The African Union has formally launched the African Credit Rating Agency (AfCRA) in Port Louis, Mauritius, to provide a more Africa-focused assessment of the risks surrounding the continent's economies and businesses. This initiative was approved by the African Union several years ago. AfCRA aims to give investors a more accurate understanding of African economies, which are often penalized by risk assessments that fail to account for their economic conditions.
The launch of AfCRA is expected to provide an alternative perspective to assessments issued by major international rating firms such as Fitch Ratings, Moody's Ratings, and S&P Global Ratings. African leaders and policymakers have long argued that the continent faces high borrowing costs and limited access to affordable capital due to biased risk assessments. Uganda's Minister of State for Finance, Planning and Economic Development, Amos Lugoloobi, representing President Yoweri Museveni, emphasized that Africa's challenge is not a lack of economic potential but its inability to mobilize sufficient resources at affordable rates.
Chairperson of the African Union Commission, Mahmoud Ali Youssouf, highlighted the importance of AfCRA's independence in maintaining the credibility of the institution. He stated that AfCRA would assess risks facing African economies while maintaining independence. Chief Executive Officer of the African Peer Review Mechanism (APRM), Marie-Antoinette Rose Quatre, stressed that AfCRA was created to present Africa's economic story with greater accuracy and credibility, not simply to compete with existing global rating agencies.
AfCRA's mandate will cover sovereign, sub-sovereign, and corporate issuers, potentially giving investors access to credit assessments for companies and governments that remain unrated. The agency will place particular emphasis on local-currency debt, an area that could become increasingly important as African governments and businesses seek to deepen domestic capital markets. This move is expected to provide investors with a more comprehensive understanding of African economies.
Although AfCRA was created through an African Union initiative, the agency is not expected to be owned by African governments. Its independence is intended to protect the credibility of its ratings and prevent political considerations from influencing assessments. Senior Executive Vice-President of Afreximbank, Denys Denya, representing the bank's President and Chairman, George Elombi, emphasized that African companies operating across several countries should not be constrained by the credit rating of the country where they are headquartered.
Denya cited large African businesses and banks with operations across multiple jurisdictions as examples of institutions whose financial strength may not always be reflected by sovereign ratings. He believes that AfCRA should establish a new benchmark for assessing African risk while maintaining strong independence and African ownership. This initiative is expected to promote a more accurate understanding of African economies and provide access to affordable capital.
The launch of AfCRA marks a significant step towards promoting African economic development and reducing borrowing costs. The agency's independence and African ownership are expected to maintain the credibility of its ratings and provide a more accurate assessment of African economies. As AfCRA begins its operations, it is expected to play a critical role in shaping the economic future of the continent.
Key points
- The African Union has launched a new credit rating agency to provide an alternative perspective to assessments issued by major international rating firms.
- AfCRA aims to give investors a more accurate understanding of African economies, which are often penalized by risk assessments that fail to account for their economic conditions.
- The agency's independence and African ownership are expected to maintain the credibility of its ratings and provide a more accurate assessment of African economies.
