The African Union is set to launch the Africa Credit Rating Agency (AfCRA) in Mauritius on Wednesday, creating a continent-based alternative to the major global credit rating agencies as African governments grapple with rising debt and borrowing costs.
The agency will be headquartered in Port Louis, Mauritius, following years of preparation. African leaders endorsed the initiative in 2018 as part of efforts to strengthen Africa’s financial architecture and develop credit assessments that take greater account of the continent’s economic conditions.
According to the African Union, AfCRA will complement existing international rating agencies by providing assessments based on African data, expertise and economic realities.
The agency will independently assess sovereign borrowers, financial institutions and private companies. It will be funded through shareholder capital and revenue from its operations, although the AU has not disclosed details of its shareholders.
Focus on borrowing costs
The creation of AfCRA comes as African countries face mounting pressure from high debt-service costs and limited access to affordable international financing.
The African Union said Africa’s annual external debt-service obligations increased to $163 billion in 2024, up sharply from $61 billion in 2010.
In some countries, debt interest payments have grown to levels that exceed annual government spending on major social sectors, including health and education.
AfCRA is expected to seek to improve access to capital markets by providing investors with additional assessments of African economies and companies.
The AU also expects the agency to strengthen market transparency and investor confidence, potentially giving borrowers another avenue through which their creditworthiness can be assessed.
Addressing the ratings gap
The initiative follows longstanding criticism from some African governments that major international ratings agencies do not always adequately account for the continent’s economic and political circumstances when assessing sovereign risk.
The global agencies have rejected allegations of systemic bias, arguing that they apply consistent methodologies across countries.
A 2024 Reuters investigation into Africa’s debt crisis found no evidence of systemic bias in sovereign ratings issued by the three major global credit rating agencies.
The AU said AfCRA could also expand credit-rating coverage across the continent. Twenty-three African economies currently do not have a rating from any of the three major global agencies, according to the bloc.
Beyond African borrowers, AfCRA could also rate non-African entities where appropriate.
Source: Reuters
Reporting: Duncan Miriri
Editing: Karin Strohecker
