The African Union plans to establish an African Credit Rating Agency (AfCRA) in Mauritius next year, citing concerns about perceived anti-African bias from the dominant global rating agencies—Fitch, Moody’s, and Standard & Poor’s. The AU argues that these agencies, with little on-the-ground presence in Africa, evaluate African countries’ creditworthiness in ways that prioritize austerity over policies that could foster growth. While the intent is to counteract these perceived biases, critics argue that AfCRA is unlikely to “level the playing field.” Ratings produced by AfCRA could be more optimistic than those of the global agencies, raising questions about credibility and potentially being viewed as a shift in the rules rather than a true solution.
Credit ratings are primarily used by global investors to compare default risk across countries. African borrowers compete in international capital markets, meaning that a regional rating alone would not shield them from shifts in global risk appetite. When global investors’ risk tolerance declines, low-rated borrowers—especially in sub-Saharan Africa—suffer most. Rating agencies often respond reactively to these market changes, which explains why they are sometimes accused of “lagging” the market. Downgrades for already low-rated countries can have especially severe consequences, bringing them closer to default-level risk.
Although African borrowers often face higher credit spreads than similarly rated countries elsewhere, evidence of systematic anti-African bias is weak. Studies cited to support this claim sometimes compare fundamentally different measures of risk. Research by Moody’s and the IMF suggests that African sovereign default rates are comparable to those of similar-rated countries globally once factors such as fiscal transparency, regulatory quality, informal economic activity, and weak financial sectors are taken into account. Governance indicators, including political stability, bureaucratic quality, and the rule of law, remain among the most reliable predictors of default risk.
Rather than creating AfCRA, practical steps could better address the underlying causes of high borrowing costs. One priority is enhancing data transparency, particularly around budgets and debt. Greater clarity can reduce uncertainty for investors and lower risk premiums. The case of Senegal’s hidden debt, which came to light last year and amounted to a third of the country’s GDP, highlights the importance of accurate reporting. A second step is improving African governments’ capacity to communicate effectively with rating agencies and bondholders. Dedicated investor relations teams, which have been successful in other emerging markets, can help convey policies, present data, and respond to questions, building trust and credibility.
Ultimately, the high cost of foreign borrowing in Africa largely reflects the inherent risk profile of many economies rather than bias alone. Establishing a regional rating agency risks being perceived as “grading one’s own homework” and may not address the market realities that drive borrowing costs. Strengthening data transparency and communication with investors and rating agencies offers a more credible and sustainable path to improving Africa’s access to capital while mitigating the perceived shortcomings of the global rating system.
