S&P: Growth & reform momentum in Africa drove ratings up in 2024

S&P Global Ratings has highlighted that the growth and reform momentum in Africa were key factors that drove ratings up in 2024. The positive rating actions were concentrated in West Africa, with 11 positive foreign currency ratings across the continent, more than double those in 2023. Benjamin Young, the Sector Lead at S&P Global Ratings, discussed the Africa 2024 Credit Ratings Review and the expectations for the current year. The report emphasized that the economic growth in rated African sovereigns is projected to surpass the global GDP growth forecast of 3%, averaging at 4.8%. Young mentioned that Africa is still on a trajectory of recovery from a low economic base, but the reform momentum is strong among sovereigns and financial services. The report showcased that there were more positive actions in 2024 than negative ones in Africa. Out of the 11 positive actions, including upgrades and positive outlooks, five sovereigns—Benin, Egypt, Morocco, South Africa, and Togo—were highlighted with positive outlooks. Senegal was the only country with a negative outlook due to potential misreporting and a significant restatement of debt from 75% to 100% of GDP. One of the key areas discussed in the report was the Eurobond market. Several countries like the Republic of Benin, Kenya, Nigeria, and South Africa tapped the market successfully last year. Young mentioned that a similar amount of commercial debt maturity is expected this year, urging sovereigns to roll over their exposures. However, uncertainties surrounding the US Fed's interest rate strategy for 2024 and 2025 might impact the ability of sovereigns to access the Eurobond market at favorable rates. The report also highlighted the positive trend among non-sovereign entities, mainly banks in Nigeria, Egypt, and South Africa. The intrinsic credit worthiness of these entities is considered higher than sovereigns, leading to ratings improvement when there is an enhancement in sovereign ratings. Additionally, the corporates sector in South Africa displayed stable performance, even amidst challenges like softer commodities prices and weaker demand. Looking ahead, S&P Global Ratings expressed optimism about the continent's growth trajectories in 2024 and beyond. Strong growth expectations are aligned with positive outlooks, particularly in countries like Benin and Cote d'Ivoire. The stability in oil prices at $75 per barrel further supports economies that are reliant on oil exports. In conclusion, the Africa 2024 Credit Ratings Review reflects the resilience and potential of African economies, driven by growth and reform agendas. The positive ratings actions underscore the progress made by sovereigns and financial entities in navigating challenges and seizing opportunities for advancement.