficits and rising debt levels, after many governments issued large amounts of foreign currency bonds. Some countries which have borrowed heavily to invest into developing infrastructure face governance questions on whether prices are inflated – Zambia is particularly affected. Debt problems are worse because of local currency declines.
Investors into Africa at a Moody’s event in London on 26 September are also worried about global financial conditions and shocks, but are more confident on domestic politics.
Lucie Villa, Moody’s Vice President-Senior Credit Officer, commented that South Africa’s economy is likely to accelerate in 2019 but to remain timid, while recognizing the challenges faced by National Treasury meeting different fiscal and social objectives. Most foreign investors into South Africa use the ZAR currency.
Daniela Re Fraschini, Assistant Vice President in the Sovereign Risk Group, says East Africa remains the fastest-growing region, with Kenya, Uganda, Rwanda and Tanzania all forecast to grow well. Kenya and Tanzania are more resilient because their economies are more diversified. Rwanda has been consistently more competitive.
Rising oil prices could bring good news for Nigeria, Gabon, Congo and Angola.
Moody’s has increased its credit ratings from 31 to 51 African banks and Akin Makejodunmi, Vice President and Senior Credit Officer at Moody’s, says Islamic finance could double its share of the sector, from 5% to 10%, given that 40% of the population are Muslims.

For more on Moody’s credit ratings on African governments and many corporate issuers, see www.moodys.com