Johannesburg - Fitch Ratings Agency’s withdrawal from the South African market has been shrugged off as of not much consequence by local economists.
“It is for Fitch to explain themselves… I am happy that Moody’s and S&P (Standard and Poor’s) remain,” was the only comment from First National Bank economist Cees Bruggemans. Fitch on Friday evening announced that it had decided to withdraw its Financial Services Board (FSB) credit rating agency registration of its South African subsidiary, Fitch Southern Africa.
“The decision reflects Fitch’s desire to maintain an optimal level of analytical resources in each geographic location in which it operates. Fitch remains committed to providing transparency and forward looking credit opinions for issuers and investors across the African continent. Fitch is in active discussions with the FSB on how best to achieve this while respecting South African legislation,” it said in its statement.
Economist Ian Cruickshanks said it was a bewildering decision by the ratings agency.
“Maybe in these difficult times they are finding it hard to find paying customers, companies are probably reluctant to pay for bad news,” he said.
Cruickshanks said the withdrawal was probably another pointer to the slowing down of South Africa’s economy. The withdrawal of Fitch leaves companies and institutions that only have a Fitch South Africa rating to now source their ratings from other agencies, including Moody’s and S&P.
The deregistration of Fitch meant that its credit rating of South Africa would only be valid for the next four months.
According to Treasury spokeswoman Phumza Macanda, the deregistration of the South African arm of the agency would have no impact on the country’s sovereign rating because that was handled internationally by the mother body. Fitch holds a negative outlook on South Africa’s sovereign rating of BBB, which is two levels above junk.
In June Fitch affirmed South Africa’s long-term foreign and local currency Issuer Default Ratings at “BBB” and “BBB+” respectively, and also affirmed the negative outlook.
Key drivers for the rating decision included weak economic growth potential on the back of electricity supply constraints and external financing vulnerabilities. The country’s deep local markets enhanced fiscal financing flexibility, the ratings agency said.
* Additional reporting by Bloomberg
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