The African Union will officially establish its own Credit Rating Agency (AfCRA) in a ceremony to be held in the Ethiopian capital city Addis Ababa on Valentine’s Day, just before the AU Summit for 2025 which runs 2/15-2/17.
Ethiopian media noted that the measure will seek to “provide credit ratings which reflect the realities and true potential of African economies”, and will specialize solely in African markets, “taking into account the characteristics of the different regions of the continent, including socioeconomic drivers and factors”
In a significant move aimed at reshaping Africa’s financial landscape, the African Union (AU) has officially launched its own credit rating agency on February 14, 2025.
This initiative comes in response to longstanding criticisms regarding the perceived bias of global credit rating agencies against African economies. Here are the key points:
African leaders, including Kenyan President William Ruto, have long argued that international credit rating agencies like Moody’s, Fitch, and S&P apply outdated or flawed models when assessing African nations, leading to unnecessarily high borrowing costs.
The AU’s new agency seeks to provide a more accurate and fair assessment of creditworthiness.
A study by the United Nations Development Programme (UNDP) highlighted that the current global rating system costs Africa an estimated $75 billion annually in lost opportunities due to higher interest rates and missed financing opportunities.
This new agency aims to rectify this by offering ratings that better reflect the continent’s economic realities.
The African Credit Rating Agency (AfCRA) was unveiled during a ceremony in Addis Ababa, Ethiopia, right before the AU Summit from February 15 to 17, 2025.
This strategic timing underscores the importance of the initiative to African leaders.
AfCRA will focus on providing transparent, continent-specific credit ratings, counteracting the perceived “African risk premium” that has historically inflated borrowing costs.
The agency is intended to be led by the private sector to ensure independence and credibility, with the aim of integrating Africa more effectively into global financial markets.
The Big Three rating agencies have traditionally defended their methodologies as globally consistent, yet they have faced scrutiny for their impact on developing economies.
The introduction of AfCRA could lead to a reevaluation of how African debt and creditworthiness are perceived internationally.
If successful, AfCRA could pave the way for lower borrowing costs, potentially unlocking vital capital for infrastructure and development across the continent.
