How the AU’s Credit Rating Agency Could Unlock African Potential

The African Credit Ratings Agency (AfCRA), initially set to launch in December 2023, will now be operational by June 2025 due to delays in securing a transaction advisory firm. The agency, the brainchild of the African Union, aims to address the high cost of capital in Africa, which is “three to four times” higher than elsewhere, according to African Development Bank President Akinwumi Adesina. AfCRA intends to provide a transparent alternative to existing global agencies like Moody’s and S&P, which dominate 95% of the market. By evaluating the financial health of African entities, AfCRA seeks to counteract the perceived “African risk premium” that unfairly inflates borrowing costs. While the effectiveness of a homegrown agency remains uncertain, if implemented effectively, AfCRA could play a crucial role in reshaping perceptions of Africa’s creditworthiness and unlocking vital capital for infrastructure development across the continent.

SOURCE: SEMAFOR