African viewpoint: The politics of credit ratings

A close-up of France's AAA rating being questioned. Is it in the interests of rating agencies to keep some of us in the junk status?

In our series of viewpoints from African journalists, Ghanaian writer Elizabeth Ohene wonders why we get so obsessed with other people's ratings of us.

One of the best put-down lines I have heard in a long time came from a young man during a discussion about Nigeria's fuel subsidy and the demonstrations that followed its withdrawal.

A panel of four was debating the subject on one of the Nigerian television stations.

Tempers were raised - and the host of the programme interjected with: "We shouldn't forget that in neighbouring Ghana, they have also just withdrawn all subsidies on the price of fuel."

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So should we be concerned that France has lost her AAA rating?”

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Quick as a flash came the young man: "Don't bring in Ghana, the size of their budget is like or even less than the budget of Lagos state."

And with a very dismissive wave of his left hand, he moved onto another subject.

That, I thought, should now put the matter to rest. People should really compare like with like - and not pineapples with pawpaws.

And so I approach the subject of the downgrading by rating agencies of the economies of some countries with a lot of trepidation.

Battered egos?

I am afraid here in Ghana we have been occupied by far more interesting stories than the downgrading of European countries - and so the story of France's slide down the ratings did not make it into our newspapers or radio and television bulletins.

But let us recall that France has been downgraded from a AAA rating to a AA.

A smiling Ghanaian vendor carrying fruit on her head Should ratings be only about money and debt - what about well-being?

So should we be concerned that France has lost her AAA rating? Or the US or Italy or all the other countries that are said to have been placed on a watch-list by the rating agencies?

I note that of the 54 countries on the continent, only 18 are given any rating whatsoever - with Botswana and South Africa doing best with As of various categories.

Libya - which used to have an A rating - has dropped off the listings for reasons we shall not get into at the moment.

I must confess that I have not quite mastered the whole rating business. For example, is it better to have a CCC rating as Greece currently has - which I understand is equivalent to junk status? Or is it better not to be rated at all?

If people's egos are taking a battering and they are agonizing about being downgraded to AA+ and you have no grading whatsoever or you are congratulating yourself for having been upgraded from B to B+, should you get involved in any discussion about downgrading?

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Ghana might only make a B+ - but quite a number of Ghanaians have a AAA ranking ”

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It also seems to me that the much-coveted AAA rating can only exist when it is an exclusive grouping.

Even if about 25% of all countries attain a AAA rating, it will surely lose its lustre.

And so it would therefore be in the interest of the rating agencies to make sure that some of us remain in the ratings ranks of junk status - and that makes me suspicious.

But more importantly, can these agencies ever really understand how we rank well-being?

No matter what your bank balance is, should you get top-notch rating when there were only 40 people at the funeral of your father?

One of the agencies apparently claims that a company cannot get a higher rating than the country in which it is sited.

Now that cannot be right.

Over here many people are mercifully doing so much better than the country they live in.

In other words Ghana might only make a B+ - but quite a number of Ghanaians have a AAA ranking.

If you would like to comment on Elizabeth Ohene's column, please do so below.


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  • rate this

    Comment number 14.

    @ Kingsley O
    If you read the news you would see that EU countries has kept their ratings because they had lied to the EU commission (Greece is one), also the ratings system is subject to short term and long term ratings depending on the agency and the transparency of the country involved.

  • rate this

    Comment number 13.

    @ Abbey
    How do you propose that Africans have a "club of creditors" when most African countries are rotten from the inside out? Disregarding Western countries, how can Africa expect to fix itself when (e.g.) Angola has 32 billion petro-$ suddenly disappear as happened this week? Cognitive dissonance is not a healthy approach especially when the problem could be corrupt, authoritarian states.

  • rate this

    Comment number 12.

    African countries should not expect to operate in a vacuum with regards to globalization. They also cannot expect the rest of the world to want to do business with them if they have a bad credit rating as many of them do have. It's all very well that these African countries want respect and considerations but if the rest of world is non-exempt why should Africa be?

  • rate this

    Comment number 11.

    I don't care about any country's ratings. The rich people who own these credit rating companies are using these rating systems to bully country's into doing what they want otherwise they threaten to lower the credit ratings. It's all a scam once again to keep the wealthy in control.

  • rate this

    Comment number 10.

    Thanks Kingsley O. Apart from the reasons analysed, most of the creditors belongs to Paris or London club of creditors or the so called multilateral agencies. They are unknown Capitalist group, backed by the IMF and World Bank. They set up the credit agencies for their own purposes and not for Africans. We should wait until we have Africans club of creditors

  • rate this

    Comment number 9.

    I have no respect for ratings' system; oftentimes, it seems to be a political ploy. African countries should rejoice that they don't have these stupid ratings to complicate their financial existence.
    Anyway, how would rating agencies ever keep up to changing economic situations in Africa?

  • rate this

    Comment number 8.

    #3 Abbey. You were so right! Africans by nature, live within their means and pay cash for everything. Food,clothes even big ticket items like cars and houses. It is Western culture to live above ones means. Incur huge debts and get rated for the ability or inability to pay back the debts. Living within our means should be encouraged not borrowing and going into debt for credit rating sake.

  • rate this

    Comment number 7.

    The reason why many African nations have no credit rating (not even CCC - junk) is because they get 'aid' and non repayable 'loans', instead of private equity via the bond markets. In other words, the ratings are for those who buy bonds to assess the likelihood of getting interest and full repayment at the end. Sadly no one expects most African states to manage either.

  • rate this

    Comment number 6.

    The country-company link is in a large part due to exchange rates and the economy.

    If a country defaults on soverign, its currency will rapidly depreciate, making it harder for companies to repay external debts held in another currency.

    Also due to rapid inflation, domestic demand will be unpredictable, making the home market tougher, also making it hard for companies to pay external debt


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