Moody’s latest mistake on Capitec compounds its earlier error
By Alec Hogg
The 2009 World Economic Forum's annual meetings in Davos were among the most eventful. Coming four months after the collapse of Lehman Brothers sparked the Global Financial Crisis, the WEF's normally rational participants were unable to hold back. Those who had caused the mess, the bankers, were absent. So the WEF attendees rounded on the next best target, CEOs of ratings agencies, the supposed canaries in the financial coal mine who remained silent as the deadly gas leaked into the system. Their mauling was intense. Leaving such deep scars that ratings agencies overcompensated. So they missed the recovery as well.
South Africa is being shown the same ratings agency movie. None of them waved flags ahead of the Abil crash. But on Friday evening Moody's, which is paid R1m a year to assess the credit rating of Capitec, hit the panic button. Basing its analysis on a 30 minute conversation with Capitec's financial director, Moody's identified two new icebergs. So it announced a rare double notch downgrade. Capitec was appalled at what it called a "knee jerk reaction". As was the SA Reserve Bank which blasted Moody's on Saturday morning. Then yesterday on CNBC Africa's Power Lunch both Kokkie Kooyman and Mohammed Nalla added their voices to the "unwarranted, even dangerous" Moody's announcement.
In the wake of all this, might the ratings agency have the spine to admit it made a mistake? Or at the very least, respond to such strong and well grounded criticism? It's not a good idea to hold your breath. Capitec's CEO Gerrie Fourie certainly isn't. He says the half year results to end August will do all the talking that's necessary. The smart call for Moody's would have been to wait five weeks or so until the numbers are released. Then again, ratings agencies haven't been that smart lately.
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