The AU’s African Peer Review Mechanism (APRM) has lambasted Fitch Rating Agency for meddling in the country’s political affairs.
APRM’s lead expert on credit rating agencies Dr Misheck Mutize accused the agency of attempting to manipulate South Africa’s internal politics.
Mutize’s harsh criticism comes after the rating agency’s statement suggesting that an ANC-DA coalition could help the country’s credit profile.
“We are not enemies with rating agencies... It’s important to acknowledge that financial markets are an arena of opinions and investors rightly trade on opinions.
“So if such an influential institution, which should operate independently, issues such an opinion that could unfavourably sway investors,” he added.
Mutize said the rating agencies were becoming arenas of opinions which according to him, bothered on the bias side.
He said such tendencies had a profound impact on how investors viewed a particular country as they relied on the opinion of these rating agencies.
“We believe that whatever the outcome of the ongoing negotiations could be, if it’s not what Fitch views as a favourable outcome it could likely take a negative action against the country.
“It is very important for ordinary citizens to understand that whatever direction rating agency takes affects everyone, because if such an opinion is negative it has a direct impact on cost of borrowing,” added Mutiz.
APRM representative said the continent was concerned with the rating agencies’ behaviour as they suffered greatly from their “bias opinions” adding that resulted in the continent paying a big chunk of its money to the borrower.
“Their negative rating also diverts resources that are aimed at improving the socio-economic development of the government towards paying debts and recurring expenditure.
“As a global financial institution Fitch Ratings should conduct itself as an independent and non-political institution. The APRM views this comment by Fitch as premature and unsubstantiated.
“Fitch should have waited for the outcomes of the ongoing negotiations by political parties and the resulting policy choices to make conclusions that are based on facts and informed analysis”.
On its statement Fitch Ratings, suggested that the South Africa’s debt trajectory would face additional risks if the former ruling party – ANC, enters into coalition with uMkhonto weSizwe Party (MKP) or the EFF, which Fitch characterises as “populist parties” with radical agendas, that pose challenges to macroeconomic stability leading to a broad weakening of investor confidence and eroded governance.
SACP spokesperson Dr Alex Mashilo also accused Fitch of descending into a political arena.
Mashilo said it was not the first time that the agency had interfered in countries’ affairs.
“They were recently criticised to be specific in China for underestimating china’s growth potential and overestimating china’s sovereign rate debt risk,” he explained.
The Star