Africa's newly launched credit rating agency, the Africa Credit Rating Agency (AfCRA), is in discussions with 15 African sovereign borrowers as it prepares to issue its first credit ratings by the end of March 2027.

The Mauritius-based agency, launched last month, aims to introduce an African perspective into sovereign credit assessments and provide an alternative to the three major international rating agencies: S&P Global Ratings, Moody's and Fitch.

AfCRA's interim Chief Executive Officer, Sifiso Falala, told Reuters that the agency would conduct research across several African countries, including Togo, Kenya, Seychelles, Burundi and Mauritius, ahead of publishing its initial ratings.

The agency was established following an African Union initiative launched in 2018 and plans to assess sovereign governments, regional multilateral institutions and private financial institutions.

Addressing Africa's Borrowing Costs

The establishment of AfCRA comes amid longstanding concerns among African leaders that international credit rating agencies underestimate the continent's economic potential and sometimes overstate sovereign lending risks.

Lower credit ratings can increase the cost of borrowing by pushing up the interest rates governments must offer investors, while also limiting access to certain institutional investors.

Falala estimates that African economies pay approximately $75 billion annually in additional interest costs compared with borrowers in other regions.

Africa's total debt has reached approximately $1.9 trillion, while the African Union estimates that the continent's annual external debt-service obligations increased to $163 billion in 2024, compared with $61 billion in 2010.

AfCRA says it intends to strengthen the quality of research underpinning African credit assessments, relying less heavily on information from international financial institutions such as the International Monetary Fund (IMF).

Plans to Raise $15 Million from African Investors

AfCRA is privately owned, with governments excluded from holding shares in the agency.

It is owned by Plus 94 Research, a South African research company co-founded by Falala and Tirhani Mabunda.

The agency plans to raise $15 million through a share sale, which would give African investors a two-thirds ownership stake.

AfCRA has also completed the acquisition of a 51% stake in Sovereign Africa Ratings, a South African credit rating firm founded and managed by Falala.

Implications for Africa's Financial Markets

The emergence of AfCRA could introduce another source of credit assessment for African governments and financial institutions seeking access to international capital markets.

Its ability to establish credibility will depend on the transparency of its methodologies, the independence of its assessments and the confidence investors place in its ratings.

For African economies facing mounting debt-service obligations and persistent financing constraints, the agency's development comes at a time when the cost and availability of capital remain central economic policy concerns.

Its first ratings, expected by March 2027, will therefore be an important milestone in determining its role in Africa's evolving financial landscape.

Source: Reuters

Reporting: Duncan Miriri

Editing: Karin Strohecker & Mark Potter