New African Rating Agency Boosts Continent’s Financial Architecture

African Export-Import Bank (Afreximbank) has lauded the launch of Africa Credit Rating Agency (AfCRA), saying it will strengthen the continent’s financial architecture and expand capacity to generate credible, independent analysis of African credit risk.

Credit ratings play an important role in determining access to capital, influencing investor perceptions and shaping the cost at which governments, institutions and businesses can finance development.

It is therefore essential that assessments of African credit risk are independent, rigorous and evidence-based, while reflecting a complete understanding of the structures, institutions and economic realities being assessed.

Denys Denya, Senior Executive Vice President at Afreximbank, says the rating methodology AfCRA develops must recognise the uniqueness of current environment and its institutional structures.

“The Agency must set its own standards and not follow those set elsewhere… It must build a unique identity that conforms to an African best practice,” Mr. Denya says.

He adds: “Most importantly, AfCRA must set a new benchmark for the continent, maintain its independence, and remain wholly owned and controlled by Africans. We must all use it, and in return expect a complete assessment of where we (Africa) stand: the strengths the market has ignored, and the weaknesses we still need to fix.”

The establishment of AfCRA adds an important African-led source of credit opinion to the market. Its value will not be measured by whether it produces more favourable ratings, but by the credibility of its analysis, the quality of its data and transparency of its methodology, and its ability to deepen understanding of African sovereigns, sub-sovereigns and corporate
credit.

Development comes as many African issuers remain unrated, while localcurrency and sub-sovereign markets continue to have limited rating coverage. Expanding
credible rating coverage can improve the information available to investors and support the development of deeper domestic and regional capital markets.

AfCRA should, therefore, be seen as complementary to existing international and regional rating agencies, broadening the range of credible analysis available to investors and issuers while strengthening competition, transparency and analytical capacity within Africa’s credit markets.

Afreximbank points out that as Africa seeks to mobilise the scale of capital required for industrialisation, trade, infrastructure and economic transformation, credible African institutions that improve nformation, strengthen market confidence and deepen the continent’s financial markets will become increasingly important.