Transcript Financial Integration and Risk Mitigation in Southern Africa

Financial Integration and Risk Mitigation
in Southern Africa:
UNDP/S&P Ratings Initiative
OECD policy seminar
25 – 26 March
Konrad Reuss
Standard & Poors
Number of Standard & Poor's
Sovereign Credit Ratings
120
100
80
60
40
20
0
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
Distribution of FX Sovereign Ratings 1975-2003
AAA
(#)
AA
A
BBB
BB
B
CCC/C
SD
120
100
80
60
40
20
0
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
*Implied senior debt ratings through 1995; sovereign credit ratings thereafter.
ODA vs. FDI vs. MDGs
• ODA flows have been declining:
– Peak in 1990 of US$ 63.5 billion
– Down to US$ 34 billion in 2002
• Private capital flows to developing countries surpassed ODA going
from US$ 60bn to US$ 150bn
• Africa received 2.3% of the world FDI, and only 0.7% of world equity
investment.
• No single African country under the top 20 FDI recipients; flows to 23
of the continent’s 53 countries declined in 2002.
• FDI to Africa fell to US$ 11billion in 2002 from US$ 19 billion in
2001
• US$ 50 billion investment needed annually between now and 2015
needed to achieve MDGs
Strategic Objectives
• Enhance resource mobilisation through
strengthening domestic financial systems.
• Improve developing countries access to foreign
direct investment and other private capital
flows.
Ratings and LDCs
• The traditional use of sovereign ratings vs. the
needs of LDC
• Are sovereign ratings a sufficient or necessary
condition for promoting capital flows to
LDCs?
• Do sovereign ratings provide new information,
that is not already available?
Africa – Sovereign Ratings History
• South Africa: BB (Oct. 94); BB+ (Nov. 95); BBB(Feb. 2000); BBB (May 2003)
• Senegal: B+ (Dec. 2000)
• Botswana: A (April 2001)
• Ghana: B+ (Sept. 2003)
• Cameroon: B (Nov. 2003)
• Benin: B+ (Dec. 2003)
• Burkina Faso: B (March 2004)
Per capita GDP (in USD)
2000
1800
1600
1400
1200
1000
800
600
400
200
0
Benin
Burkina
Cameroon
Ghana
B-Median
2000
2001
2002
2003
2004
2005
Real per capita GDP (% chg.)
4
3.5
3
2.5
2
1.5
1
0.5
0
-0.5
-1
Benin
Burkina
Cameroon
Ghana
B-Median
2000
2001
2002
2003
2004
2005
Government deficit-to-GDP
8
6
Benin
Burkina
Cameroon
Ghana
B-Median
4
2
0
-2
-4
2000
2001
2002
2003
2004
2005
Government Debt-to-GDP
180
160
140
120
100
80
60
40
20
0
Benin
Burkina
Cameroon
Ghana
B-Median
2000
2001
2002
2003
2004
2005
Conclusions
• Ratings have to be seen as part of the wider
range of initiatives in the context of NEPAD,
MDGs and AGOA
• The combined effect could open the way
toward integrating Africa into global capital
markets.