Will Africa's new credit rating agency earn the trust of investors?
The long-awaited Africa Credit Rating Agency launched this month in Mauritius, but will the alternative to Wall Street firms gain credibility?
The Africa Credit Rating Agency (AfCRA) was launched amidst mixed reactions from various stakeholders. Proponents argue that the institution offers a timely alternative to the perceived biases of international credit ratings agencies like Moody's, S&P, and Fitch. However, critics caution that AfCRA must first establish its independence and analytical rigor to earn the trust of investors.
The Big Three global credit rating agencies have often been criticized for overstating default risks of African borrowers, thus increasing borrowing costs in a highly financing-dependent continent. Furthermore, there are concerns about the agencies' speed in downgrading African economies during crisis situations. Berenger Ramphoul, Mauritius' Minister of Foreign Affairs, Regional Integration, and International Trade, emphasized the importance of context-specific methodologies during the launch ceremony.
AfCRA aims to rate African sovereigns, sub-sovereigns, and corporates, and may even extend its coverage to non-African entities with management approval. The agency's ultimate goal is not to replace the Big Three but to complement their offerings by providing ratings that accurately reflect on-the-ground realities. Despite the African Union's initial endorsement of AfCRA nearly a decade ago, the private-sector‑owned agency is currently 100% owned by Plus94, a South African research and intelligence firm.
Its CEO, Sifiso Falala, emphasized that AfCRA's independence will not be influenced by African governments or any state-owned entities. The agency will issue new shares to approved buyers, with Plus94 retaining roughly one-third ownership in the long term. AfCRA's success hinges on its ability to remain objective, maintain institutional independence, adhere to sound governance practices, and employ methodological rigor.
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