AfCRA is expected to provide an alternative to Fitch, Moody’s and S&P, as African leaders push for ratings that better reflect the continent’s economic realities…..
Africa is set to take a major step towards reshaping how its economies are assessed in global financial markets, with the launch of its own credit rating agency on Wednesday.
The Africa Credit Ratings Agency, AfCRA, is expected to provide an alternative to the major international rating firms, amid long-standing concerns that their assessments have often failed to fully capture the economic realities of African countries and, in turn, contributed to higher borrowing costs.
The initiative, which has received backing from the African Union, follows nearly a decade of discussions over the need for an African-led rating institution.
Mauritius has been selected as the agency’s headquarters, with its established financial services industry cited among the reasons for the choice.
AfCRA will assess the creditworthiness of African countries, companies and institutions, positioning itself as an alternative source of financial information alongside the global rating giants Fitch, Moody’s and S&P.
Those three agencies have faced criticism over the years from African policymakers and analysts who argue that their assessments can portray the continent’s economies in an overly negative light.
The African Peer Review Mechanism, which is leading the initiative, says 23 African countries currently have no sovereign ratings from the traditional international agencies.
Analysts also point to the size of Africa’s informal economy as an area that conventional credit-rating models may struggle to capture because significant economic activity does not always appear in official data.
President Bola Tinubu has welcomed the creation of AfCRA, stressing that the continent is not seeking preferential treatment from rating agencies.
“Africa is not asking for favourable ratings,” Tinubu wrote on X last month.
“We are asking for fair ratings, grounded in our fundamentals and in the reforms our economies are actually carrying out.”
The debate over credit ratings goes beyond figures on financial reports, as the assessments can directly affect how much governments pay when they borrow from international markets.
Countries with weaker ratings are generally considered higher-risk borrowers, prompting investors to demand higher interest rates to compensate for the perceived risk.
Estimates from the Organisation for Economic Co-operation and Development show that African countries paid an average of nine dollars in interest for every 100 dollars borrowed on international markets in 2024.
That compares with about 4.70 dollars for emerging economies in Asia and 6.50 dollars in Latin America.
For AfCRA, the argument therefore goes beyond simply creating another rating institution.
Hannah Wanjie Ryder, chief executive of consultancy Development Reimagined, said the agency should not be viewed merely as a response to dissatisfaction with existing international rating firms.
Speaking at a recent seminar organised by the Chatham House think tank, Ryder said the new agency could offer a different assessment of African economies by examining factors that may receive less attention in conventional rating models.
“The theory of change is they would actually be able to look with clearer eyes,” she said.
While African governments and policymakers have welcomed the agency, its biggest challenge may come after the launch: convincing international investors that its assessments are independent, objective and accurate.
AfCRA’s founders have pledged that governments will not interfere with its ratings.
But analysts say the agency will face an early credibility test if it has to downgrade an African government.
A reluctance to issue negative ratings against African sovereigns could raise questions about whether AfCRA is genuinely independent or simply defending the continent’s interests.
For AfCRA, the message from investors is likely to be straightforward: its ratings will only influence borrowing decisions if markets believe they are reliable.
