Review of subnational credit rating methodologies and the applicability in the South African context

Abstract

A credit rating is a prerequisite to enter financial markets. While most sovereigns have assigned credit ratings, many subnational governments (i.e. states, provinces or counties) do not, despite the considerable benefits they enjoy. Of the subnational governments that are rated, those residing in developing economies face considerable hurdles. No subnational credit ratings or a methodology to institute these exist for South African subnational governments. This article reviews subnational credit rating methodologies and discusses the applicability in terms of challenges and benefits for such a rating system in South Africa