Economy
Moody’s Drops South Africa’s Rating to Baa3
By Dipo Olowookere
South Africa’s long-term issuer and senior unsecured ratings have been downgraded to Baa3 from Baa2 by Moody’s.
The rating firm also assigned a negative outlook to the country as well as dropping its senior unsecured Shelf and MTN program ratings to (P) Baa3 from (P) Baa2.
“The government’s senior unsecured short-term program rating was also downgraded to (P)P-3 from (P)P-2. The rating actions conclude the review for downgrade that commenced on 3 April 2017,” Moody’s said in a statement issued on Friday.
According to the rating agency, the factors which brought about the downgrades were weakening of South Africa’s institutional framework, reduced growth prospects reflecting policy uncertainty and slower progress with structural reforms; and the continued erosion of fiscal strength due to rising public debt and contingent liabilities
Moody’s said the Baa3 rating recognizes a number of important strengths that continue to support South Africa’s creditworthiness.
However, the negative outlook reflects the continued downside risks for growth and fiscal consolidation associated with the political outlook.
Over the medium-term, economic and fiscal strength will remain sensitive to investor confidence and hence uncertainty surrounding political developments, including prospects for structural reforms intended to raise potential growth and flexibility in fiscal expenditures, it said.
In a related decision, Moody’s also downgraded to Baa3 from Baa2 the backed senior unsecured debt issued by ZAR Sovereign Capital Fund Propriety Limited, a special purpose vehicle whose debt issuance is ultimately the obligation of the South African government, and assigned a negative outlook.
South Africa’s long-term local-currency bond and deposit ceilings were lowered to A2 from A1, and the long-term and short-term foreign-currency bond ceilings lowered to A3/P-2 from A2/P-1, respectively. The long-term foreign-currency bank deposits ceilings was lowered to Baa3 from Baa2, while the short-term foreign-currency bank deposits ceiling was lowered to P-3 from P-2.
The downgrade, Moody’s said, reflects its view that recent political developments suggest a weakening of the country’s institutional strength which casts doubt over the strength and sustainability of the recovery in growth and the stabilisation of the debt-to-GDP ratio over the near-term.
The first driver for the downgrade is Moody’s view that South Africa’s institutional strength, the second factor in our rating methodology, has eroded.
The independence and strength of key institutions such as the judiciary, the Reserve Bank and the National Treasury are a key support in Moody’s assessment of South Africa’s credit profile, through ensuring the continuity of a predictable, credit-supportive policy environment, the agency explained.
Moody’s said it has taken comfort from the manifest commitment of the country’s policy institutions to achieving a broad program of structural reforms through cooperation between government, labour, and business, while at the same time maintaining rigorous adherence to fiscal spending ceilings and embarking on reforms of state-owned enterprises.
However, recent events, particularly but not exclusively the abrupt March Cabinet reshuffle, illustrate a gradual erosion of institutional strength. The institutional framework has become less transparent, effective and predictable, and policymakers’ commitment to previously-articulated reform objectives is less certain.
As a consequence, Moody’s views the underlying political dynamics which led to the March cabinet reshuffle as posing a threat to near- and medium-term real GDP growth.
Uncertainty over near- and medium-term policy priorities has damaged investor confidence, reducing investment in South Africa’s economy which fell by 3.9% in 2016 and is projected to remain subdued in 2017. Investment levels are likely to remain weak until a more stable policy environment emerges.
Medium-term growth will additionally be constrained by mixed progress with structural reforms, including delays in the implementation of reforms in the mining sector, in the governance of state-owned enterprises, and in the elimination of barriers to competition in key network sectors. With the economy already recording two consecutive quarters of contraction prior to the cabinet reshuffle, Moody’s forecasts growth below 1% in 2017 and 1.5% in 2018, with stagnating investment reducing medium-term (and potential) growth as well.
Lower levels of growth and heightened uncertainty about policy direction and policymakers’ commitment to structural reforms have increased the risk of a weakening of the government balance sheet.
In Moody’s view, lower than expected growth will further delay the stabilization of South Africa’s debt-to-GDP ratio. Instead of stabilizing in 2018/19 Moody’s now expects the debt burden will reach about 55% of GDP that year and continue to rise gradually afterwards. While the National Treasury has reiterated its commitment to expenditure ceilings, pressures to raise public wages will again rise in the next fiscal year as the end of the current three-year agreement will open room for new negotiations. Underperformance on revenue collection is another risk, the statement said.
Furthermore, contingent liabilities linked to state-owned enterprises continue to pose a tail risk to the country’s fiscal strength.
Operational inefficiencies, weak corporate governance, and poor procurement practices persist in SOEs, with government guarantees extended to SOEs rising. This has also increased the likelihood of contingent liabilities crystalizing on the government’s balance sheet. Pressures to further extend guarantees and utilize procurement practices to advance political objectives are sources of additional potential risk.
By Aduragbemi Omiyale
The acquisition of the Bullet brand portfolio from Sun Mark has been completed by Champion Breweries Plc, a statement from the company confirms.
This marks a transformative milestone in the organisation’s strategic expansion into a diversified, pan-African beverage platform.
With this development, Champion Breweries now owns the Bullet brand assets, trademarks, formulations, and commercial rights globally through an asset carve-out structure.
The assets are held in a newly incorporated entity in the Netherlands, in which Champion Breweries holds a majority interest, while Vinar N.V., the majority shareholder of Sun Mark, retains a minority stake.
Bullet products are currently distributed in 14 African markets, positioning Champion Breweries to scale beyond Nigeria in the high-growth ready-to-drink (RTD) alcoholic and energy drink segments.
This expansion significantly broadens the brewer’s addressable market and strengthens its revenue base with an established, profitable portfolio that already enjoys strong brand recognition and consumer loyalty across multiple markets.
“The successful completion of our public equity raises, together with the formal close of the Bullet acquisition, marks a defining moment for Champion Breweries.
“The support we received from both existing shareholders and new investors reflects strong confidence in our long-term strategy to build a diversified, high-growth beverage platform with pan-African scale.
“Our focus now is on disciplined execution, integration, and delivering sustained value across markets,” the chairman of Champion Breweries, Mr Imo-Abasi Jacob, stated.
Through this transaction, Champion Breweries is expected to achieve enhanced foreign exchange earnings, expanded distribution leverage across African markets, integrated supply chain efficiencies, portfolio diversification into high‑growth consumer beverage categories, and strengthened presence in the RTD and energy drink segments.
The acquisition accelerates Champion Breweries’ transition from a regional brewing business to a multi-category consumer platform with continental reach.
Bullet Black is Nigeria’s leading ready-to-drink alcoholic beverage, while Bullet Blue has built a strong presence in the energy drink category across several African markets.
By Adedapo Adesanya
Emerging market fintech firm, M-KOPA, has announced plans to deepen its reach in Nigeria to the South South and South East regions, starting with Edo this year, after providing N231 billion in credit to over 1 million customers in the country.
The firm released its first Nigeria-focused Impact Report, which showed that Nigeria is M-KOPA’s fastest-growing market and fastest to reach the milestone.
Since its foray into the Nigerian market in 2019, M-KOPA has been working to dismantle barriers to financial inclusion by providing flexible smartphone financing and digital financial tools that align with how people in the informal economy earn and manage their money.
It operates in six states in the country, including Lagos, Ogun, and Oyo, among others.
The report highlights the company’s contribution to income generation, digital inclusion and economic opportunity for Every Day Earners across the country.
The report showed that M-KOPA has enabled 290,000 first-time smartphone users, while 56 per cent of agents accessed their first income opportunity through the platform.
It showed high income and livelihood gains among its users, with about 77 per cent of customers leveraging smartphones or digital loans obtained through the platform to generate income, indicating that access to financed devices is directly supporting micro-entrepreneurial activity and informal sector productivity.
Furthermore, 75 per cent of users report higher earnings since gaining access to M-KOPA’s services, suggesting measurable improvements in personal revenue streams. On the distribution side, 99 per cent of agents disclose increased earnings, reflecting positive spillover effects across the company’s value chain.
In addition, 81 per cent of long-term customers state that their household expenses have improved, pointing to enhanced financial stability and better consumption smoothing over time.
Speaking on the report, Mr Babajide Duroshola, General Manager, M-KOPA Nigeria, said, “Nigeria represents extraordinary potential, and we’re proud that it has become M-KOPA’s fastest-growing market. Our Impact Report shows that when Every Day Earners gain access to the right digital and financial tools, they use them to create stability and long-term progress for their families. This is about access that unlocks opportunity and sustained prosperity.”
On its expansion plans Nigeria-wide, the M-KOPA helmsman said, “Many of the states we are considering are already similar to the ones we are currently in proximity… So, there is proximity and similarity between these states, and that’s what we are going to do, starting with Edo.”
He noted that as M-KOPA Nigeria continues to expand, the focus remains on ensuring more everyday earners gain access to the digital and financial tools they need to build resilient, prosperous futures in Nigeria’s rapidly digitising economy.
By Aduragbemi Omiyale
The ban on the export of raw shea nuts from Nigeria has been extended by one year by President Bola Tinubu.
A statement from the Special Adviser to the President on Information and Strategy, Mr Bayo Onanuga, on Wednesday disclosed that the ban is now till February 25, 2027.
It was emphasised that this decision underscores the administration’s commitment to advancing industrial development, strengthening domestic value addition, and supporting the objectives of the Renewed Hope Agenda.
The ban aims to deepen processing capacity within Nigeria, enhance livelihoods in shea-producing communities, and promote the growth of Nigerian exports anchored on value-added products, the statement noted.
To further these objectives, President Tinubu has authorised the two Ministers of the Federal Ministry of Industry, Trade and Investment, and the Presidential Food Security Coordination Unit (PFSCU), to coordinate the implementation of a unified, evidence-based national framework that aligns industrialisation, trade, and investment priorities across the shea nut value chain.
He also approved the adoption of an export framework established by the Nigerian Commodity Exchange (NCX) and the withdrawal of all waivers allowing the direct export of raw shea nuts.
The President directed that any excess supply of raw shea nuts should be exported exclusively through the NCX framework, in accordance with the approved guidelines.
Additionally, he directed the Federal Ministry of Finance to provide access to a dedicated NESS Support Window to enable the Federal Ministry of Industry, Trade and Investment to pilot a Livelihood Finance Mechanism to strengthen production and processing capacity.
Shea nuts, the oil-rich fruits from the shea tree common in the Savanna belt of Nigeria, are the raw material for shea butter, renowned for its moisturising, anti-inflammatory, and antioxidant properties. The extracted butter is a principal ingredient in cosmetics for skin and hair, as well as in edible cooking oil. The Federal Government encourages processing shea nuts into butter locally, as butter fetches between 10 and 20 times the price of the raw nuts.
The federal government said it remains committed to policies that promote inclusive growth, local manufacturing and position Nigeria as a competitive participant in global agricultural value chains.
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