The African Union to Establish Its Own Credit Rating Agency by 2024
The African Union aspires to create its own financial rating agency with the ultimate objective of responding to the major concerns of African countries after several sometimes arbitrary evaluations of the three international financial rating agencies, in this case: Moody’s, Fitch and S&P Global Ratings.
The announcement was made on Tuesday September 12, 2023 by the main expert on financial rating agencies at the African Union, Misheck Mutize, quoted by the Reuters agency.
“The agency, which will develop its own risk assessment of loans to African countries, will be based on the continent and will add context to the information that investors consider when deciding whether to buy bonds or grant loans,” he said.
According to expert Misheck Mutize, this desire to change the paradigm is due to the fact that the three international financial rating agencies (Moody’s, Fitch and S&P Global Ratings) do not fairly assess the credit risk of African countries and that they are “more quick to downgrade them during different crises such as the Covid-19 pandemic”.
“In 2020, while all economies were suffering the effects of Covid-19, 18 of the 32 African countries rated by at least one of the major assessment agencies saw their rating downgraded.
This represents 56% of downgraded ratings for African countries compared to a global average of 31% during the period,” explained expert Misheck Mutize.
Several studies show that African countries could save up to $74.5 billion if credit ratings were based on less subjective assessments.
