In step with an international paradigm shift to adapt various methods to suit the unique needs, cultural practices, linguistic variances & economies of different nation states, groups & individuals, Sovereign Africa Ratings (SAR) aims to usher in a methodologically sound approach to sovereign ratings. Emerging markets present numerous opportunities for business, as well as international corporatio
ns & fund managers as it is a continent with vast natural resources, albeit fraught with challenges. Conflict, drought, poverty, military coups & unstable governments still dominate the landscape, especially in Africa. Corporate activity in emerging markets depends on a keen understanding of political & socio-economic dynamics, analyzing the macroeconomic environment, pure business transactions, due diligence & binding contracts. The sole reliance on external credit ratings agencies to determine the investment grades of emerging markets, as well as the juristic entities conducting business within emerging markets, could place the economies in a precarious position. It is argued that the ratings by privately owned foreign entities could be perceived as being biased & not adequately take into consideration various unique factors that shape the emerging countries being rated. Sovereign credit ratings are a prerequisite for governments to access the capital market, particularly the international capital market, to finance infrastructure investments. Developing countries are increasingly engaging with international rating agencies to rate the creditworthiness of their governments. As part of broad fiscal reform, sovereign credit ratings help enhance fiscal transparency, price risks & returns, & facilitate capital market participation in fiscal monitoring & surveillance. The task of credit rating agencies is to provide global investors with an informed analysis of the risk associated with debt securities.
