The influence of credit rating agencies on state governance: The case of South Africa

Abstract

In the past decade South Africa has been mired by downgrades from international Credit Rating Agencies (CRAs) which has been detrimental to its policies and economy. This study explored the role played by CRAs in influencing South Africa’s governance prior the current global Corona (Covid 19) pandemic. The study adopted an interpretivist paradigm making it a qualitative enquiry. Data was collected through interviews, purposefully
sampling key knowledge-holders while seeking a thematic analysis of the interview data. The study found that CRAs are key actors in the South African policy-making environment, they determine the creditworthiness of the country and are critical investment gatekeepers, while creating awareness as well as exerting pressure on policy makers in the policymaking process. Consequently, this has had a great impact on both monetary and fiscal policy of the country. Which underpins the overall domestic or local economic development path and eventually affects service delivery and the way of life of citizens. With the current adverse pandemic, and its impact on already fragile economies such as that of South Africa. The role of CRA will become ever more vital during and post the pandemic when countries scramble to borrow and pay debt accumulated before, during and post the pandemic. Making the behaviour of a country (policy-wise) greatly influenced by CRA. South Africa has not been exempted from this conundrum while it has already engaged in talks with the International Monetary Fund (IMF) for funds to help fight the pandemic.

Keywords: Credit Rating Agencies; Sovereign Rating; Governance; Public Policy; Public Actors; Economic Development