Do You Know Govt Paid R80m To Rating Agencies?
While the economy is continually plunged in its debt leading to its return to recession, it’s been confirmed that South African government paid R80 million to rating agencies.
This is according to the Finance Minister Malusi Giga in his written response to parliamentary questions on how much government has so far spent in payment to the rating agencies.
According to the minister, SA government has paid a total amount of R81.5m over the past nine years for the services rendered by four international rating agencies.
Gigaba was responding to a question by DA’s spokesperson on finance David Maynier who asked for full details of the making use of Standard and Poor’s (S&P), Moody’s, Fitch and any other ratings agency.
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The minister Gigaba also stated that government aside payments to rating agencies, SA government pays for the services of a Japanese rating agency called the Japanese Ratings and Investment information (R&I).
From the details provided, Standard and Poor’s (S&P) remained the highest paid rating agency with R30.6 million being paid to it within nine years.
Next to it is Moody’s with the government paying R28.7 million, Fitch at R20.3 million, while Japan’s R&I amounted receives R1.8 million over the same time span.
These payments are for the services rendered by the agencies for the span of 9years.
These services, according to Minister Gigaba include annual and quarterly surveillance, the ratings of long-term and short-term debt issuance, the ratings of commercial paper and medium-term notes and foreign and domestic currency issuer ratings.
Fitch is also paid additional money for travel and lodging expenses when they visit South Africa for their annual rating mission.
It would be recalled that rating agencies S&P and Fitch downgraded South Africa’s unsecured foreign currency and local currency bonds to non-investment grade – commonly known as junk status.
Following President Jacob Zuma’s Cabinet reshuffle in March, which saw the removal of Pravin Gordhan as finance minister and further fall of the economy as a result, rating agency S&P downgraded SA sovereign credit rating.
While S&P’s outlook was negative, Fitch retained the outlook at stable. The third rating agency – Moody’s – has South Africa two notches above junk status but put the nation’s sovereign rating on downgrade review.
During the ratings downgrade, ANC secretary-general Gwede Mantashe and his deputy Jessie Duarte noted that the rating agencies are no saints and therefore stand the chance of being politically biased.
The ANC Youth League at the time called on the government to bar Moody’s from setting foot in South Africa.
Today, following the unheeded warnings against corruption, and bad policy- noted to be the cause of SA’s main drawbacks- issued by these agencies, South Africa has returned to recession, the first of its kind in eight years.
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Data from Statistics South Africa noted that the economy contracted by 0.7 percent in the first three months of 2017 after shrinking by 0.3 percent in the fourth quarter of last year, lagging market expectations of a quarter-on-quarter GDP expansion of 0.9 percent.
Stats SA noted that political instability, high unemployment and credit rating downgrades have dented business and consumer confidence in South Africa and the rand extended its losses against the dollar, while government bonds also weakened.