Africa’s new credit rating agency will have to convince investors that its assessments offer a more accurate picture of the continent’s economic risks if it is to influence borrowing costs and expand access to financing.

The Africa Credit Rating Agency (AfCRA) was launched in Mauritius on October 7, following years of efforts by the African Union (AU), the African Peer Review Mechanism (APRM) and the United Nations Economic Commission for Africa (ECA), alongside African financial institutions.

ALSO READ: Africa launches own credit rating agency

The independent, private sector-driven institution is intended to complement existing international credit rating agencies by bringing additional data, local knowledge and perspectives into assessments of African governments and businesses.

Its establishment comes amid longstanding concerns among African policymakers that international rating methodologies do not always adequately reflect the continent’s economic conditions, potentially contributing to higher borrowing costs.

ECA Deputy Executive Secretary Hanan Morsy said persistent risk premiums were estimated to cost Africa about $75 billion annually in excess interest payments.

She said AfCRA could help address the problem by incorporating a deeper understanding of African economies, available data and countries’ reform trajectories into credit assessments, giving investors more information when evaluating borrowers.

ALSO READ: Africa’s rating agency must be built on reliable data

However, the agency’s ability to influence financing conditions will depend on whether investors trust its analysis.

Angello Musigunzi, a Tax and Regulatory Partner at Garnet Partners Limited, a firm providing tax, audit and advisory services, said the initiative presents an opportunity to improve how African credit risk is assessed, rather than simply produce more favourable ratings for the continent.

"The agency could help governments and businesses access financing on better-informed terms by improving the information available to investors. However, AfCRA would need to demonstrate independence, technical credibility and transparency before its assessments could materially affect borrowing costs,” he said.

He said the agency’s ability to provide a more Africa-informed assessment of credit risk would depend on the quality of the data it uses and whether its ratings accurately reflect the economic conditions of the countries and businesses it assesses.

Investors would need to understand how AfCRA reaches its conclusions and have confidence that its assessments are based on rigorous analysis rather than political considerations or pressure to portray African borrowers more favourably, he said.

Musigunzi said the agency’s contribution should be measured by whether it improves the information available to financial markets and helps investors make better-informed lending decisions.

"AfCRA's biggest contribution could be to make the assessment of African credit risk more accurate, rather than simply more favourable. If it earns market confidence, it could help African governments and companies access capital on better-informed terms,” he said.

He added that a credible alternative source of ratings could help deepen African capital markets by giving investors more information about governments and businesses seeking financing.

"However, improved ratings would not automatically translate into lower interest rates, as borrowing costs also depend on factors such as debt levels, economic stability and global financial conditions,” he said.

"Its real success will be measured not by how many favourable ratings it issues, but by the confidence investors place in its analysis and the financing opportunities that follow.”

African Union Commission Chairperson Mahmoud Ali Youssouf described the launch as an important development for the continent, while stressing that the agency must remain independent to earn the confidence of investors and financial markets.

He also cautioned that AfCRA alone would not significantly reduce Africa’s cost of capital, pointing to the need for broader reforms to address the continent’s financing challenges.

Morsy similarly emphasised that countries must strengthen their economic fundamentals through sound macroeconomic management, domestic resource mobilisation, responsible fiscal policies and reliable economic data.

ECA, working with the African Union and the African Development Bank, supports African countries in strengthening these fundamentals and improving their creditworthiness.

Mauritius Minister of Financial Services and Economic Planning Jyoti Jeetun said the objective was not to obtain more favourable ratings for African countries, but to ensure their economies were assessed accurately.

"AfCRA is not about asking the world to rate Africa more favourably. It is about helping the world understand Africa more accurately,” he said during the launch.

The agency is expected to assess not only sovereign borrowers but also subnational entities and African companies. This could expand access to credit information and help deepen domestic capital markets, where many potential borrowers lack formal ratings.

In a statement delivered on his behalf by Uganda’s State Minister of Finance, Planning and Economic Development, Amos Lugoloobi, President Yoweri Museveni also called for closer links between Africa’s trade and financial integration efforts.

Museveni, who chairs the African Peer Review Forum of Heads of State and Government, said stronger capital markets, credible financial institutions and reliable credit information were important to supporting regional investment and economic transformation under the African Continental Free Trade Area.

APRM Chief Executive Officer Marie-Antoinette Rose-Quatre, reflecting on the decade-long effort to establish AfCRA, also stressed the importance of protecting the institution from political interference and ensuring rigorous, unbiased assessments.

"Independence must not be a slogan used at launch; it must be the discipline by which this institution lives,” Rose-Quatre said.

Mauritius will host the agency’s headquarters, while Chief Executive Officer Sifiso Falala will lead its operations.