Africa’s New Credit Rating Agency Aims to Lower the Cost of Borrowing 

The African Peer Review Mechanism (APRM) is preparing to launch an independent pan-African credit rating agency in an effort to give African governments an alternative to the major global ratings firms.

Paul Sikazwe, the African Union’s technical adviser on debt, said the Africa Credit Rating Agency (AfCRA) is scheduled to launch in Mauritius in October, according to Reuters. The agency is backed by the African Union (AU).

The planned launch is part of a broader push by African governments and institutions to reshape how the continent’s credit risk is assessed and priced in global financial markets.

Why Africa Wants Its Own Ratings Agency 

Credit ratings function as an important signal to global investors. They estimate how likely a borrower is to repay its debt on time. For countries, a lower credit rating typically means higher interest rates on money that they borrow. This is because investors demand more compensation for perceived risk. 

Currently, three agencies – Moody’s, S&P Global and Fitch – dominate the ratings system. They rate the vast majority of the world’s sovereign borrowers, including 32 of 54 African countries. 

Many African policymakers argue that these agencies apply a rigid, standardized methodology. They say it fails to account for regional context, informal economic activity, and growth potential specific to African markets. This results in ratings that are harsher than the underlying risk justifies. “For decades, skewed risk perceptions have forced African nations to pay an unfair ‘risk premium’ on global capital,” the AU said on its official X account. 

Debt issues in Africa have become an increasingly pressing issue. Zambia defaulted on its external debt in 2020, Ghana followed in 2022, and Ethiopia in 2023. Within three years, three African economies were pushed into default. Global interest rates rose, and issues like the global pandemic made existing debt harder to service. 

Misheck Mutize, a lead country expert at the APRM, has argued that foreign ratings of Africa seldom have a contextual understanding of local institutions, political dynamics, and market conditions. “Risk assessments are not produced by algorithms alone; they are strengthened by local knowledge, continuous engagement with issuers, constant access to decision-makers and a deep understanding of domestic political, economic and institutional realities,” he said. 

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The Africa Credit Rating Agency 

For years, the APRM has been working on the launch of an agency that assesses the creditworthiness of African sovereigns, Reuters reports. Now it is almost ready. The AfCRA, being launched in October, is designed to assess African countries’ credit scores. It will use criteria specifically for the continent’s economies. Details on its full methodology have not yet been made public. But the broader goal is to give African governments an alternative source of credit assessment. This comes as they seek to reform how the continent’s risk is priced globally.

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A Larger Push for African Financial Sovereignty

The ratings agency is one part of a greater effort by the AU. The bloc is seeking to build independent financial infrastructure for the continent. The AU is moving forward with the inauguration of an African Monetary Institute in Abuja, Nigeria, later this year. The institute is designed as a precursor to an eventual regional central bank. The aim is to give the continent’s 54 states more coordinated control over monetary and debt policy. 

“This is a sign of progress in our ambition to provide momentum for the reform of the international financial architecture,” said Sikazwe at a conference on debt and development in Nairobi.

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What this Means Going Forward 

The success of the new agency will depend on whether international investors treat its ratings as credible. Another factor will determine its legitimacy. That is, whether the AfCRA can build a track record independent of political pressure from governments. It is still uncertain if it will meaningfully change the borrowing costs African nations currently face. But for now, the launch represents a concrete step in a continental push toward financial self-determination. 

Main image: Obal Daniel speaking at the APRM. Source: Amanya Stuart Edward.