The ICT industry could present increased credit risk on imports with the weakening rand and pending interest rate hike. 

Coface, the international credit insurance company, says exporters of electronic and IT equipment to South Africa could become concerned about the local ICT industry’s ability to meet its payment commitments. And economists are speculating that there may be another interest rate hike this year.
Currently, South Africa has an A3 credit rating, which refers to “adverse political or economic circumstances which may lead to a worsening payment record, but with a low payment default probability”.
“In order to grow our economy, it is crucial that South Africa at least maintains its current credit rating,” says Pieter Breitenbach, director: underwriting at Coface.
He adds that a weakening currency and negative political sentiment could adversely affect the country’s credit rating.
“More than ever, South Africa needs to project a positive international image, especially in the run-up to 2010 – and aggressively protect its current rating while working to improve it to an A.”
Current estimates are that between R2-billion and R5-billion will be needed for ICT expenditure, covering the public and private sectors, in the run-up to 2010.
“Credit ratings are affected by macro factors such as economics and politics, but perceptions are also important. The ICT industry needs to also play its part in maintaining South Africa’s image as a good debtor,” says Breitenbach.
The ICT industry can contribute to this goal by continually meeting its payment commitments.
“A drop in South Africa’s credit rating could have a severe negative effect on ICT industry imports in preparation for the World Cup”
On the other hand, says Breitenbach, a positive credit rating could assist local ICT importers.
It would provide local ICT companies with the credit they need in preparation for the infrastructural changes needed for 2010.
Credit research obtained by Coface is cross-checked with data from several hundred public and private sources and is used to manage each company’s rating and Coface’s risk exposure on a continuous basis.
Coface produces two credit ratings: for companies and countries. “While a company may be perfectly able to pay its creditors, a poor country rating may discourage new IT investment,” says Breitenbach.
Coface determines its ratings for each of the 151 countries monitored and ranks country ratings on seven risk levels ranging from A1 to D.
Through its network of international information sources, data is fed into the Common Risk System, which forms the backbone of the Coface Group’s credit risk rating.
The system is used by Coface’s underwriters and clients, to obtain up-to-date information on over 50-million companies worldwide in realtime.