The African Union (AU) intends to launch a new African credit rating agency in 2024. This is in response to dissatisfaction with the ratings given to African countries by the three major international credit rating agencies: Moody's, Standard & Poor's, and Fitch.
African countries have argued that the international rating agencies are biased against them and that their ratings do not accurately reflect the true creditworthiness of African countries. For example, only two African countries, Botswana and Mauritius, are currently rated investment grade by all three major rating agencies. The rest of Africa is either rated junk or has no rating at all.
The AU believes that its own credit ratings agency will be more objective and will give African countries a fairer assessment of their creditworthiness. The agency is expected to be based in Ghana and will be funded by the AU and its member states.
The launch of the AU's credit ratings agency is a significant development. It is a sign of the growing maturity of the African financial markets and the increasing confidence of African countries in their own ability to manage their economies. It is also a challenge to the international rating agencies, which will need to justify their ratings if they want to maintain their relevance in Africa.
There are a few reasons why African countries are dissatisfied with the ratings given to them by the international credit rating agencies. First, the international credit rating agencies typically use data that is several years old to assess the creditworthiness of African countries. This data may not accurately reflect the current economic situation in these countries. Second, the international credit rating agencies often overlook the specific challenges that African countries face, such as high levels of poverty, debt, and political instability. These challenges can make it more difficult for African countries to repay their debts and meet their financial obligations. And third, some critics have argued that the international credit rating agencies are biased against African countries and give them lower ratings than they would give to countries in other regions. This bias may be due to a lack of understanding of the African continent or to racism.
Furthermore, the ratings given by the international credit rating agencies can have a significant impact on the ability of African countries to attract investment and access capital markets. This can make it more difficult for these countries to develop their economies.
The dissatisfaction of African countries with the ratings given to them by the international credit rating agencies is a reminder of the need for Africa to have its own independent financial institutions. This will help to ensure that African countries are not at the mercy of the international credit rating agencies. The African Union is currently considering the creation of such an agency.