The influence of rating agencies on South Africa’s governance and fiscal policies.

Abstract

Since 2010, South Africa (S.A) has received and endured heighted attention in the form of downgrades from Rating Agencies (RAs) who have shown serious concerns about the country’s governance and fiscal policies. This was linked to the political decisions made by the governing political party, the African National Congress (ANC), and the then government, popularly referred to as the ‘Zuma administration’. As a result, post 2010, RAs in S.A have become one of the key oversight institutions in determining the country’s financial borrowing status and also play a key role in the country’s development agenda which is informed by its fiscal policies. A country with a negative rating from RAs often finds it difficult to access capital (loans) as well as in attracting investors. When financial institutions accede to giving loans, such loans are always expensive and bear high interest rates due to fear of high-risk exposure. Within this context, this study explored the influence of RAs on South Africa’s governance and fiscal policies. Underpinned by an interpretivist worldview/philosophy, the study adopted a qualitative design using a phenomenological strategy. The data was collected using in-depth, face-to face, one-on-one interviews which were recorded and guided by an interview schedule. In doing so, non-probability sampling strategy and purposive sampling technique were used. To ensure data quality control, the research ensured data trustworthiness, applying a credibility technique; and the data was analysed using thematic analysis. With the application of this methodology the study found that RAs play a critical role in ensuring that government preserves sound fiscal and governance policies. The study also established that in South Africa, RAs post 2010 played a major role in creating awareness about their existence, role and benefits within the different social spheres in the country. The study further found that methods of rating applied by RAs does not take into cognisance the socio-economic circumstances and conditions that affect the country being rated, hence it becomes difficult for countries such as in the case of South Africa to implement the recommendations provided by RAs.