The Africa Credit Rating Agency (AfCRA) has introduced a new methodology for assessing Africa's credit risk, incorporating new data while maintaining measurable evidence and international standards. The agency aims to provide uniform ratings across the continent, with variables not deviating much from international standards. AfCRA's assessment will be based on evidence that is measurable and reproducible.
AfCRA CEO Dr. Sifiso Falala stated that the agency's goal is not to judge issuers but to provide them with data and use the provided data to determine if it makes a difference to their credit rating. The agency is pursuing ways to incorporate the continent's natural resources into its profiles, arguing that this will create new value. Dr. Falala emphasized the need for better research to catalyze change and deepen understanding of Africa's financial market.
AfCRA's Interim Chief Rating Officer, Ted Maseselesele, added that the agency's assessment needs to be based on evidence that is measurable and reproducible. The variables used for measurements of sovereigns will not change based on which sovereign is being assessed but will be based on historical and best international standards. AfCRA is also exploring ways to factor in natural resources, which are currently seen as a credit weakness rather than a neutral point.
For the first time, African countries will have the opportunity to interact with their credit rating agency both virtually and physically. They will be able to input their data into the AfCRA portal after being granted access, with the data expected to be used as part of the total analysis in assessing their credit worthiness. This new approach aims to provide a more accurate assessment of Africa's credit risk.
According to Dr. Misheck Mutize, Lead Expert Credit Ratings Agencies, APRM, the forecasting methodology and qualitative indicators may be formulated differently by AfCRA. The agency's methodology is expected to stand out from other rating agencies. AfCRA will focus more on sovereign business at 70% and corporate business at 30% in the medium term, with a target of a 50:50 ratio in the long term.
AfCRA's rating methodology is expected to have a significant impact on the continent's financial sector. The agency is set to open its shares to other buyers, with Plus94 Research currently holding 100% of the shares. After the share sale, Plus94 Research is expected to hold at least 33% of shares in the agency, with investors taking up the rest.
The launch of AfCRA and its new methodology has raised expectations about its impact on Africa's financial sector. With its focus on measurable evidence, natural resources, and forecasting methodology, AfCRA aims to provide a more accurate assessment of Africa's credit risk. The agency's goal is to catalyze change and deepen understanding of Africa's financial market.
Key points
- AfCRA introduces new methodology for assessing Africa's credit risk
- Agency aims to provide uniform ratings across the continent
- AfCRA to focus on sovereign business at 70% and corporate business at 30% in the medium term
