Africa’s New Credit Rating Agency Launches Amid Criticism

The launch of the Africa Credit Rating Agency (AfCRA) has drawn both support and skepticism. Proponents argue it offers a much-needed alternative to global agencies whose assessments, they say, unfairly penalize African economies. Critics, however, emphasize that the new agency must first prove its independence and analytical rigor before investors will place full trust in its ratings.

Criticism of Global Agencies

Moody’s, S&P and Fitch – the so-called “Big Three” global credit ratings agencies – have faced longstanding criticism from African leaders for relying on models that overstate default risk, thereby increasing borrowing costs for African borrowers. Concerns also extend to limited contextual understanding and rapid downgrades during crises.

“There is increasing dissatisfaction with the influence, approach, and methodology of the three international credit rating agencies in assessing credit worthiness. The situation became more challenging during the Covid-19 pandemic, when more than 25 African countries suffered negative credit rating actions,” said Berenger Ramphoul, Mauritius’ minister of foreign affairs, regional integration, and international trade, during the launch ceremony of AfCRA in Balaclava, northern Mauritius.

AfCRA’s Structure and Goals

AfCRA aims to assess and price African risk more accurately by using context-specific methodologies it claims better reflect African realities. The Mauritius-based agency plans to rate African sovereigns, sub-sovereigns, and corporates, with the possibility of rating non-African entities subject to management approval.

The agency’s goal is not to replace the Big Three but to complement their coverage. Only 32 African countries currently have sovereign ratings from at least one global agency, leaving significant room for AfCRA to expand coverage and address the continent’s financing gaps.

AfCRA also intends to focus on deepening local currency and regional markets, enabling Africa’s pension funds and insurance firms to invest more domestically. According to the Africa Finance Corporation (AFC), Africa’s capital market is valued at about $4 trillion, yet fewer than 5% of instruments by value carry a rating.

Ownership and Independence

Mahmoud Ali Youssouf, chairperson of the African Union Commission (AUC), framed AfCRA’s establishment as a critical step in strengthening Africa’s financial architecture. “It reflects our shared commitment to assessing and communicating economic and financial risks in ways that draw on the continent’s realities, knowledge and expertise while upholding international standards of independence, credibility and professionalism,” he said.

Nearly a decade after its initial endorsement by African leaders at the 2017 AU Summit in Addis Ababa, AfCRA was handed to the private sector. “Although the vision emerged from the African Union, AfCRA was deliberately designed as a wholly private-sector endeavour,” explained Marie Antoinette Cattra, CEO of the African Peer Review Mechanism (APRM).

No African government or state-owned entity holds an ownership stake, ensuring independence. AfCRA is currently 100% owned by Plus94, a South African research and intelligence firm. Its CEO, Sifiso Falala, serves as interim chief executive and confirmed plans to issue new shares to “approved buyers,” with Plus94 retaining roughly one-third ownership long-term.

Falala emphasized that AfCRA’s African ownership does not equate to leniency. “As an independent private-sector-owned entity, AfCRA will be independent of the African Union and will apply its research methodologies without fear or favour,” he said. “We do not take any particular view with regard to whether ratings are favourable or unfavourable. Our concern is whether they are accurate.”

Building Credibility

Denys Denya, executive vice president of Afreximbank, stressed that AfCRA’s strength must stem from professionalism, not just African ownership. “Its governance arrangements must therefore safeguard the integrity of its rating decisions while its methodologies must be transparent. It must tell us the truth about our economies, including where reforms are necessary, while ensuring that Africa is assessed on the basis of complete evidence and a proper appreciation of our economic circumstances,” he said. “It must tell us the truth about our economies, including where reforms are necessary.”

Hanan Morsi, deputy executive secretary at the United Nations Economic Commission for Africa, argued that credibility hinges on AfCRA’s willingness to deliver unwelcome news. “A rating agency that cannot downgrade will not be believed when it upgrades, so maintaining credibility will be key,” she stressed.

The agency’s initial focus on sovereign ratings reflects the urgent need for credible assessments in this segment, where existing global coverage remains sparse. Discussions are actively progressing with other African nations to follow suit, indicating growing interest in the new agency’s services. This sovereign-first approach targets the most critical gap in the continental credit assessment system.

AfCRA’s operational framework includes proactive engagement with national regulators to secure formal recognition across African jurisdictions. The agency is pursuing licensing and acceptance from central banks and securities regulators to ensure its ratings integrate into institutional risk management systems. Such regulatory endorsement would enable AfCRA assessments to become standard reference points for investment decisions and prudential compliance within African financial institutions, embedding the agency’s methodology into the continent’s capital market infrastructure.

Targeting the Africa Risk Premium

The Africa risk premium represents a substantial financial burden, with UNDP estimating $74.5 billion in excess debt service costs annually due to inflated risk perceptions from international ratings agencies. The artificial premium drives up borrowing costs for governments and private borrowers alike, constraining investment in essential development sectors. AfCRA’s context-sensitive methodologies aim to correct these misperceptions by accounting for Africa-specific economic factors that global models may overlook, potentially reducing financing costs for the continent’s growing debt obligations.

This fiscal strain threatens long-term development prospects for a continent with the youngest and fastest-growing population globally. By providing more accurate risk assessments, AfCRA seeks to dismantle this risk premium, enabling governments to redirect savings toward infrastructure, healthcare, and industrialization priorities rather than expensive debt servicing.

Building Long-Term Credibility

The agency’s success depends entirely on demonstrating analytical independence and methodological transparency that withstands scrutiny from both African issuers and international investors. Governance structures explicitly prevent government influence, with no state-owned entities holding ownership stakes and private-sector control maintained through Plus94’s majority position. Initial focus on sovereign ratings allows AfCRA to establish its track record in the most consequential segment before expanding into sub-sovereign and corporate domains where competition with global agencies intensifies.