As many African nations struggle with debt, the African Union established the first credit rating agency on the continent on Wednesday in an effort to offer an alternative to the “big three” international rating firms.
At a ceremony in Port Louis, the capital of Mauritius, where it will be headquartered, African officials witnessed the opening of the Africa Credit Rating Agency (AfCRA), which was approved by African leaders in 2018.
Denys Denya, an executive vice president of Afreximbank and one of the agency’s founders, said that the new organization will provide investors with additional information and context to help them evaluate Africa’s investment risk.
“Lenders charge for the fog when they are unable to see clearly. He said at the inaugural ceremony that “Africa continues to pay for the fog that is generated by Western-centric examinations.”
African governments have long accused Western rating agencies, such as S&P, Moody’s, and Fitch, of failing to accurately evaluate the risk of lending to African nations and of downgrading them too rapidly in times of crisis like pandemics and conflicts.
The organizations deny that criticism, claiming they use the same techniques everywhere.
TEST OF CREDIBILITY DURING CRISIS
The initiative’s success, according to rating experts, will depend on how credible the new agency is seen, particularly during emergencies.
According to Dennis Shen, a former sovereign analyst at Scope Ratings and a finance instructor at the International School of Management in Berlin, “a new rating agency starts with a promise while investors ultimately require a track record.”
However, a rating agency’s credibility is most severely challenged when its judgments are uncomfortable rather than when they are very handy; hence the hardest test will occur when markets are under stress.
According to former Nigerian Vice President Yemi Osinbajo, “AfCRA may offer a counterweight to established rating agencies, but it must meet global standards.” “It cannot simply be a nationalistic or chauvinistic organization,” he stated.
The African Union (AU) announced that the newly formed African Credit Rating Agency (AfCRA) will operate independently to rate sovereign borrowers, corporations, and financial firms.
Funded by undisclosed shareholders and its own revenue, AfCRA aims to improve Africa’s access to international capital by offering more balanced, context-aware economic evaluations.
Currently, African countries average a B to B- credit rating—compared to the BB average of other emerging markets—a disparity that the AU warns restricts the investor pool and inflates borrowing expenses.
The need for better borrowing terms in Africa has intensified after years of rising government debt pushed several nations into severe financial distress.
According to the AU, annual external debt servicing skyrocketed to $163 billion in 2024, up from $61 billion in 2010.
This heavy debt burden means many countries now spend more on interest payments than on vital public sectors like healthcare and education. To combat this, AfCRA aims to expand credit coverage, providing ratings for the 23 African nations currently ignored by the world’s three major agencies
