Rethinking Africa's Credit Rating

Africa is moving to establish greater ownership over how its economies are assessed globally. The African Union has announced plans to launch the African Credit Rating Agency (AfCRA) by September, offering what it calls a more contextual and Africa-led approach to credit assessments. The initiative follows renewed scrutiny of the “Big Three” Western rating agencies—Fitch, Moody’s, and S&P—particularly after Fitch’s recent downgrade of the African Export-Import Bank (Afreximbank) to BBB-. The decision sparked debate among African policymakers and finance experts about the need for a more regionally grounded view of creditworthiness.

Global credit ratings play a crucial role in determining borrowing costs for African governments and institutions. Lower ratings often translate into higher interest rates, limiting the fiscal space available for investment in infrastructure, healthcare, and other development priorities. AfCRA aims to address this challenge by incorporating local economic conditions and policy contexts more directly into its assessments. It will also place special emphasis on rating local-currency debt—an area seen as key to strengthening domestic capital markets and reducing exposure to foreign exchange risks.

To support its independence and credibility, AfCRA will be owned by African private-sector entities, not governments. This structure is designed to ensure objectivity and avoid perceptions of political influence. A CEO appointment is expected by the third quarter of 2024. According to the AU, AfCRA won’t replace existing agencies but will provide an additional, complementary perspective tailored to Africa’s financial landscape.

While some observers have expressed caution about how the agency will be received globally, its launch reflects a growing recognition of the need for more diverse viewpoints in credit assessment. For African institutions, AfCRA offers a chance to shape a more balanced narrative—one that reflects both risk and resilience—and to play a greater role in defining the frameworks that influence access to capital.

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Source: Semafor