Africa has launched its own credit rating agency in a move aimed at improving how African countries are assessed, therefore, addressing concerns over high borrowing costs.
The Africa Credit Rating Agency (AfCRA) was launched in Mauritius on Tuesday in collaboration with the African Union (AU), the African Peer Review Mechanism (APRM) and the Economic Commission for Africa (ECA).
The big three global rating agencies are Moody’s Investors Service, S&P Global Ratings and Fitch Ratings.
These three agencies control roughly 95% of the global credit rating market and evaluate sovereign, corporate, and municipal debt.
ECA deputy executive secretary Hanan Morsy says high risk premiums were estimated to cost Africa about US$75 billion (N$1.2 trillion) a year in excess interest payments.
She says AfCRA would provide investors with additional data and a deeper understanding of African economies.
However, Morsy says better ratings alone would not solve the continent’s financing challenges.
Mauritius minister of financial services and economic planning Jyoti Jeetun says the agency was not intended to give African countries more favourable ratings.
“AfCRA is not about asking the world to rate Africa more favourably. It is about helping the world understand Africa more accurately,” Jeetun says.
African Union Commission chairperson Mahmoud Ali Youssouf says the agency’s independence would be critical to gaining the confidence of investors and financial markets.
APRM chief executive ambassador Marie-Antoinette Rose-Quatre says there will be a need to protect the agency from political interference.
“Independence must not be a slogan used at launch; it must be the discipline by which this institution lives,” she says.
UN special adviser on Africa Ahunna Eziakonwa says African financial institutions must also use the agency if it is to gain international credibility.
“We cannot ask global capital to trust what African capital treats as optional,” she says.
AfCRA, headquartered in Mauritius and led by chief executive Sifiso Falala, will assess sovereign governments, as well as African companies and subnational entities.
The agency is expected to complement existing international rating agencies as African countries seek to reduce financing costs and attract more investment.
Namibia’s current sovereign global credit ratings are B1 with a positive outlook from Moody’s, and BB- with a stable outlook.
