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Enhancing Public Debt Management: CABRI's Contribution

29 January 2024
Sustainable Debt Management Q3 Newsletter
(Photo by CABRI)

Dr Misheck Mutize of the African Peer Review Mechanism (right) with Jim Matsemela of CABRI (2nd on the right) and the Government of Uganda's Country Liaison Team

In late November 2023, CABRI's Programme Manager for the Sustainable Public Debt Management programme, part of the Collaborative Africa Budget Reform Initiative, participated in a crucial technical support visit on credit ratings organised by the African Peer Review Mechanism (APRM) in South Africa. The visit, focusing on the Government of Uganda's Country Liaison Team, addressed various aspects of credit ratings, offering valuable insights and strategic perspectives.

Key Discussions and Sessions:

The sessions covered critical themes, including APRM's role in supporting AU member states on credit ratings, factors influencing ratings in Africa, engagement with Credit Rating Agencies (CRAs), credit rating methodologies, ESG ratings, emerging methodologies, and the regulation of credit rating agencies. National Treasury officials, collaborating with CABRI, shared South Africa's sovereign rating management processes through a presentation by Jim Matsemela.

Credit Rating Agency Appointment Process:

Matsemela outlined the credit rating agency appointment process, emphasising its evolution since 1994. Initially driven by the need to issue foreign currency-denominated bonds post-sanctions, South Africa established benchmarks for State-Owned Companies (SOCs) and diversified funding sources. Despite the impact of credit ratings, the RSA Constitution and PFMA do not explicitly address sovereign credit ratings.

Strategic Focus and Importance:

The presentation delved into the strategic focus of ratings, answering why a country like South Africa is rated and the significance of a good rating. The importance of a cohesive communication strategy during the sovereign rating review process was underscored, emphasising the need for a unified government voice. The presentation detailed the steps, key indicators, credit rating evolution, and peer analysis involved in South Africa's sovereign rating review.

Thematic Points and Credit Rating Evolution:

The final part of the presentation provided thematic points since 1993/94, showcasing South Africa's credit rating under various macroeconomic policy initiatives such as the Reconstruction and Development Plan (RDP), Growth, Employment and Redistribution (GEAR), Accelerated and Shared Growth Initiative in South Africa (ASGISA), New Growth Plan (NGP), and the National Development Plan (NDP).

This technical support visit exemplified CABRI's commitment to fostering knowledge exchange and strategic insights in public debt management, contributing to the broader goals of fiscal sustainability and economic growth in African nations.

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