AU unveils credit agency to challenge high borrowing costs

The African Union has launched a new credit rating agency aimed at giving investors a more Africa-focused assessment of the risks surrounding the continent’s economies and businesses.

The African Credit Rating Agency was formally launched in Port Louis, Mauritius, on Wednesday, several years after the African Union approved the initiative.

The agency 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 is penalised by risk assessments that fail to fully account for its economic conditions, resulting in higher borrowing costs and limiting access to affordable capital.

At the launch, Uganda’s Minister of State for Finance, Planning and Economic Development, Amos Lugoloobi, representing President Yoweri Museveni, said Africa’s challenge was not a lack of economic potential but its inability to mobilise sufficient resources at affordable rates.

He said African economies continue to face high borrowing costs and need credit assessments that accurately reflect their cirumstances.

Chairperson of the African Union Commission, Mahmoud Ali Youssouf, said AfCRA would assess risks facing African economies while maintaining independence, which he described as critical to the credibility of the institution.

Chief Executive O fficer of the African Peer Review Mechanism (APRM), Marie-Antoinette Rose Quatre, said the agency was created because Africa needed institutions capable of presenting its economic story with greater accuracy and credibility.

She stressed that AfCRA was not established simply to compete with existing global rating agencies.

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Rather, she said, it would provide independent and unbiased assessments grounded in the realities of African economies.

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 is expected to 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.

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, said African companies operating across several countries should not necessarily be constrained by the credit rating of the country where they are headquartered.

He 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 said AfCRA should establish a new benchmark for assessing African risk while maintaining strong independence and African ownership.