Africa has launched its first continent-wide credit rating agency amid concerns that limited access to reliable credit assessments and high borrowing costs are restricting the continent’s access to international capital.
Key Highlights
- Africa Credit Rating Agency (AfCRA) was officially launched in Port Louis, Mauritius, under the auspices of the African Union.
- 23 of Africa’s 55 countries reportedly lack sovereign credit ratings from S&P Global Ratings, Moody’s and Fitch Ratings.
- AfCRA will provide independent credit assessments of African governments, companies, financial institutions and sub-sovereign entities.
- The agency is expected to use African data, expertise and economic conditions in developing its credit assessments.
- Africa’s annual external debt service reportedly rose from $61 billion in 2010 to $163 billion in 2024.
- AfCRA faces a major credibility test over whether international investors will consider its ratings independent, rigorous and consistent.
Africa Launches AfCRA To Expand Credit Rating Coverage
The Africa Credit Rating Agency (AfCRA) was officially launched on Wednesday in Port Louis, Mauritius, under the auspices of the African Union (AU).
The agency is expected to provide independent credit assessments of African governments, sub-sovereign entities, companies and financial institutions, potentially expanding the number of African borrowers visible to investors.
The launch comes as 23 of Africa’s 55 countries reportedly lack sovereign credit ratings from the three major global rating agencies — S&P Global Ratings, Moody’s and Fitch Ratings.
According to the AU, limited ratings coverage can reduce the visibility of African economies among international investors and restrict access to some sources of capital.
AfCRA To Provide African-Focused Credit Assessments
AfCRA is expected to complement, rather than replace, established international credit rating agencies by producing assessments based on African data, expertise and economic conditions.
The agency is being established against the backdrop of rising debt-service obligations across the continent.
According to the AU, Africa’s annual external debt service increased from $61 billion in 2010 to $163 billion in 2024, while interest payments in several countries now exceed annual government spending on critical sectors such as health and education.
The AU also said average sovereign credit ratings in Africa currently hover around the B to B-minus range, compared with an average of BB for other emerging-market regions.
The disparity has fuelled concerns over the premium African governments and businesses pay when seeking financing on international markets.
African Union Endorsed Credit Rating Agency In 2018
AfCRA’s establishment follows years of debate among African policymakers over the role of credit ratings in determining the cost and availability of capital.
The African Union Assembly endorsed the creation of the agency in 2018, while subsequent efforts focused on developing its governance structure, institutional framework and rating methodology.
The African Peer Review Mechanism supported the development process before AfCRA commenced operations as an autonomous institution.
Under its proposed structure, AfCRA will operate as an independent, private-sector-driven and self-funded institution.
Governments will not be allowed to own shares in the agency, a provision intended to limit political interference and strengthen its independence.
The agency will rate sovereign borrowers as well as corporations, financial institutions and other public and private entities, with its headquarters in Port Louis and regional operations expected to expand coverage across Africa.
AfCRA Faces Test Of Investor Confidence
The AU said AfCRA’s ratings would be evidence-based and aimed at improving investor decision-making while strengthening Africa’s participation in global financial markets.
However, the new agency faces a major credibility test over whether international investors will consider its ratings sufficiently independent, rigorous and consistent to influence investment decisions and borrowing costs.
That credibility could be particularly tested when AfCRA issues ratings that are unfavourable to African governments or companies.
Former Nigerian Vice President Yemi Osinbajo, who has supported the initiative, has stressed that the agency must meet international standards rather than operate as a purely nationalist institution.
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Credit Rating Debate Remains Significant In Africa
African governments have repeatedly criticised the methodologies and assessments of major international rating agencies, arguing that they sometimes fail to adequately capture the economic realities, reforms and resilience of African economies.
The global agencies have rejected accusations of systemic bias and maintain that their methodologies are applied consistently across countries.
A 2024 Reuters investigation found no evidence of systemic bias in the sovereign ratings assigned to African countries by the major agencies.
The debate remains significant because sovereign credit ratings can directly affect the cost of government and corporate borrowing.
The United Nations has estimated that weaknesses in existing credit-rating methodologies have contributed to additional financing costs for African countries. The UN Office of the Special Adviser on Africa put the annual cost associated with inaccurate or unfair ratings at about $74.5 billion.
AfCRA Targets Companies, Financial Institutions And Capital Markets
Beyond sovereign debt, AfCRA is expected to expand ratings coverage for African companies, financial institutions and domestic financial instruments.
The AU said Africa has a substantial pool of domestic capital, but only a relatively small proportion of African assets and issuers are covered by formal credit ratings.
Expanding ratings coverage could provide investors with more information about potential investments and help channel capital into sectors including infrastructure, energy and manufacturing.
African financial institutions are also working to strengthen the continent’s capacity to understand and manage sovereign credit risk.
The African Development Bank recently announced an initiative aimed at helping African countries better prepare for and manage sovereign credit ratings.
For AfCRA, its immediate challenge will be translating its mandate into ratings that investors regard as credible enough to influence investment decisions and borrowing conditions.
If successful, the agency could expand the number of African borrowers visible to international investors, provide an additional benchmark for assessing credit risk and deepen the continent’s capital markets.
The AU said AfCRA is ultimately intended to strengthen Africa’s financial architecture and ensure that the continent’s governments, businesses and institutions are assessed more accurately in international financial markets.
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