Press Release: African Leaders Say The African Credit Rating Agency Will Help Shift The Global Financial Architecture In Africa’s Favour

20 September 2024

On the eve of the United Nations (UN) Summit of the Future in New York, a group of leading African organisations – the African Peer Review Mechanism (APRM), African Union, the United Nations Economic Commission for Africa (UNECA), the UN Development Programme Africa, and Development Reimagined co-hosted a High-Level Dialogue on the Establishment of Africa’s First Credit Rating Agency.

The event brought together leading voices in Africa’s financial ecosystem – including leaders of high-level African organisations and African Ministers of Finance – to discuss the establishment of the Africa Credit Rating Agency (AfCRA)—a new initiative aimed at addressing the persistent challenges African countries face with international credit rating agencies (CRAs) such as Fitch, S&P, and Moody’s – often known as the “Big Three”. The session explored how the AfCRA could reshape the financial landscape for African sovereigns, making credit ratings more transparent and representative of Africa’s economic realities.

The well-attended event was facilitated by Dr McBride Nkhalamba, APRM Director of Governance and Specialized Reporting, and a lively panel discussion moderated by Ms. Hannah Ryder, CEO of Development Reimagined.

The opening speeches and discussion were extremely rich, covering the problems the Agency is expected to address, its design, several arguments that detractors have raised with regards to the likely impact of the AfCRA, as well as the next required steps by African governments and organisations.

H.E. Amb. Albert Muchanga, African Union Commissioner for Economic Development Trade Tourism Industry and Minerals said the establishment of the AfCRA will mark another major milestone in Africa’s regional integration, building on the 2021 launched African Continental Free Trade Area (AfCFTA).

H.E. Amb. Marie-Antonnette Rose Quatre, CEO of the African Peer Review Mechanism (APRM) Secretariat then provided context for this new instrument by explaining that African countries have long contended with biased credit ratings, with CRAs often applying inaccurate models and risk perceptions, contributing to negative investment outlooks and inflated borrowing costs. H.E Ms Ahunna Eziakonwa, UN Assistant Secretary General UNDP Assistant Administrator and Regional Director for Africa, also set out the debt servicing costs that could be saved by investment grade ratings on the continent.

H.E. Ms. Hassatou Diop N’Sele Vice President for finance and Chief Financial Officer for the African Development Bank Group was also keen to emphasise that the AfCRA presents an opportunity for deepening African capital markets, which would in turn be beneficial to the work of banks such as AfDB and Africa’s private sector.

H.E. Chileshe Mpundu Kapwepwe, Secretary General of COMESA, focused her remarks on the need for the new agency to be transparent and credible, using already available local data as well as ensuring new data is provided by countries as necessary.

H.E. Dr Montfort Mlachila, Deputy Director of the African Department of the IMF was cautious on the likely impact of the AfCRA on lowering borrowing costs. He however noted that the demand for the AfCRA will likely come from both existing subscribers to other CRAs, as well as those countries who have no ratings. Dr Mlachila reiterated that the competition created by the new agency in the credit ratings market will be a positive step.

H.E. Claver Gatete, Executive Secretary of the Economic Commission for Africa, noted that a lack of local presence is one of the major problems of the “Big Three” that the AfCRA must avoid in its own implementation. H.E. Quatre also emphasised that AfCRA is not intended to deliver “favourable” credit ratings, but objective, better informed ratings, and this will in itself provide evidence that the big three credit ratings are not objective.  Honorable Rania A. Al Mashat, Minister of Planning, Economic Development and International Cooperation for the Arab Republic of Egypt agreed strongly and emphasized that a well-designed and credible AfCRA is an opportunity for Africa to demonstrate to the rest of the world that there is strong data and expertise on and from the continent.  Honorable Minister Al Mashat also called for broader reforms to the international financial architecture such as reform of debt sustainability assessment frameworks – which many CRAs take as a departure point for their analysis – to also, in tandem, shift biased perceptions of African markets.

In terms of demand for an AfCRA, Vice President N’Sele noted that once the agency is up and running, African governments may well use the AfCRA analysis to challenge the “Big Three” assessments, if necessary. However, she cautioned that even after the establishment of the Agency, however successful, Africa’s investors will still likely use other ratings agencies as well as other market information they need to make investments. In this sense, the AfCRA was a necessary, but not sufficient condition for greater agency in international finance, a point also reiterated by Dr Mlachila.

In terms of next steps, the leaders were very clear that the AfCRA should be launched as soon as possible. H.E. Muchanga also made a direct call to African private sector leaders to support the establishment of AfCRA because it will help grow and cut the cost of external capital as well as African domestic capital markets, and ultimately help the continent take charge of its financial destiny.

Honorable Minister Al Mashat encouraged African governments to engage in peer-to-peer review of their experiences with CRAs and strategies for active management of CRAs as well as other aspects of the international financial architecture. H.E. Claver Gatete, Executive Secretary of the Economic Commission for Africa, said African governments must take credit rating exercises from the new agency and “Big three” as seriously as IMF and World Bank missions, and work much harder to prepare for them as well as challenge them in private and in public if needed. H.E. Eziakonwa also shared information on a number of capacity building activities that UNDP has recently launched to support African governments with engaging with CRAs.

In closing, Secretary General Kapwepwe had the last but crucial word. Building on a remark made previously by H.E. Muchanga regarding the Economist Magazine having set various damaging narratives about Africa in 2000 and beyond, SG Kapwepwre reiterated that the AfCRA, beyond its technical detail and data, is an opportunity that African governments, the private sector and institutions must grab as one means to present a truly objective narrative about Africa.

Interested to learn more? Watch the full event “Africa’s Credit Rating Challenges: Will the Africa Credit Rating Agency Be a Solution?” [Click Here].

On 8-10th October 2024, the 9th Ad-hoc committee meeting on APRM support to member states on international credit rating agencies will be held in Cairo, Egypt, and a further public event on the AfCRA will be hosted by APRM, Development Reimagined, and others on the sidelines of the annual meetings of the World Bank and IMF in October 2024 in Washington DC.  Other events and opportunities for dialogue will be shared on APRM’s website: https://aprm.au.int/en

If you are interested in joining or following these events please contact ejigayhu.tefera@aprm-au.org or email clients@developmentreimagined.com for more information.

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