New Africa-focused credit rating agency set to launch in 2025

BREAKING NEWSJuly 23, 2024 at 12:21 PM UTC

TLDR

New credit rating agency for African sovereign borrowers to launch next year led by African Union Commissioner.
Aim is to offer tailored credit ratings for African nations to address high borrowing costs and lack of global rating system representation.
Independent entity focused on fair evaluation and enhancing financial conditions for African countries.

A new credit rating agency designed to address the needs of African sovereign borrowers is expected to be operational by next year, Albert Muchanga, the African Union (AU) Commissioner for Development, Trade, Tourism, Industry, and Minerals, said recently.

The agency aims to provide a "more tailored" approach to credit ratings for African nations, which have traditionally faced challenges related to high borrowing costs and inadequate representation in global rating systems.

Muchanga explained that this initiative is driven by a desire for a fairer evaluation and to improve the financial conditions under which African countries operate. It will be an independent entity, not owned by the AU or any other regional bloc.

Key Takeaways

The idea for an African credit rating agency was first implemented in 2017, following numerous complaints by African governments regarding the conduct of the "big three" international ratings agencies — Moody's, Fitch, and S&P in particular. And rightly so, research shows subjectivity and bias in African credit ratings cost countries up to $24 billion in interest and over $46 billion in foregone lending. But according to analysts, an African credit ratings agency may help to tackle lender biases but will not be the only solution to reducing borrowing costs.

Africa

Credit

Credit Rating

Sovereign Credit

African Union

Moody's

Fitch

S&P