LAGOS, Nov 3 – The Africa Credit Rating Agency (AfCRA) is targeting the publication of its first sovereign credit ratings by the end of March, as it begins engagements with 15 African governments in an effort to establish an alternative assessment of the continent’s creditworthiness.
Interim Chief Executive Officer Sifiso Falala told Reuters that the agency’s staff would conduct research in several countries, including Togo, Kenya, Seychelles, Burundi and Mauritius.
“We will be in a position, by March, before the end of March, to have released results,” Falala said in an interview.
Based in Mauritius, AfCRA was established following an African Union initiative launched in 2018 and officially launched last month. The agency aims to provide an additional perspective on African sovereign risk through its own credit assessment approach.
Its initial activities will focus on solicited sovereign ratings, under which governments pay for assessments and provide access to public officials and financial data. AfCRA also intends to rate African multilateral lenders, including the African Export-Import Bank (Afreximbank), as well as private financial institutions.
African concerns over sovereign credit ratings
The agency’s emergence comes amid longstanding concerns among some African leaders that the three dominant global credit rating agencies, S&P Global Ratings, Moody’s and Fitch, overstate lending risks across the continent and downgrade African sovereigns too quickly during periods of economic stress.
The three agencies have rejected allegations of systemic bias, maintaining that they apply their methodologies consistently across markets. A 2024 Reuters investigation into Africa’s debt crisis found no evidence of systemic bias in the sovereign ratings assigned by the firms.
Credit ratings have significant implications for sovereign borrowing costs. Lower ratings typically increase the yields investors demand to hold government debt and can restrict access to certain institutional investors.
Falala described the cost of borrowing as a major burden for African economies, citing estimates that countries across the continent pay an additional $75 billion annually in interest costs compared with borrowers elsewhere.
Africa’s total debt has risen to approximately $1.9 trillion, according to Falala. The African Union estimates that the continent’s annual external debt-service bill increased to $163 billion in 2024, from $61 billion in 2010.
“What Africa needs is thorough research,” Falala said, adding that AfCRA intended to rely less heavily on data from international financial institutions such as the International Monetary Fund (IMF).
Ownership structure and capital raising plans
AfCRA is privately owned, with its structure barring governments from holding equity stakes in the agency.
It is owned by Plus 94 Research, a South African research company co-founded by Falala and Tirhani Mabunda. The agency plans to raise $15 million through a share sale that would give African investors a two-thirds stake, Falala said.
AfCRA has also completed the acquisition of a 51% stake in Sovereign Africa Ratings, a South African credit rating firm founded and run by Falala.
The ownership and capital-raising arrangements form part of the agency’s effort to establish an African investor base while maintaining a privately owned structure.
Establishing credibility in Africa’s credit markets
AfCRA’s initial sovereign assessments will be an important step in establishing its position within a market dominated by three international rating agencies.
Its ability to influence how investors assess African sovereign risk will depend on the credibility, transparency and consistency of its methodologies, as well as the quality and independence of its research.
The agency will also need to demonstrate that its assessments provide useful additional information to investors and lenders, particularly in markets where access to reliable economic and fiscal data remains uneven.
For African governments, the emergence of another rating institution could broaden the range of assessments available to investors. However, whether this translates into lower borrowing costs will depend on market acceptance of its ratings and how creditors incorporate them into investment and lending decisions.
AfCRA’s first ratings, expected by the end of March, will therefore mark an early test of its methodology and its ambition to establish a stronger African presence in sovereign credit assessment.
