The information and communications telecommunications (ICT) industry could present increased credit risk on imports with the weakening rand and pending interest rate hike.
Coface, the international credit insurance company, says exporters of electronic and IT equipment to SA could become concerned about SA`s ICT industry`s ability to meet its payment commitments. And economists are speculating that there may even be two more interest rate hikes this year.
Currently, SA`s has an A3 credit rating which refers to "adverse political or economic circumstances which may lead to a worsening payment record, but with a low payment default probability".
"In order to grow our economy, it is crucial that SA at least maintains its current credit rating," says Coface director Underwriting Pieter Breitenbach.
Breitenbach says a weakening currency and negative political sentiment could adversely affect the country`s credit rating.
"More than ever, SA needs to project a positive international image, especially in the run-up to 2010, and aggressively protect its current rating while working to improve it to an A2."
Current estimates are that between R2 billion and R5 billion will be needed for ICT expenditure, covering the public and private sectors, in the run up to 2010.
"Credit ratings are affected by macro factors such as economics and politics, but perceptions are also important. The ICT industry needs to also play its part in maintaining SA`s image as a good debtor."
The ICT industry can contribute to this goal by continually meeting its payment commitments.
"A drop in SA`s credit rating could have a severe negative effect on ICT industry imports in preparation for the World Cup."
On the other hand, says Breitenbach, a positive credit rating could assist local ICT importers.
This would provide local ICT companies with the credit they need in preparation for the infrastructural changes needed for the World Cup.
Credit research done obtained by Coface is cross-checked with data from several hundred public and private sources and is used to manage each company`s rating and Coface`s risk exposure on a continuous basis.
Coface produces two credit ratings, company and country credit ratings. "While a company may be perfectly able to pay its creditors, a poor country rating may discourage new IT investment in that country," says Breitenbach.
Coface determines its ratings for each of the 151 countries monitored and ranks country ratings on seven risk levels ranging from A1 to D. See www.cofaceratings.com.
Through its network of international information sources, data is fed into the Common Risk System, which forms the backbone of the Coface Group`s credit risk rating.
The system is used by Coface`s underwriters and clients, to obtain up-to-date information on over 50 million companies worldwide in real-time. It includes default data for EUR300 billion worth of commercial transactions.
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