The African Union (AU) is set to launch the Africa Credit Rating Agency (AfCRA) today in a bid to bring a deeper understanding of African economies and markets to the global credit ratings landscape.
The new agency will focus on strengthening Africa’s financial architecture and closing data gaps to make sure that African firms are “assessed fairly in international financial markets”.
It will be self-funded and independent, and cover sovereign, sub-sovereign and corporate entities, including segments of the African market that remain largely unrated.
Global credit ratings for African entities have long been criticised for overestimating risk and burdening entities with high borrowing costs.
According to the AU, Africa’s external debt service leapt from US$61bn in 2010 to US$163bn in 2024.
Last year, Fitch Ratings’ downgrade of the African Export-Import Bank to BBB-, the lowest investment grade rating, drew criticism from the African Peer Review Mechanism, an arrangement established in 2003 by the AU to monitor governance.
It said the downgrade showed “a misunderstanding of the governance architecture of African financial institutions and the nature of intra-African development finance”.
Earlier this year, Samaila Zubairu, president and chief executive of the African Finance Corporation, said that global bank capital rules and outdated perceptions of African risk inflate the cost of financing productive assets across the continent and discourage investment.
Part of the AfCRA’s mandate will be to “broaden access to credible credit opinions, support access to capital and contribute to the development of stronger domestic financial markets”.
“It also brings an African perspective to the global financial system, where credit ratings play an important role in investment and financing decisions,” the organisation said.
The creation of AfCRA was endorsed by the AU Assembly in 2018 and in July 2023, AU leaders adopted a declaration in Nairobi supporting AfCRA.
The rating agency will be formally launched at an event today in Port Louis, Mauritius, where it will also be headquartered.
