International insurance company, Allianz Trade has released its first Country Risk Atlas and investigated some of the major issues South Africa faces.
The Country Risk Atlas is based on a proprietary risk ratings model that is updated every quarter with the latest economic developments and the organisation’s proprietary data on global insolvencies, according to a statement.
“The Country Risk Atlas provides comprehensive analysis and insights into economic, political, business environment and sustainability factors that influence trends in non-payment risk for companies at a macroeconomic level,” according to Ana Boata, head of Economic Research at Allianz Trade.
Boata said that the publication hopes to be a guide for businesses and investors in making informed decisions by identifying potential risks and opportunities in 83 different economies.
In this first Atlas on risks, Allianz Trade reveals that it upgraded 21 country risk ratings in 2023, including South Africa.
According to the organisation, these countries showcased their resilience to global shocks.
“The trend is totally different from that of 2022, when Allianz Trade upgraded only eight country risk ratings while downgrading 17,” it said.
South Africa: Strengths and weaknesses
Allianz Trade said that South Africa's strengths lie in its positive economic performance, despite the issues we face such as load shedding, critical infrastructure backlogs and huge unemployment numbers.
The report did note that SA has experienced declining trends in insolvencies and reduced external vulnerabilities.
According to the research, fiscal consolidation efforts, disciplined salary increases, and increased tax collection have contributed to stabilising the government debt ratio.
South Africa additionally showed external resilience to shocks, with abundant international reserves, a flexible exchange rate, and limited external debt in foreign currency.
Some of the weaknesses the country faces, according to Allianz Trade, include the lack of a reliable electricity supply. This hinders growth and impacts businesses, industries, and households.
The report also noted that SA ranks poorly in public debt sustainability risk due to short-term absorption of revenues for debt repayment and elevated sovereign bond yields.
The infighting that has been prevalent in the ruling African National Congress (ANC) and other political parties could also impact our risk rating, it said.
The research noted that “disputes among political elites have led to social unrest, impacting the institutional framework and predictability of government action”.
OTHER CREDIT RATINGS
Standard & Poor's credit rating for South Africa stands at BB- with a stable outlook.
Moody's credit rating for SA was last set at Ba2 with a stable outlook.
Fitch's credit rating for SA stands as a BB- with a stable outlook.