THE ECONOMY: South Africa Rating Maintained
Recent Western Cape Business News
In what is seen as good news internationally for South Africa, it is one of a very few countries globally which has maintained its Coface business rating through the recession. This speaks directly to the relative stability of the business environment in South Africa as opposed to other economies.
The Coface Group, which specialises in trade solutions for businesses including credit insurance, trade information and receivables management in over 104 countries globally, produces country ratings based on the risk of doing business in that country. Macro-economic information such as GDP growth and socio political circumstances are combined with Coface’s experience in payment default, the availability of trade information and the ability to recover money through the judicial system, is combined into a rating.
The ratings range from A1, being an excellent country to trade with, to D being a very risk country to trade with. Coface South Africa was rated as an A3 country from September 2005 until April 2008 when it was placed on negative watch. A negative watch means that certain elements within the rating scale have become negative, and further investigation is required to determine whether the rating should be downgraded.
South Africa has maintained its A3 negative watch status since April 2008. This, in spite of 70 other countries being downgraded in the last 18 months. The countries downgraded include, UK, USA, Australia, Botswana, China to name a few.
The reason for the relative stability of the South African Coface rating has to do with the country's protective financial policies, combined with the government’s ability to react to the economic downturn through the infrastructure stimulation, and the relatively low indebtedness of consumers in South Africa. In addition economic stability leading up to and post the elections, continued steadiness in the business environment within South Africa, and recent green shoots within the economy, have all helped to maintain the rating.
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