The Demand for an Africa Credit Rating Agency.

The African Development Bank, Prosper Africa (a U.S. presidential initiative), and the United States Department of the Treasury have agreed to create an African online credit rating data platform with a $700,000 grant.

Why does this matter : Several African countries have recently been accessing international credit markets to issue Eurobonds, which have gained popularity and led to oversubscription from global investors. However, high borrowing costs, primarily stemming from low credit ratings, continue to be an issue for these African nations during times of economic reforms.

• The lack of accurate and comprehensive data and the inability of international credit agencies to fully capture the complexities of African economies does affect credit ratings of African markets and businesses, discouraging foreign investment and obscuring investment opportunities.
• Some international credit agencies, like Moodys, have taken active steps to establish a presence in Africa, notably through the acquisition of GCR Ratings, which has a strong foothold in several central African economies, including South Africa, Nigeria, Kenya, and Mauritius.
• As African businesses and startups seek alternative financing, particularly in the private credit sector, developing fact-based risk profiles and assessments for sovereign and corporate bond issues becomes imperative to help improve the cost of debt.

The bottom line: While a credit rating agency focused on Africa has the potential to facilitate better access to international financing by providing more accurate credit scores for African sovereigns and corporations, the responsibility lies with African governments and corporate entities to furnish verifiable, timely, and comprehensive data, including historical information. This will help create unbiased insights that accurately reflect local realities and enhance investor confidence.