Original Research

A proposed quantitative credit-rating methodology for South African provincial departments

Erika Fourie, Tanja Verster, Gary Wayne van Vuuren
South African Journal of Economic and Management Sciences | Vol 19, No 2 | a1260 | DOI: https://doi.org/10.4102/sajems.v19i2.1260 | © 2016 Erika Fourie, Tanja Verster, Gary Wayne van Vuuren | This work is licensed under CC Attribution 4.0
Submitted: 03 December 2014 | Published: 13 May 2016

About the author(s)

Erika Fourie, North West University, Centre for Business Mathematics and Informatics, South Africa
Tanja Verster, North West University, Centre for Business Mathematics and Informatics, South Africa
Gary Wayne van Vuuren,, United Kingdom

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Abstract

The development of subnational credit-rating methodologies affords benefits for subnationals, the sovereign and its citizens. Trusted credit ratings facilitate access to financial markets and above-average ratings allow for the negotiation of better collateral and guarantee agreements, as well as for funding of, for example, infrastructure projects at superior (lower) interest rates. This paper develops the quantitative section of a credit-rating methodology for South African subnationals. The unique characteristics of South African data, their assembly, and the selection of dependent and independent variables for the linear-regression model chosen, are discussed. The methodology is then applied to the provincial Department of Health using linear regression modelling.


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1. Development and comparison of payment behaviour prediction models for two South African state departments
Erika Fourie, Tanja Verster, Gary W. Van Vuuren
South African Journal of Economic and Management Sciences  vol: 20  issue: 1  year: 2017  
doi: 10.4102/sajems.v20i1.1701