The African Credit Rating Agency (AfCRA) is launched with headquarters in Mauritius.
On October 7, the African Credit Rating Agency (AfCRA) was launched. The initiative, which emerged almost ten years ago within the African Union (AU), will, however, be an independent and private organization. Its main objective is to ensure that the debt interests of the countries of the continent are more in line with reality and to address the historical complaint that the main rating agencies – in particular Moody’s, Standard & Poor’s and Fitch Ratings – cause strong interest cost overruns that derive from excessive risk assessments that they make on the economies of African countries.
Misheck Mutize, the UA’s leading expert on credit rating agencies, wrote in The Conversation days before the launch of AfCRA that, far from being a rival to the main international rating agencies, the African initiative is “rather a new lever to broaden and deepen African capital markets, expand credit information and help redirect capital towards productive investments in infrastructure, energy and manufacturing.” The South African expert believes that the agency’s success should be measured “based on whether it helps African countries advance in these areas” and that, therefore, it is not just another rating agency, but rather the “pioneer in the creation of a more solid, deep and efficient African financial ecosystem.”
According to a recent report by UNCTAD, the UN body for trade and development, 3.7 billion people live in countries where debt interest payments are higher than spending on education or health. Between 2010 and 2025, the net interest on public debt in developing countries has tripled, according to the organization’s study, which also highlights that these countries pay, on average, twice the interest than developed nations. If the rates were the same for both, the former would save up to $500 billion.
The Bissauguinean economist Carlos Lopes, in statements collected by The Countrypoints out that “what Africa needs is a much more sophisticated African risk assessment framework, based on data and foundations, that can demonstrate where perceptions deviate from the evidence. If AfCRA contributes to this, its impact can go far beyond its own ratings». Coincident or not, on the same day that AfCRA was launched, Moody’s raised the outlook for sub-Saharan African countries to “positive” – although only two of the 25 countries it rates in the region, Botswana and Mauritius, it considers relatively low-risk borrowers – and warned that “debt service, limited public revenues, climate change risks and regional security threats remain the main weaknesses,” according to Reuters.
In the image above, two workers prepare a shipment of oranges in the Coega Special Economic Zone, in Nelson Mandela Bay (South Africa), on September 29. Photograph: Emmanuel Croset/Getty
