The credit agency said high interest rates, weak policies, and tough market conditions have made loans and credit more expensive across these three major African economies.
This problem is made worse by their limited access to cheaper sources of finance.
“Borrowing costs are high across the board,” said Moody’s Senior Vice President Lucie Villa.
“Debt costs for banks, non-financial companies and governments have increased in all three markets alongside higher policy rates during the past five years.”
The report said loans from development partners, which usually come with lower interest rates, have helped reduce the cost of foreign debt but have not been enough to balance out the high interest rates in local and international markets.
Borrowing costs on international markets have eased slightly, with interest spreads over U.S. Treasuries narrowing since 2022 for lower-rated Kenya and Nigeria.
But they still remain elevated at about 500 basis points, Moody’s said.
South Africa benefits from deeper domestic capital markets and a stronger monetary policy framework, which has helped keep its interest rates lower than those of Nigeria and Kenya.
However, Moody’s warned that South Africa’s borrowing costs are still high compared to many other emerging markets because of its fiscal constraints.
“Without improvements, South Africa risks continuing a negative spiral in which high interest rates aimed at attracting inflows amid subdued growth limit domestic investment and further hinder economic prospects,” the report said.
Moody’s said fixing these challenges will take time and will require stronger policies and more effective financial systems to reduce borrowing costs across the region.
