The global credit crisis and subsequent recession slump has resulted in Coface downgrading over 60 countries over the past two years, it announced in its recent results. Countries downgraded include the UK, moving from A1 to an A3 rating due to massive business failures and deep rifts in economic policy. Botswana was downgraded from and A2 to A4 due to the fall off in demand for tourism and diamonds.
South Africa has had an A3 country risk rating since 2005. The country was placed on an A3 negative watch country rating in 2007 following the xenophobic attacks based on the social and political tensions the attacks highlighted.
The A3 rating means that SA has a stable business environment with a good business infrastructure and the strong likelihood of debt recovery should a South African company fail to pay for goods. However, concerns around political and social stability do pose a risk for foreign investors, it says.
South Africa's rating stability throughout the recession is mainly due to government's sensible fiscal management of the problem. With global markets recovering around the world, the country needs to show business rejuvenation and improvement in debt repayment trends, along with political and social improvement. These elements are key to ensuring foreign investor interest in South Africa.
The group runs an international rating department based on macro and micro economic information for every country around the world. This rating indicates the risk of payment default in each country by reviewing elements such as business infrastructure, its credit insurance payment experience in that country and socio/political influences. The ratings range from A1 being the lowest risk rating to D being the worst risk rating.
Suppliers to those countries use the ratings to manage their credit risk exposure. It also rates each country's business environment, looking specifically at elements such as the banking system, judicial and legal systems, and availability and reliability of corporate information.
Coface, a subsidiary of Natixis, facilitates global business-to-business trade by offering business lines to fully or partly outsource trade relationship management and to finance and protect receivables: credit insurance, factoring, ratings and business information and receivables management. Its service is delivered by 7000 staff in 65 countries.
