South Africa is among a plethora of countries on the continent whose long-term foreign currency credit rating is rated junk by S&P Global Ratings whilst Botswana is the only country with a very strong investment grade. According to the table below, the majority of country’s on the continent rated by the organisation are rated at junk making the cost of borrowing excessive. S&P’s ratings express its opinion about the ability and willingness of a government, to meet its financial obligations in full and on time.

The agency states that “credit ratings can also speak to the credit quality of an individual debt issue, such as a corporate or municipal bond, and the relative likelihood that the issue may default”.

S&P describes those with an:

• A investment grade as “having a very strong capacity to meet their financial commitments but somewhat susceptible to adverse economic conditions and changes in circumstances”.
• BBB – adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
• BB speculative grade – less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
• B speculative grade – more vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
• D – speculative grade, payment default on a financial commitment or breach of an imputed promise, also used when a bankruptcy petition has been filed or similar action taken.

Source: Wikipedia