SA coughs up R80m over 9 years for ratings agencies

Cape Town – South Africa has paid a total amount of R81.5m over the past nine years for the services rendered by four international ratings agencies, according to a written response by Finance Minister Malusi Gigaba. 

Democratic Alliance (DA) spokesperson on finance David Maynier asked Gigaba in a parliamentary question to give the total amount spent by government as well as a detailed breakdown of the costs of making use of Standard and Poor’s (S&P), Moody’s, Fitch and any other ratings agency.

In addition to the three well-known ratings agencies, government also pays for the services of a Japanese ratings agency called the Japanese Ratings and Investment information (R&I). 

READ: Gigaba: Ratings agencies fret over SOEs, policy uncertainty 

S&P is currently the “highest paid” ratings agency which cost South Africa R30.6m over a nine-year period, followed by Moody’s at R28.7m and Fitch at R20.3m. Japan’s R&I amounted to R1.8m over the same time span. 

Gigaba in his response said government pays the ratings agencies for services such as annual and quarterly surveillance, the ratings of long-term and short-term debt issuance, the ratings of commercial paper and medium-term notes and foreign and domestic currency issuer ratings. 

Fitch is also reimbursed for travel and lodging expenses when they visit South Africa for their annual ratings mission. 

In April this year, South Africa’s sovereign credit rating was downgraded to sub-investment grade by S&P and Fitch and the verdict is still out on whether Moody’s will follow suit. 

Moody’s – viewed as the more lenient of the three ratings agencies – currently has South Africa on Baa2, which is two notches above sub-investment grade. It is scheduled to pronounce a decision on South Africa’s credit rating as early as in the coming days. 

READ: Moody's may downgrade SA in coming weeks - economist 

The ratings decisions of ratings agencies have come under fire from the ranks of the ANC and even some government officials in the past year.

In November 2016, Luther Lebelo, a senior official at the South African Revenue Service (SARS), wrote a letter on BusinessLive in which he lashed out at ratings agencies, calling the institutions “organised economic gangs". He said their decisions must be viewed in the context of “fear-mongering colonialism”.  

READ: ANC's Mantashe, Duarte slate ratings agencies over political bias 

ANC secretary general Gwede Mantashe and deputy secretary general Jessie Duarte said at a press conference in January this year ratings agencies are “no angels” and they both criticised them for being “politically biased”. 

The ANC Youth League in January called on government to bar Moody’s from setting foot in South Africa. 

In April, The Sunday Times quoted Water and Sanitation Minister Nomvula Mokonyane as saying that South Africa’s junk status was an opportunity for South Africa to restructure its debt repayments. 

“It’s actually better,” she allegedly said in a WhatsApp message. “Western investors will pull back and we have an opportunity to bring them back in our own terms, after we have consolidated our relations with Africa and Brics. We must rearrange our foreign debt repayments.”

However, Gigaba, since his appointment on 31 March, has been at pains to point out that credit ratings opinions bear considerable weight and that government is pulling out all the stops to reassure ratings agencies and investors alike of the country’s fiscal prudence and ability to meet its financial obligations. 

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