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 Aduragbemi Omiyale
One of the players in the hydrocarbon business in Nigeria, Geo-Fluids Plc, which trades its securities on the NASD OTC Securities Exchange, is planning to restructure its share capital with an increased of about 1,090 per cent.
Next Monday, the company will hold its Annual General Meeting (AGM) and one of the resolutions to be tabled to shareholders by the board is an authorisation for raising the share capital from N2.1 billion to N25.0 billion.
This is to be achieved by creating an additional 45,742,332,488 ordinary shares of 50 kobo each, each ranking pari passu in all respects with the existing ordinary shares of the firm.
Funds from this action would be used to expand the business scope to include hydrocarbons, mining, and natural resource development.
“That the share capital of the company be and is hereby increased from N2,128,833,756 to N25,000,000,000 ordinary shares of 50 kobo each, each ranking pari passu in all respects with the existing ordinary shares of the company,” a part of the resolutions read.
In addition, Geo-Fluids wants approval, “To undertake the business of bitumen production and processing in all its forms, including but not limited to the exploration, prospecting, drilling, extraction, refining, treatment, blending, storage, packaging, distribution, marketing, importation, exportation, shipping, transportation, trading, and general supply of bitumen, its derivatives, by-products, and ancillary materials; and to carry on all other related or incidental undertakings, services, or operations that may be considered advantageous, beneficial, or necessary for the advancement, expansion, or diversification of the bitumen industry.”
Also, it wants the authority of shareholders, “To engage in the acquisition, development, and management of mining assets and concessions for the purpose of exploring, extracting, processing, and producing hydrocarbons, oil and gas, minerals, and other natural resources; and to develop, mine, and process coal, industrial minerals, and other raw materials required for industrial, commercial, energy, or infrastructural purposes, together with all related activities necessary to ensure the effective exploitation, utilisation, and commercialisation of such resources.”
Further, it wants, “To operate and participate in all segments of the oil and gas value chain, including but not limited to the exploration, prospecting, drilling, extraction, refining, processing, storage, blending, supply, marketing, distribution, importation, exportation, transportation, shipping, and trading of crude oil, refined petroleum products, petrochemicals, liquefied natural gas, compressed natural gas, and other related hydrocarbons and derivatives; and to establish, own, operate, or participate in facilities, ventures, or partnerships that advance the energy and petroleum sector.”
At the forthcoming meeting, the organisation wants its name changed from Geo-Fluids Plc to The Geo-Fluids Group Plc.
By Adedapo Adesanya
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has warned against the full privatisation of the country’s government-owned refineries.
Recall that the Nigerian National Petroleum Company (NNPC) is putting in place mechanisms to sell the moribund refineries in Port Harcourt, Warri, and Kaduna.
However, this has met fresh resistance, with the President of PENGASSAN, Mr Festus Osifo, saying selling a 100 per cent stake would mean the government losing total control of the refineries, a situation he warned would be detrimental to Nigeria’s energy security.
Mr Osifo said the union was advocating the sale of about 51 per cent of the government’s stake while retaining 49 per cent, which he described as being more beneficial to Nigerians.
“PENGASSAN, even before the time of Comrade Peter Esele, had been advocating that government should sell its shares. The reason why we don’t want government to sell it 100 per cent to private investors is because of the issue bordering on energy security,” he said on Channels Television, late on Sunday.
“So, what we have advocated is what I have said earlier. If government sells 51 per cent stake in the refinery, what is going to happen? They will lose control, so that is actually selling. But for the benefit of Nigerians, retain 49 per cent of it.“
The PENGASSAN leader maintained that if the government had heeded the union’s advice in the past, the oil industry would be in a better state than it is today.
He addressed concerns in some quarters over whether investors would be willing to buy stakes in government-owned refineries, insisting that there are investors who would be interested.
“Yes, there are investors who surely will be willing to buy a stake in the refinery because our population in Nigeria is quite huge, and those refineries, when well maintained without political pressures and political interference, will work,” he said.
However, Mr Osifo warned that even if the government decides to sell a 51 per cent stake, it must ensure that a complete valuation is carried out to avoid selling the refineries cheaply.
By Aduragbemi Omiyale
Capital market operators have been given a deadline by the Securities and Exchange Commission (SEC) for the renewal of their registration.
A statement from the regulator said CMOs have till Saturday, January 31, 2026, to renew their registration, and to make the process seamless, an electronic receipt and processing of applications would commence in the first quarter of 2026.
“These initiatives reflect our commitment to leveraging technology for faster, more transparent, and efficient regulatory processes.
“The commission is taking deliberate steps to make regulatory processes faster, more transparent, and technology-driven. We are investing in automation, database-supervision, and secure infrastructure to improve how we interact with the market,” the Director General of SEC, Mr Emomotimi Agama, was quoted as saying in the statement during an interview in Abuja over the weekend.
He noted that through the digital transformation portal, the organisation has automated registration and licensing end-to-end as operators can now submit applications, upload documents, and track approvals online, cutting down manual processing time and reducing the need for physical visits.
According to him, the agency has also rolled out the Commercial Paper issuance module, which allows operators to file documents, monitor progress, and receive approvals electronically while feedback from early users shows a clear improvement in turnaround time.
“Work is ongoing to automate quarterly and annual returns submissions, with structured templates and system checks to ensure accuracy. A returns analytics dashboard is also in development to support risk based supervision and exception reporting.
“To back these changes, we have started upgrading our IT infrastructure, servers, storage, networks, and security layers, to boost speed and reliability.
“Selective cloud migration is underway for platforms that need scalability and external access, while core internal systems remain on premisev5p for now as we assess security and cost implications.
“At the same time, we are strengthening data integrity and cybersecurity with vulnerability assessments and planned penetration testing once automation and migration phases are stable.
“These efforts show our commitment to building a modern, resilient regulatory environment that supports efficiency, investor confidence, and market stability,” he stated.
Mr Agama affirmed that the nation’s capital market was clearly on a path toward digital transformation adding that there is an urgent need for regulatory clarity on advanced technologies, targeted support for smaller firms, and capacity-building initiatives.
“A phased and proportionate approach to regulating emerging technologies such as AI is essential, complemented by internal readiness through supervisory technology tools.
“Furthermore, investor education, particularly among younger demographics, will be critical to future-proof participation and drive fintech adoption.
“Innovation is vital, but it must be accompanied by responsibility. As operators embrace automation, artificial intelligence, and data-driven tools, they bear a duty to ensure ethical, secure, and compliant deployment. Safeguarding investor data, preventing market abuse, and maintaining operational resilience are non-negotiable,” he declared.
The SEC DG said that ultimately, responsible technology adoption is about building trust, the cornerstone of our markets saying that trust thrives on fairness, transparency, accountability, and regulatory compliance.
He, therefore, urged operators to uphold these principles adding that it will not only protect investors and systemic stability but also strengthen the long-term credibility and competitiveness of the Nigerian capital market.
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