By: Helmut Mahongo
The newly established Africa Credit Rating Agency (AfCRA) will pioneer the expansion of financial markets in Africa.
Africa’s financial market is one of the least advanced and least developed globally, with the continent dominated by just a few deeper stock exchanges.
In an interview with African News this week, Misheck Mutize, who is the lead expert on rating agencies at the African Union, said that the goal for the agency goes beyond competition.
“What we are driving towards is to expand the portfolio of African capital that is invested through international instruments, or continental instruments so that international investors have more confidence into rated instruments, he explained.”
Adding that the Agency will be expanding the continent’s financial market beyond its objective of enhancing its competitiveness.
Mutize said that the aim and objective of AfCRA is to analyse risks and help redirect and re-channel capital into productive development sectors where investment is needed the most, and not to compete or attack other agencies.
According to the African Union, AfCRA was established to address concerns over what it refers to as biases, inaccuracies, and high costs associated with international credit rating agencies when assessing African countries.
AU says the agency will provide an opportunity for the continent to have a credit rating system that reflects its unique socio-economic realities and fosters a fairer representation of its creditworthiness.
AfCRA was formed as part of the African Union’s broader agenda for financial integration and independence, according to the AU.
As is the case for many industries, the world of credit rating has been dominated by only a handful of companies, namely Standard and Poor’s (S&P), Moody’s, and Fitch for so long that they have been dubbed The Big Three.
“The Big Three” have been accused of being biased in their rating especially of developing countries, something that has divided both experts and common men alike as to the reasons behind the rating tendencies.
In April of last year, the United Nations Conference on Trade and Development UNCTAD published a policy review that showed that by mid-2024, 68 developing countries had below investment grade ratings and therefore only had limited and/or relatively expensive access to global capital markets.
According to the review, only 24 developing economies had investment grade ratings.
These rating shifts, especially the downgrades that happen during economic shocks, have the potential to negatively impact both public and private borrowing costs and debt restructuring efforts.
This, in turn, ends up negatively affecting investments, especially in the attainment of Sustainable Development Goals (SDGs) and climate mitigation and adaptation initiatives.
According to the policy review, only Botswana, Morocco and Mauritius had investment-grade status in Africa in 2025, while South Africa, Côte d’Ivoire and Benin were rated below investment grade.
The remaining 49 countries were rated below investment grade, with several countries not being rated at all.
UNCTAD acknowledged the fact that financial markets are influenced by many other factors beyond just ratings.
The Africa Credit Rating Agency is a continental initiative aimed at providing independent, credible, and African-owned credit ratings for sovereigns, sub-sovereign and corporates.
Its primary objective is to enhance transparency, reduce reliance on the three international credit rating agencies, and address the specific needs of African countries, institutions, and contexts.
AfCRA was set to officially launch in June of last year but didn’t. The 1st of this month, the Africa Peer Review Mechanism posted on its official X page that 7th of October is the official launch of AfCRA.
