Digging through the data of S&P Global offers surprising findings. Sub-Saharan African sovereigns rated in the B category between 2010 and 2023 defaulted in 22 per cent of all cases within five years. The respective global number stands at a long-term average of only 16 per cent. Over at Moody’s, the observed default ratios look similar at 30 per cent for sub-Saharan African sovereigns and 15 per cent for its global average. The default data shows that default rates of African sovereigns are higher at each rating level than that of their global peers. Africa’s ratings have been too high, not too low. The actual, objectively-observed bias in sovereign ratings has been in favour of Africa. This is not to belittle the severity of the debt crisis ravaging the continent and the consequent setback in its quest for progress and poverty alleviation. However, the data shows that much of African criticism of credit rating agencies is a red herring. The agencies are convenient scapegoats. African leaders should focus instead on pushing for faster debt restructuring mechanisms. Progress in this area has been at a glacial pace. Each day that goes by without removing the debt overhang intensifies the social and economic crisis in Africa.
China has a some pretty significant sovereign debt exposure in Africa but has also frequently negotiated special conditions which put them at the head of the line in restructurings. Some tough times ahead.
And the more basic issue is not that financiers are too harsh in their judgments but that the commercial opportunities in Africa simply are not wha they need to be in order to serve the expectations of the population. Most the issue is, in my opinion, an absence of freedoms combined with central planning at national and international levels (World Bank, IMF, NGOs, etc.)
Institutional support for individual rights (including property rights) would do wonders. But we are not there yet.
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