Africa will soon have its credit rating agency, African Credit Rating Agency (AfCRA). The move became necessary following the growing discontent over the credibility of the ratings assigned to African governments and institutions by the three global rating agencies including Fitch, Moody’s and S&P.
In February, African heads of state and government as well as financial experts met to fashion out the modalities for the establishment of the AfCRA.
The event, which was held on the sidelines of the 37th AU Ordinary Summit underscores Africa’s commitment to enhancing the continent’s financial sovereignty and addressing long-standing challenges associated with the three international credit rating agencies.
The decision to establish an AfCRA was to provide fair, transparent and development-focused credit ratings that reflect the realities and potential of African economies.
AfCRA is coming to address concerns over perceived biases, inaccuracies and high costs associated with international credit rating agencies when assessing African countries.
According to the promoters of the new credit rating agency, it will provide an opportunity for the continent to have a credit rating system that reflects Africa’s unique socio-economic realities and fosters a fairer representation of its creditworthiness.
Lead expert on credit rating agencies at the African Peer Review Mechanism (APRM), a structure under the African Union, Misheck Mutize, said AfCRA was in the final stages of selecting a chief executive officer with a shortlist already in place and an appointment expected in the third quarter of the year.
He said the establishment of AfCRA was a response to long-standing frustrations from African policymakers over how global agencies assess the continent’s credit risks.
Countries like Ghana and Zambia have publicly condemned multiple downgrades that, they argue, contributed to rising borrowing costs and eventual defaults.
To guard against political interference and maintain credibility, AfCRA will not be owned by African governments, Mutize emphasized. “This was designed to maintain independence and avoid conflict of interest. The shareholding will mainly be African private-sector driven entities,” he said.
AfCRA plans to focus primarily on local-currency debt ratings, which Mutize believes will play a critical role in strengthening Africa’s domestic capital markets and reducing overreliance on foreign currency-denominated debt. On the claim in some quarters that AfCRA was coming to give favourable ratings to African countries, Mutize said that is far from the truth.
