Africa’s long-awaited continental credit rating agency, the African Credit Rating Agency (AfCRA), has officially launched in Port Louis, Mauritius, marking a major step in the continent’s efforts to reshape how its economies and businesses are assessed by investors.
The agency, established under the African Peer Review Mechanism (APRM), is designed to provide independent credit assessments based on African data, expertise and economic realities. The African Union says AfCRA will complement existing global rating agencies rather than replace them.
However, the agency’s biggest challenge may be convincing international investors that its ratings are independent, transparent and rigorous enough to influence investment decisions and borrowing costs.
Africa’s credit-rating gap
African policymakers have long argued that global credit-rating systems do not always adequately reflect the continent’s economic conditions, resilience and growth prospects.
The AU says AfCRA will help address information gaps and provide greater coverage of African sovereigns, companies and institutions.
The need for broader coverage is significant. About 23 African economies currently lack ratings from the three major international agencies — Moody’s, S&P Global Ratings and Fitch Ratings.
The continent’s borrowing costs have also become an increasingly important concern. Africa’s annual external debt-service burden rose from $61 billion in 2010 to $163 billion in 2024, according to the AU.
Investor trust is the real test
AfCRA’s creation does not automatically mean African governments will borrow more cheaply.
Credit ratings influence how investors assess risk and, consequently, the interest rates governments and companies may have to offer when raising funds.
For AfCRA to have a meaningful impact, international investors must be willing to incorporate its assessments into their investment and pricing decisions.
That makes credibility and independence central to the agency’s success.
President Bola Tinubu has similarly said AfCRA must earn the confidence of global investors through independence, credibility and rigorous assessments. He said Africa is seeking ratings based on its fundamentals and actual economic reforms rather than preferential treatment.
Questions over independence
The agency will also have to demonstrate that it can maintain sufficient distance from the governments and institutions whose creditworthiness it assesses.
Critics have questioned whether an agency created through an African institutional framework can maintain the independence needed to challenge African governments when their fiscal or economic conditions deteriorate.
The concern is that investors could discount AfCRA’s ratings if they believe the agency is designed primarily to produce more favourable assessments of African borrowers.
On the other hand, consistently issuing ratings that reflect deteriorating economic or fiscal conditions — even when those assessments are politically uncomfortable — could strengthen its reputation over time.
Methodology under scrutiny
AfCRA will also need to establish a rating methodology that investors can understand and independently assess.
The AU says the agency will provide independent, evidence-based assessments and strengthen transparency and accountability in African financial markets.
That means investors will be watching how AfCRA gathers data, assesses sovereign risk and handles issues such as debt sustainability, currency volatility, political risk and fiscal performance.
African-specific expertise could give the agency a deeper understanding of local conditions, but that advantage will only matter if its methodology is viewed as technically robust.
Can AfCRA reduce borrowing costs?
The potential economic benefits are substantial if AfCRA gains market acceptance.
A credible additional source of credit information could improve price discovery, expand coverage of African borrowers and potentially reduce the risk premium attached to some African assets.
It could also provide investors with more detailed information about markets that are currently poorly covered by international rating agencies.
However, borrowing costs are determined by more than credit ratings. Investors also consider liquidity, currency risk, political stability, fiscal strength, market depth and global financial conditions.
AfCRA therefore cannot by itself eliminate the structural factors that make borrowing expensive for many African countries.
A new chapter for African capital markets
The launch marks the culmination of a process that began several years ago. African Union leaders endorsed the creation of AfCRA in 2018, while the institutional framework and methodology were subsequently developed under the APRM.
The agency will rate sovereign borrowers, financial institutions and private companies and may also assess non-African entities where appropriate. It is intended to operate independently and be funded through shareholder capital and its operations.
AfCRA’s success will ultimately depend not on its launch, but on whether investors accept its ratings.
If it establishes a strong track record for independent and transparent assessments, it could become an important part of Africa’s financial architecture.
If investors remain unconvinced, however, its influence on the cost of capital could remain limited.
For now, Africa has created the institution. The next challenge is earning the trust of the global market.
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