The purpose of this publication is to aid regional and sectoral comparability, alongside providing a platform for understanding GCR Ratings. The table and charts below provide a snapshot of the GCR risk scores across GCR’s public issuer credit/financial strength ratings, as of Q3 20231.
At the time of publication, GCR rated approximately ZAR426 billion of the combined South African short-term interest bearing and money market funds (by funds under management). This segment represents 15.5% of the total South African funds industry (by assets under management) and 50% of South African interest-bearing funds as at 31 March 2023. The following report provides a peer comparison of rated funds, including a snapshot of the ratings factors and some other market related information.
Outlined below is a breakdown of the rated funds using the major components of the Criteria for Fund Ratings, which can be found on the GCR website. Fund ratings (f) are not credit ratings. Therefore, they do not measure the relative ability of a fund to repay principal and/or interest in a timely manner. Rather, Fund ratings indicate an opinion regarding the fund’s ability to preserve the principal value under varying market conditions which may be affected by credit risk, interest rates, and liquidity, as well as other market conditions. The report does not focus on fund performance.
The proliferation of both residential and commercial solar energy installations in South Africa over recent months evidences the emergence of a new asset class. As more and more rooftops glisten with panels, more and more providers are creating receivables in the form of contracts to collect monthly payments. These providers face the problem of finance. This following report considers the potential of tapping the debt capital market through securitisation as a source of wholesale finance for household and commercial solar providers and financiers.
Many factors will influence the future scale and economics of South African solar power. Two of the most important of these are access to capital and cost of capital. Asset-based securitisation could play a role in the South African solar energy market that is as powerful as the role that it played in revolutionising mortgage finance. Auto loans represent another asset class fuelled by securitisation. Retail solar energy can be yet another.
• The Nigerian hospitality sector has demonstrated a strong comeback in revenue since COVID-19 as international tourist arrivals and business tourism are reaching pre-pandemic levels on the back of the total relaxation of pandemic-related restrictions. The sector also recorded strong support from the leisure segment.
• Nonetheless, the Russo-Ukrainian conflict has constrained the pace of recovery. In the past year, the sector has grappled with various challenges, including sustained inflationary pressure from higher than anticipated global energy prices, the persistent rise in food prices and general operating expenses, and rising interest rates.
• Aside from these macroeconomic challenges, there are industry-specific challenges including low governmental support for the hospitality and tourism sector, inadequate regulatory oversight, and low levels of standardization, which diminish the global attractiveness of the sector.
• Despite the rebound in demand, these challenges have moderated the financial performance of the sector. As such, industry earnings are expected to remain volatile, with pricing pressures making second-tier players especially vulnerable to losses.
• Overall, we expect that the country’s importance as a key business destination in Africa should continue to support industry growth.
The purpose of this publication is to aid regional and sectoral comparability, alongside providing a platform for understanding GCR Ratings. The table and charts below provide a snapshot of the GCR risk scores across GCR’s public issuer credit/financial strength ratings, as of Q2 20231.
The GCR Ratings Framework is anchored upon the GCR Risk Score. This numerical scoring system, which forms a single analytical approach across multiple sectors (including Financial Institutions, Insurance Companies, Corporates, Asset Management, Investment Holding Companies and Financial Services Companies), was designed to improve the transparency of GCR’s ratings. Furthermore, GCR risk scores simultaneously determine both international and national scale ratings, which is a significant enhancement from the traditional approach of determining national scale ratings from international ratings via mapping tables. Lastly, we believe the GCR’s Ratings Framework anchors an entity’s creditworthiness in its operating environment.
If you are interested in the underlying scores, ratings, a more detailed score breakdown for any of the issuers mentioned, or the methodologies that underlay the scores please visit our website.
ESG stands for Environmental, Social, and Governance. It is a set of criteria used to assess a company's performance and practices in these three areas. ESG factors are used to evaluate the sustainability and societal impact of a company, beyond just its financial performance.
L’inflation est restée maitrisée au second semestre de l’année, à 2,8% en décembre 2022, concrétisant l’efficacité des mesures gouvernementales anti-inflationnistes de février et mars 2022, consistant principalement en un renoncement partiel de l’Etat à la TVA, la subvention de certains produits importés, l’instauration de mesures tendant à limiter l’exportation de certains produits et intrants agricoles. Selon le FMI, la maitrise de l’inflation dont a fait preuve le Bénin est également à mettre à l’actif d’une bonne saison agricole. Cela dit, le Bénin reste le seul pays de l’espace UEMOA à avoir su maitriser les conséquences des conjonctures régionale et internationale sur l’évolution du niveau général des prix à la consommation.
With the South African private healthcare sector still on the road to recovery post the outbreak of the COVID-19 pandemic, another contagion is currently posing a significant threat to its financial wellbeing. Loadshedding – a symptom of the chronic South African energy crisis for which it seems a vaccine is not in sight - refers to ongoing periods of widespread national blackouts of electricity supply, which commenced in late 2007. Having been left untreated, it has worsened considerably and become critically detrimental to the healthy functioning of the South African economy and its people. As private healthcare providers can ill-afford periods of total blackouts due to the life-saving nature of the care that they provide, the energy outages have forced industry players to run costly generators so as to ensure uninterrupted electricity across their campuses. However, as the price of fuel and diesel continues to escalate globally, the costs associated with running and maintaining these generators is quickly eroding the profitability of the sector that is still reeling from the long-term after-effects of the pandemic.
• The South African medical schemes industry continued to show resilience during and after the COVID-19 pandemic due to sustained solvency strength despite increased earnings risk from slow membership growth and swings in benefit utilisation patterns.
• Membership growth has remained subdued for both open and closed medical schemes and has been compounded by low contribution increases that are sympathetic with real income pressures and option buydowns.
• Compensatory behaviour saw earnings deterioration driven by excess claims in post COVID-19 pandemic trading and high expense inflation. However, stronger investment yields from the interest rate upcycle could moderate the deterioration in net incomes over the short to medium term.
• Solvency levels for the industry remained strong, given sound reserve buffers, and are expected to moderate defensively as the earnings impact on capital balances is likely to be partly offset by slower growth in capital demands to cover contributions.
• Liquidity metrics are expected to trend within an adequate range, supported by large and tradable investment portfolios. Liquidity strength is, however, susceptible to weakening operating cash flows over the medium term, due to the high likelihood of a sustained surge in benefit utilisation.
• We also note consolidations in the industry through mergers and acquisitions, and the proliferation of low-priced unregulated health insurance products as well as the proposed National Health Insurance bill as early stages of a process of disruption that could result in a differently structured industry over the medium to longer term.
• Overall, risks have not increased substantially since our review of the sector in September 2022, which resulted in the sector risk score being lowered to 7.50 from 7.75. Therefore, the current sector risk score has been maintained, taking cognisance of tolerable imbalances in solvency drivers over the medium term.