February 2021 – The APRM held its first Capacity Building Workshop with the Republic of Congo, the first African Union Member State to receive technical support in line with the Assembly Decision to support countries in the field of rating agencies. The APRM has been supporting countries through other mechanisms such as its newly established Continental Information Exchange Platform, the African Sovereign Credit Rating Review biannual publication, the Adhoc Committee of Experts as well as engaging with rating agencies on specific rating review outcomes.

The APRM credit rating research team; Dr. McBride Nkhalamba, Ms. Ejigayhu Tefera, and Dr. Misheck Mutize met with Mr. Hermann Rodney Gouellet (Tax and Customs Advisor), Mr. Welcome Cielht Akouala Matondo (Economic Advisor to the Minister for Budget) and Mr. Sylvain Lekaka (Director of the Cabinet of the Minister Delegate in charge of the budget) from the Republic of Congo’s Ministry of Finance and Budget representatives, who also form part of the country’s Credit Ratings National Committee.

This Capacity Building workshop on International Credit Rating Agencies comes at a time when many countries are being downgraded due to Covid-19. “The main objective of the support program is to ensure that the scientific methods of risk assessment are consistently applied in the profiling of Member States creditworthiness. The mechanisms thus provide tools for supporting Member States in the pre-rating preparatory phase, facilitate a systematic credit rating assessment exercise, manage the post-rating appeals and the implementation of admissible recommendations to promote continental policy convergence”, Dr. Nkhalamba.

In her presentation, Ms. Tefera, underscored the APRM’s commitment to continue providing strategic and operational support to AU Member states in the field of rating agencies.  This will be done through technical support missions to prepare Member States for the rating services, continental and national research to produce an annual performance report on ICRAs in Africa and targeted reviews to capacitate Member States liaison team with relevant recommendations to ensure fair credit ratings.

The Republic of Congo welcomed the support initiative by APRM and expressed their willingness to further engage the Continental Secretariat to offer technical support during the rating review exercise in the upcoming sovereign credit rating reviews by Fitch and S&P Global this year. They highlighted the challenges that the country is facing with regards to; the drop in oil price which caused a fall in national revenue by approximately 75%, the lack of economic diversity as the country depended more on oil exports, lack of funding for ongoing critical projects, high deficit and the impact of Covid-19. Further to these challenges, the majority of the country’s debt is commercial, with an estimated 3-quarters of its government debt owed to China in commercial debt. Congo has thus not significantly benefited from G20 debt relief. Despite these challenges however the Government of Congo has expressed commitment to service these debts and avoid defaulting.

Noting that Fitch and S&P classify the Congo’s sovereign rating in CCC-category, it is interpreted as currently vulnerable to nonpayment and its ability to pay is dependent upon favorable business, financial, and economic conditions. On technical areas, the APRM identified that the main driver of negative outlooks turning to downgrades is the failure by government to address specific risk factors cited by rating agencies in previous rating reviews. The following was therefore recommended to the Congo’s National Committee on rating agencies;

• Develop a Ministry of Finance’s strategy for addressing highlighted risk factors in previous review;
• Provide comments on the factual accuracy of the draft rating reports of rating agencies for factual correctness.
• Confirm dates of the sovereign rating review visits with all parties that will be engaged by agencies in the upcoming review;
• Coordinate with all policy departments in government, key public and private sector to ensure coherence in communicating government’s matters to agencies and investors.
• Inform agencies of any materially positive developments in risk indicators.
• Issue Ministry of Finance post-rating action statement, especially expressing government’s commitment in addressing the risk factors highlighted in rating review.
•  Issue government statement on material media speculations on topics such as; government debt, policies, business and political developments to ensure clarity and accuracy on information to stakeholders.
• Attend to all media queries to avoid misinformation, speculative actions by both public media and investors.

Following the discussions, the APRM indicate commitment to continue offering support to the Republic of Congo’s Credit Rating National Committee to enhance their engagements with the international rating agencies and improve the outcomes of future credit rating reviews.

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