In its recent 2016 risk-country review published on January 26, credit-insurer Coface lowered the ratings of five African countries: Algeria, South Africa, Gabon, Tanzania and Madagascar.

Algeria whose economy depends mostly on oil and gas had its ratings dropped to “B” from “A4” with a negative outlook. South Africa also fell down to “B” from “A4” with a negative outlook, due to a sluggish growth and growing social tensions.  

Gabon moved down from “B” with a negative outlook to “C” because of weak price of crude.

As for Tanzania, the continued depreciation of shilling to dollar in 2016 combined to a difficult political environment (cancellation of elections on the Zanzibar Island following fraud allegations) led Coface to bring down the country’s rating to “C” from a previous “B” with a negative outlook.

Finally comes Madagascar who fell to “D”, from “C” with negative outlook, because of its growth which is hampered by political uncertainties.

Due to falling prices of commodities, ratings of Namibia and Zambia (A3 and C respectively) have been tagged with a negative outlook.

The only country to have had its risk profile improved is Cote d’Ivoire whose “C” rating was put under a positive outlook. WAEMU’s driver also benefits from the return of investors as its political situation has stabilized.

Coface’s risk-country ratings respect a 7 levels scale: A1 (very weak), A2 (slightly high), A3 (satisfactory), A4 (convenient), B (fairly high), C (high). These can be associated with a negative or positive outlook. The ratings measure the average level of debt risk for companies regarding their commercial transactions in the short term. They do not involve sovereign debt. To obtain a rating, Coface uses the country’s business environment, its economic, political, financial perspectives, and Coface’s payment experience.

Worldwide, 15 countries were downgraded or put under a negative outlook by Coface. Meanwhile, it gave a positive outlook to only four countries. The credit insurer does not foresee any rebound of growth world-wise. With a 2.7% forecast, it should not do any better than it 2015. 

No area was spared but concern arises mainly from emerging markets. Apart from India, the slowdown is generalized in BRICS’ big emerging markets. Russia and Brazil in fact should see their GDP fall 1.5 and 3% respectively this year.

China’s growth should be capped at 6.2%. In this context, Coface raises another concern: the soaring of companies’ debt in emerging markets. With 160% of GDP, Chinese companies are the most indebted. Since 2008, their debt has increased 60 points. Behind China are Turkey (+30 pt), Brazil (+17 pt); Russia (+14%) and Malaysia (+11 pt).