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Moody’s downgrades SA’s biggest banks – outlook negative

Moody’s downgrades SA’s biggest banks – outlook negative

Credit ratings agency, Moody’s Investors Service has downgraded the five largest South African banks on Monday from Baa2 to Baa3.

In a statement released on 12 June 2017, Moody’s said it has downgraded the long-term local and foreign currency deposit ratings of Standard Bank, FirstRand, Absa, Nedbank and Investec, following the earlier sovereign rating’s downgrade to Baa3.

“The rating agency has also downgraded Standard Bank Group Limited’s long-term local- and foreign-currency issuer ratings to Ba1 from Baa3, and affirmed all banks’ national scale ratings.” Moody’s stated.

“This rating action concludes the review initiated on 4 April 2017, and follows the weakening of the South African government’s credit profile, as captured by Moody’s similar rating action on the sovereign rating on 9 June 2017. The rating action also takes into account the reduced capacity of the [South African] government to provide support to banks in case of need.”

Moody’s said the weakening credit and macro profile of the South African government exerts pressure on SA banks.

“The primary driver for today’s rating downgrades is the challenging operating environment in South Africa, characterized by a pronounced economic slowdown, and weakening institutional strength that has led Moody’s to lower South Africa’s Macro Profile score to ‘Moderate-‘ from ‘Moderate’. The lower Macro Profile exerts pressure on the individual factors on banks’ scorecards, and implies that the country’s banks need stronger loss-absorption and liquidity buffers to withstand the headwinds and in order to remain at the same rating levels.”

The rating agency expects [SA] GDP growth of only 0.8% in 2017 and 1.5% in 2018, from 0.3% in 2016, levels significantly below the government’s target growth. The banks’ high sovereign exposure, mainly in the form of government debt securities held as part of their liquid assets requirement, links their credit profile to that of the government.

The top five banks’ overall sovereign exposure, including loans to state-related entities, averages more than 150% of their capital bases, according to South African Reserve Bank’s regulatory returns (BA900) as of March 2017.

The negative outlook assigned to all the banks’ ratings is primarily linked to the negative outlook on the sovereign rating, which is itself partly driven by the weak economic environment.

As a consolation, Moody’s said although it expects banks’ financial fundamentals to largely remain robust, the weak economic environment increases the downside risks for the banks’ asset quality and core capital levels. The relatively weak economic growth points to potentially higher impairments for the banks, especially on the retail front, exerting some pressure on their earnings and testing the resilient performance they have demonstrated in recent years. However, Moody’s does not anticipate that the asset quality deterioration will compromise materially banks’ recurring earnings, and expects banks will maintain healthy capital levels.”

About The Author

Musa Carter

Musa Carter is a long-standing freelance contributor to the editorial team and also an active reporter. He gathers and verifies factual information regarding stories through interviews, observation and research. For the digital Economist, he promotes targeted content through various social networking sites such as the Economist facebook page (/Nameconomist/) and Twitter.

Following reverse listing, public can now acquire shareholding in Paratus Namibia

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20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.