African Union To Establish Its Own Credit Rating Agency.

The African Union (AU) a continental union of 55 member states is planning to launch its own credit rating agency according Bloomberg.

Why is this important: This initiative is motivated by a growing concern among African governments about the objectivity of major credit agencies' assessment of African countries, which has led to lower credit ratings and higher borrowing costs. As a result, the AU is taking steps to create an independent agency funded by shareholders through equity capital from African multilateral financial institutions, domestic and regional rating agencies, and private international investors, rather than by African nations.

The bottom line: While establishing a credit agency is commendable. it is imperative for African governments to undertake further measures to empower such an institution to provide accurate ratings. This should include ensuring the provision of timely and accurate data, preventing political interference that could compromise the credibility of the credit agency, and guaranteeing its complete independence as a corporate entity with the capacity to generate revenue autonomously.