The African Union (AU) will on Wednesday inaugurate the Africa Credit Rating Agency (AfCRA), the continent’s first home-grown credit rating agency, as African countries seek to reduce borrowing costs and provide an alternative perspective to the dominant global ratings agencies.
The agency will be headquartered in Port Louis, Mauritius, where its formal inauguration will take place.
The initiative, which has been nearly a decade in the making, was endorsed by African leaders in 2018 as part of efforts to strengthen the continent’s financial architecture and address concerns over how African economies are assessed by international investors.
According to the AU, AfCRA will complement existing global credit rating agencies by providing assessments based on African data, expertise and economic realities.
African leaders have repeatedly criticised major Western ratings agencies for allegedly underestimating the creditworthiness of African economies and reacting too quickly with downgrades during periods of crisis, including conflicts and pandemics.
The global ratings agencies have rejected such criticism, maintaining that they apply the same methodologies across countries and regions.
A 2024 Reuters investigation into Africa’s debt crisis, however, found no evidence of systemic bias in the sovereign ratings assigned to African countries by the three major global ratings agencies.
AfCRA is expected to rate sovereign borrowers, financial institutions and private companies. The AU said the agency would operate independently and be financed through shareholder capital and income generated from its operations, although it did not disclose details of its shareholders.
The AU said the new agency is expected to improve African countries’ access to international capital markets by providing investors with more balanced and context-specific assessments of the continent’s economies.
The initiative comes as rising government borrowing and higher debt-servicing costs have pushed several African economies into debt distress, making access to affordable financing an increasingly critical issue.
The AU said Africa’s annual external debt service surged to $163 billion in 2024, from $61 billion in 2010.
In several countries, debt-interest payments now exceed annual government spending on critical sectors such as health and education, putting additional pressure on public finances.
“AfCRA aims to reduce such burdens by improving investor confidence and market transparency,” the AU said.
The agency is also expected to rate non-African entities where appropriate, while expanding credit-rating coverage across the continent.
The AU noted that 23 African economies currently do not have a sovereign rating from any of the three major global credit-rating agencies.
By providing coverage for these economies, AfCRA is expected to generate more credit information for investors and potentially widen access to domestic and international capital markets.
However, the effectiveness of the new agency will ultimately depend on its independence, credibility, analytical capacity and ability to win the confidence of international investors and financial institutions.
For African governments facing elevated borrowing costs and mounting debt-service obligations, the success of AfCRA could have significant implications for future financing conditions.
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