African Union Launches First Credit Rating Agency to Support Economies

The African Union (AU) has officially launched the Africa Credit Rating Agency (AfCRA), the first of its kind in Africa. The inauguration took place in Port Louis, Mauritius, on Wednesday. This new agency aims to help African nations lower their borrowing costs and offer a different viewpoint from the major global credit rating agencies.

The initiative has been in development for nearly ten years and received support from African leaders in 2018. They believe it will strengthen the continent’s financial system and address concerns about how international investors evaluate African economies. AfCRA plans to provide credit ratings based on local data and economic conditions.

African leaders have often criticized Western rating agencies for undervaluing African economies and making quick downgrades during crises, such as conflicts or pandemics. However, these global agencies argue that they use the same methods for all countries. A recent investigation found no evidence of bias in how these agencies rated African countries.

AfCRA will assess sovereign borrowers, financial institutions, and private companies. The AU stated that the agency will operate independently and will be funded by its shareholders and its own earnings. However, it has not disclosed who the shareholders are.

The agency is expected to improve access to international capital markets for African countries by offering more balanced assessments of their economies. This comes at a time when many African nations are struggling with high debt levels and rising borrowing costs. The AU reported that Africa’s annual external debt service increased significantly, from $61 billion in 2010 to $163 billion in 2024.

Currently, 23 African countries do not have a sovereign rating from any major global credit rating agency. AfCRA aims to provide ratings for these nations, which could help them gain better access to funding. The success of AfCRA will depend on its credibility and ability to earn the trust of international investors.