There must be a mechanism somewhere that can be used to hold ratings agencies to account for the undeserved damage a negative or even a poorly thought out rating can do.
When a country’s sovereign rating is cut by Moody’s, Fitch or Standard & Poor’s, usually based on factors that are visible to all except the bone-headed politicians and administrators whose policies created the problem in the first place, that’s one thing; but all the citizens get to pay for the pleasure of having their economy paralysed (like South Africa), deflated (like Japan) or sunk (like Zimbabwe).
Remember, it is not just taxpayers who get shafted when the fiscus takes a hit from increased borrowing charges and the like; the poorest people (almost everyone) get especially hammered by inflation and we all pay VAT. It kind of makes the big stuff democratically acceptable.
All this on the whim of a handful of privately owned businesses that hold economies and markets by the throat with their arbitrary observations and opinions.
But when the victim is a business, like Capitec Bank, which at one stage yesterday saw 4.9 percent clipped off its share price and market cap on the basis of a bad, bad rap from Moody’s that chose to lump a good bank in the basket with the bad bank, African Bank, the pain is real and unfairly and uneccessarily applied.
Both play in the murky unsecured lending market, African Bank exclusively and Capitec with perhaps more circumspection and with the benefit of funding its loans with the deposits it also takes.
With analysts saying that Moody’s call was largely driven by fear after seeing the African Bank calamity, is it too much to expect that the agencies also take in the bigger picture that considers the positive differences alongside the negative similarities?
Sun International
Sun International has been one busy hotel and casino operator this year. From juggling multiple acquisitions with its competitors, Tsogo Sun and Grand Parade Investments (GPI) earlier this year, to selling a majority of its African stake to Minor International Public Company, also known as Mint.
At the moment, Sun International has made it clear that it wants to grow its Asian and Latin American presence and has also made significant investments in casino operations around the world.
In May it announced that it would buy up to 70 percent of GPI Slots, a holding company for all GPI’s limited payout machine (LPM) operations. The GPI Slots transaction is expected to be completed in three phases, with the purchase consideration being based on the financial results for the years to June 2014, 2015 and 2016.
At the time of the announcement, Sun International said the rationale behind this acquisition was that the LPM market was fragmented and was gaining traction.
As part of its strategy to increase its footprint in the Latin American and Asian markets, Sun International announced plans to buy the remaining stakes from different shareholders in Chilean gaming group Monticello.
It will also operate the Ocean Club Casino in Panama and has applied for a casino licence in Cartagena, Colombia. But the group said this did not mean that it would move from its core business, which is hotel operations.
Yesterday’s news that the group would dispose of its African assets was driven by the plans to consolidate its business and increase its focus in Asia and Latin America.
On completion of the latest transaction, Sun International would own an interest of 20 percent or less in the Gaborone Sun, Kalahari Sun, Lesotho Sun and Royal Swazi Sun, among other operations. Proceeds from this transaction would be used to reduce debt and invest further into the Latin American and Asian markets.
Edited by Peter DeIonno. With contributions from Peter DeIonno and Nompumelelo Magwaza.