Economy
Fitch Downgrades South Africa to ‘BB+’
By Modupe Gbadeyanka
South Africa’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) has been downgraded to ‘BB+’ from ‘BBB-‘ by Fitch Ratings with the outlooks stable.
The issue ratings on South Africa’s senior unsecured foreign- and local-currency bonds have been downgraded to ‘BB+’ from ‘BBB-‘.
The rating on the sukuk trust certificates issued by RSA Sukuk No. 1 Trust has also been downgraded to ‘BB+’ from ‘BBB-‘, in line with South Africa’s Long-Term Foreign-Currency IDR.
The Short-Term Foreign-and Local-Currency IDRs and the rating on the short-term local-currency securities have been downgraded to ‘B’ from ‘F3’. The Country Ceiling has been revised down to ‘BBB-‘ from ‘BBB’.
The downgrade of South Africa’s Long-Term IDRs reflects Fitch’s view that recent political events, including a major cabinet reshuffle, will weaken standards of governance and public finances.
In Fitch’s view, the cabinet reshuffle, which involved the replacement of the finance minister, Pravin Gordhan, and the deputy finance minister, Mcebisi Jonas, is likely to result in a change in the direction of economic policy.
The reshuffle partly reflected efforts by the out-going finance minister to improve the governance of state-owned enterprises (SOEs). The reshuffle is likely to undermine, if not reverse, progress in SOE governance, raising the risk that SOE debt could migrate onto the government’s balance sheet.
Differences over the country’s expensive nuclear programme preceded the dismissal of a previous finance minister, Nhlanhla Nene, in December 2015 and in Fitch’s view may have also contributed to the decision for the recent reshuffle.
Under the new cabinet, including a new energy minister, the programme is likely to move relatively quickly.
The state-owned electricity company, Eskom, has already issued a request for information for nuclear suppliers and is expected to issue a request for proposals for nuclear power stations later this year.
The treasury under its previous leadership had said that Eskom could not absorb the nuclear programme with its current approved guarantees, so the treasury will likely have to substantially increase guarantees to Eskom.
This would increase contingent liabilities, which are already sizeable. According to the 2017/18 budget, the government’s guarantee exposure to public institutions was ZAR308.3 billion at end-March 2017, up from ZAR255.8 billion a year earlier.
The main SOEs had additional liabilities of ZAR463 billion in 2016 with no explicit guarantee but with a significant probability that the government would step in should SOEs be unable to service the debt.
The government has repeatedly needed to support SOEs, including Eskom, which is responsible for a large share of liabilities.
The new finance minister has stated that he does not intend to change fiscal policy and remains committed to expenditure ceilings that have been a pillar of fiscal consolidation.
However, Fitch believes that following the government reshuffle, fiscal consolidation will be less of a priority given the president’s focus on “radical socioeconomic transformation”. This means that renewed shortfalls in revenues, for example as a result of lower than expected GDP growth, are less likely to be compensated by expenditure and revenue measures.
This could put upward pressure on general government debt, which at an estimated 53 percent of GDP at end-March 2017 was already slightly above the ‘BB’ category median of 51 percent.
The tensions within the ANC will mean that political energy will be absorbed by efforts to maintain party unity and fend off leadership challenges and to placate rising social pressures for addressing inequality, poverty and weak public service delivery. The Treasury’s ability to withstand departmental demands for increased spending may also weaken.
Political uncertainty was already an important factor behind weak growth last year, as in Fitch’s assessment it has affected the willingness of companies to invest.
The agency believes that the cabinet reshuffle will further undermine the investment climate.
Fitch forecasts GDP growth of 1.2 percent in 2017 and 2.1 percent in 2018, but the reshuffle has raised downside risks.
The current account deficit narrowed to 3.3 percent of GDP in 2016 from 4.4 percent in 2015, on the back of import compression reflecting weak domestic demand, low oil prices and increasing investment income from abroad.
This improvement, together with the flexible exchange rate, will contain pressures should external financing dry up. The government’s low reliance on foreign-currency financing, which accounted for just 11.3 percent of debt at end-March 2017, is also helping to contain external pressures.
Most indicators of economic development are in line with ‘BB’ category medians. GDP per capita at market prices is estimated at USD5,207 for 2016, compared with a median of USD5,007.
The World Bank’s governance indicator, at the 59th percentile, is well above the ‘BB’ median and more in line with the ‘BBB’ median.
However, this may not adequately reflect governance issues that were highlighted in the recent state of capture report by the public prosecutor and governance may deteriorate as a result of the reshuffle.
The rating is supported by a sound banking sector, which has a Fitch Bank Systemic Risk Indicator of ‘bbb’.
By Adedapo Adesanya
The federal government has expressed readiness to leverage the €59 million West Africa Sustainable Ocean Programme (WASOP) as part of intensified efforts to combat illegal, unreported and unregulated (IUU) fishing while strengthening sustainable management of its marine resources.
The Minister of Marine and Blue Economy, Mr Adegboyega Oyetola, made this known in Abuja during a meeting with the European Union Ambassador to Nigeria, Mr Gautier Mignot, where both sides reaffirmed their commitment to deepening cooperation on maritime security and sustainable ocean governance.
Welcoming the EU Ambassador, Mr Oyetola commended the group for its longstanding partnership with Nigeria, particularly its support for maritime stability in the Gulf of Guinea, a region critical to global shipping and regional economic development.
He noted that the West Africa Sustainable Ocean Programme (WASOP) presents a timely opportunity to strengthen coordinated action against illegal fishing, improve ocean governance, and promote sustainable exploitation of marine resources across West Africa.
He said Nigeria is keen to fully engage with the programme to attract technical and financial support that will enhance enforcement capacity and boost the country’s blue economy ambitions.
The Minister stressed that illegal fishing remains a major threat to the marine ecosystem and coastal livelihoods, warning that IUU fishing continues to deplete fish stocks, undermine food security, and erode the economic well-being of coastal communities.
He said: “Illegal, unreported, and unregulated (IUU) fishing is a direct threat to national security, food sovereignty, and the survival of our coastal communities. We cannot afford to stand by and watch our marine ecosystems be depleted and economic livelihoods eroded.
“We are calling for an era of stronger international collaboration, backed by aggressive monitoring and uncompromised enforcement systems, to permanently dismantle these illicit operations and safeguard our waters.”
Mr Oyetola also highlighted ongoing reforms in Nigeria’s maritime sector under the National Policy on Marine and Blue Economy, which prioritises innovation, private sector investment, and sustainable development of ocean resources.
He referenced key milestones in the sector, including improvements in port operations and logistics, as well as enhanced maritime security.
He further noted that Nigeria is strengthening initiatives aimed at expanding its maritime infrastructure and improving competitiveness in global trade.
The Minister also reiterated the need for broader cooperation beyond piracy control, urging development partners to support Nigeria in addressing environmental crimes, human trafficking, and illegal fishing in a more integrated and coordinated manner.
He sought increased technical assistance from the European Union, particularly in surveillance systems, fisheries monitoring, and enforcement capacity to strengthen Nigeria’s ability to curb IUU fishing across the Gulf of Guinea.
On his part, Mr Mignot reaffirmed the European Union’s commitment to strengthening maritime cooperation with Nigeria and supporting regional efforts to ensure safer and more sustainable oceans.
He highlighted the West Africa Sustainable Ocean Programme (WASOP), a major EU-funded initiative designed to promote integrated ocean governance, sustainable fisheries management, and protection of coastal and marine ecosystems across West African countries.
According to him, the programme will support improved coordination among coastal states, strengthen enforcement mechanisms, and promote a more inclusive and sustainable blue economy in the region.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited recorded a 3.11 per cent week-on-week loss last week as a result of the decline suffered by 65 equities. In the preceding week, the bourse ended with 51 price decliners.
In the five-day trading week, 23 equities appreciated compared with 34 equities a week earlier, while 58 equities remained unchanged versus 61 equities in the preceding week.
Business Post reports there was no room for the bulls in the week, as all other indices closed in red, except for the sovereign bond, which finished flat.
ABC Transport lost 24.73 per cent to trade at N6.21, University Press shrank by 17.07 per cent to N5.10, Eterna crashed by 12.92 per cent to N30.00, John Holt slipped by 12.09 per cent to N14.90, and First Holdco decreased by 11.43 per cent to N62.00.
On the flip side, International Energy Insurance gained 60.62 per cent to sell for N7.26, Abbey Mortgage Bank expanded by 47.24 per cent to N9.35, Tripple Gee grew by 9.80 per cent to N4.37, Ikeja Hotel increased by 9.45 per cent to N44.00, and RT Briscoe soared by 8.86 per cent to N14.86.
At the close of business, market participants traded 3.966 billion shares worth N175.659 billion in 343,587 deals, in contrast to the 2.398 billion shares valued at N111.480 billion transacted in 241,313 deals a week earlier, which had only three trading sessions due to the Sallah holiday.
The financial services industry led the activity chart with 2.690 billion stocks sold for N69.975 billion in 134,882 deals, contributing 67.83 per cent and 39.84 per cent to the total trading volume and value, respectively.
The services sector exchanged 323.601 million shares worth N6.443 billion in 25,906 deals, and the ICT segment traded 176.039 million equities valued at N27.892 billion in 40,837 deals.
Access Holdings, Abbey Mortgage Bank, and Sterling Holdco accounted for 1.290 billion units worth N17.560 billion in 17,768 deals, contributing 32.53 per cent and 10.00 per cent to the total equity turnover volume and value, respectively.
By Adedapo Adesanya
The duo of MRS Oil and FrieslandCampina Wamco Nigeria Plc weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.68 per cent on Friday, June 5.
MRS Plc lost N19.00 during the session to sell at N171.00 per share compared with Thursday’s value of N190.00 per share, and FrieslandCampina Wamco Nigeria Plc depreciated by N8.70 to finish at N181.68 per unit compared with the preceding session’s N190.38 per unit.
As a result, the market capitalisation further lost N22.59 billion to close at N2.607 trillion versus the N2.630 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropped 37.76 points to settle at 4,358.32 points, in contrast to the previous day’s 4,396.08 points.
The alternative stock market closed the last trading day of this week with a price gainer, Central Securities Clearing System (CSCS) Plc, which gained 6 Kobo to quote at N78.40 per share compared with the preceding session’s N78.34 per share. However, it could not prevent the market from going down at the close of business.
Yesterday, the volume of securities bought and sold by investors went down by 50.0 per cent to 140,345 units from the preceding day’s 280,714 units, the value of stocks decreased by 16.5 per cent to N17.9 million from the previous session’s N21.5 million, and the number of deals carried out by market participants fell by 35.7 per cent to 27 deals from the 42 deals recorded on Thursday.
When trading activities closed for the day, Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 64.7 million units traded for N4.4 billion.
GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units transacted for N6.5 billion, and Resourcery Plc with 1.1 billion units valued at N415.7 million.
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