With the African Credit Rating Agency set to officially launch in June, the key questions remain: how can this pan-African initiative stay independent and credible, free from political interference, and earn the trust of investors as a reliable tool for pricing African risk? This question was raised during a sideline event at the latest African Development Bank (AfDB) annual meetings in Abidjan, Côte d’Ivoire, where experts gathered to discuss the strategic role of the African Credit Rating Agency. ALSO READ: Why Africa needs its own credit rating agency Jide Okeke, the Coordinator of the UNDP Regional Programme for Africa, emphasised that the fact that the African credit rating agency was endorsed by the African Union is a boost. “The political legitimacy that the African Union comes with is one that is unparalleled on the African continent,” he said. Okeke emphasised that the agency should remain independent and not be embedded as an organ within the African Union. He stressed that maintaining this separation is crucial to preserving the true value and credibility that the African Credit Rating Agency aims to bring. He dismissed the notion that the new agency should replace the established global rating agencies but affirmed that it unquestionably has an important role to play. Globally, there are three credit rating agencies; S&P Global Ratings (S&P), Moody's, and Fitch Group, that have gained significant credibility and trust from various stakeholders, and especially investors. “In setting up the African Credit Rating Agency, you do need partners, like the African Union, like UNDP. There are different ways on how independence can be assured. One is how we constitute the steering committee, ensuring qualified people are hired for positions, rather than candidates nominated by member states. These are some of the factors we need to focus on.” Looking at the agency’s core functions, Okeke emphasised the importance of building real capabilities within African countries. “Our countries need capability development, not just capacity development. The capabilities of those who can gather data, negotiate with credit rating agencies, and support governments in discussions about altering methodologies must be upscaled. This could be one of the primary mandates of the African Credit Rating Agency.” ALSO READ: Africa’s rating agency plan to end unfairness Okeke emphasised that through UNDP’s engagement with countries, exchanging best practices and lessons has proven invaluable. This is why UNDP is working to establish a community of practice, leveraging the African Credit Rating Agency as a platform to facilitate the sharing of best practices across nations. “Most importantly, not all countries have been rated. With the African Credit Rating Agency, all 55 African Union member countries can be rated, and that is a major step forward,” he said. On ensuring that the African Credit Rating Agency moves beyond rhetoric to deliver real impact, Pierre Celestin Rwabukumba, the president of the East African Securities Exchanges Association (EASEA) and CEO of the Rwanda Stock Exchange, urged careful consideration in its design and governance. “It’s a good idea to have something like this but we must change a lot in how we do it. The way it is structured will be very important,” he said. Rwabukumba cautioned that the agency must not be politically driven from Addis Ababa but should be genuinely led by the private sector, while receiving support from governments and multilateral organisations. Highlighting the risks of ineffective institutions, he cautioned that, “We don’t want to create another big ghost, or white elephant institution. These happen all the time. We must be serious about what we are talking about.”
