Corporates placed on negative watch
Fitch’s call to place four state-owned entities on negative outlook came as no surprise following a similar call at the beginning of the month which also placed the country on a negative outlook. The anticipated announcement was made earlier this week by the ratings agency.
The key rating drivers are the earlier negative outlook placed on the country. Said Fitch, “The rating actions follow the revision of the Outlook on Namibia’s Long-Term IDRs and National Long-Term ratings to Negative from Stable.”
Added Fitch, “Namibian Ports Authority and Namibia Power Corporation’s ratings remain aligned to those of the Namibian sovereign, based on Fitch’s assessment of its legal, operational and strategic ties with the state as strong in accordance with the agency’s ‘Parent and Subsidiary Rating Linkage’ criteria.”
Further explaining, Fitch said, “Namibia Water Corporation’s (NamWater) linkage with the Namibian sovereign remains strong in accordance with the agency’s ‘Parent and Subsidiary Rating Linkage’ criteria. However, the lack of strong legal links means that we would view the links as supporting the utility’s rating at one notch below the sovereign rating. As such, NamWater’s standalone profile drives the ratings. The Outlook on NamWater’s ratings is now constrained by the Outlook on Namibia’s ratings. Fitch applies its parent subsidiary linkage criteria to Telecom Namibia’s ratings, which are notched down two levels from Namibia’s Long-Term Local Currency IDR of ‘BBB-‘.”
Rating sensitivities outlined by Fitch was an inability by the Treasury to narrow the fiscal deficit that led to a continued rise in the government debt to GDP ratio, a failure to narrow the current account deficit and a deterioration in economic growth. Added Fitch in its assessment, “Future developments that could result in the Outlook being revised to Stable include; a narrowing of the budget deficit consistent with a stabilisation of the government debt/GDP ratio a marked improvement in the current account balance and increase in foreign exchange reserves.”