Africa launches its own credit rating agency to challenge how its risk is assessed

The African Union is set to launch the Africa Credit Rating Agency (AfCRA) on Wednesday in Mauritius, giving the continent its own institution to assess the creditworthiness of African governments, companies and other entities.

The agency is designed to provide an Africa-focused perspective on credit risk and address concerns that international ratings do not always fully reflect the economic realities, resilience and growth potential of African countries. The African Union says AfCRA will complement, rather than replace, established global agencies such as Moody’s, S&P Global Ratings and Fitch Ratings.

The launch comes after years of criticism from African policymakers over the way the continent is assessed by international rating agencies. African officials have argued that ratings can overlook factors specific to African economies and contribute to higher borrowing costs, particularly when countries are downgraded during periods of global financial stress.

According to the United Nations, what it describes as inaccurate or unfair credit assessments are estimated to cost Africa about $74.5 billion a year through higher financing costs. The UN says Africa has one of the world's highest costs of capital despite relatively low default rates.

AfCRA was mandated by the African Union and its establishment was overseen by the African Peer Review Mechanism, or APRM. Mauritius was selected as the agency's headquarters after a competitive process, with its financial sector and international connectivity cited among the reasons for the choice.

The agency will provide credit assessments for sovereign governments, sub-sovereign entities, companies and institutions. It is also expected to cover parts of the African market that remain largely unrated.

The African Union says only 32 of its 55 member states currently have ratings from the three major global agencies, leaving 23 without such coverage. AfCRA aims to broaden access to credit assessments while incorporating more local data, expertise and knowledge of African markets.

Its model is intended to be independent and private-sector driven. Governments will not hold shares in the agency, a structure designed to limit political influence over its assessments.

African governments have long argued that perceptions of risk can translate into a higher cost of borrowing than their economic fundamentals justify.

The issue has gained renewed attention as African countries face rising debt-service costs and seek greater access to long-term financing for infrastructure, energy, health and other development priorities.

The African Union says AfCRA will seek to address information gaps by using more detailed and context-specific data when assessing African economies. The goal is not to give African countries more favourable ratings, but to produce assessments that the continent says are more accurate and better grounded in local realities.

Nigeria's President Bola Tinubu has similarly said Africa is not seeking preferential treatment but fairer assessments based on countries' economic fundamentals and reforms. He has also stressed that AfCRA will need to establish its independence and analytical credibility to gain the confidence of international investors.

The launch represents a significant step in Africa's efforts to have a stronger voice in the global financial system, but the agency will face an important test: convincing investors that its ratings are independent, rigorous and comparable with international standards.

AfCRA is being launched alongside broader efforts to strengthen African capital markets. A two-day African conference on credit ratings in Mauritius has brought together policymakers, regulators, investors, development finance institutions and rating agencies to discuss improving transparency, mobilising domestic capital and expanding access to local-currency financing.

For the African Union, the creation of AfCRA is therefore about more than establishing another rating institution. It is an attempt to change how African economic risk is understood in global financial markets — and ultimately to make financing for the continent's development less costly.