Does Africa Need Its Own Credit Rating Agencies?

African countries have long relied on the “Big Three” global agencies (Standard & Poor’s, Moody’s and Fitch) to signal their creditworthiness. These firms use familiar letter grades (AAA down to C) to gauge default risk, and investors treat them as a convenient shorthand for safety or peril. In Africa today 33 countries have sovereign ratings – up from just one (South Africa) in the 1990s– yet nearly all sit in the junk category. Only Botswana and Mauritius enjoy investment-grade scores. As a result, African governments typically pay some of the world’s highest interest rates when they borrow internationally: a single-notch downgrade can add millions to the cost of a bond issue. In short, ratings exert an outsized influence on Africa’s borrowing costs and investor appeal. This reality has spurred a long-running debate: if Africa’s fate is so tightly bound to external assessors, should the continent try to take charge of its own credit narrative?

Africa’s Credit Ratings Landscape

To frame the question, consider how sovereign ratings work. Globally the Big Three dominate the industry; they analyze macroeconomic data, fiscal and debt metrics, and institutional factors to assign a grade. Higher grades (BBB–/Baa3 or above) signal lower default risk, while lower grades (the so-called junk levels) indicate higher risk (Aninver Development Partners, 2025). For sovereign borrowers, these ratings have concrete effects: investors often use them to set bond yields and decide how much capital to allocate. In practice, the grades act as a ceiling – when a country is rated B (for example), few institutional investors will buy its dollar bonds unless they are willing to take on “junk” risk .

Over the past two decades more African nations have joined the ratings game in pursuit of capital. In 1994 only South Africa had a rating; by 2003 some 13 countries had issued Eurobonds to finance infrastructure and reform. Now in 2025, 33 African governments have ratings from one of the big three . But those ratings are, with rare exceptions, low. As of 2023 only Botswana and Mauritius are at investment grade . All the rest are deep in speculative territory – a mix of B, CCC and even RD (restricted default) labels. In other words, almost the entire continent lives in the credit shadows. That partly reflects fundamentals: many economies are still rebuilding after debt crises, commodity crashes or fiscal slumps (Chirikure et al., 2022). But it also helps explain why borrowing is so expensive. In the words of development experts, African governments today “contend with some of the highest borrowing costs globally, partly due to low sovereign credit ratings” (Aninver Development Partners, 2025).

Domestic investors heed these scores too. A sovereign rating often caps what local corporations can achieve: if the government is rated B, private borrowers typically cannot get higher on average. This “sovereign ceiling” means that a country’s rating reverberates through its whole market, affecting loans, bonds and even foreign direct investment prospects. In short, global credit ratings carry weight far beyond mere advice. They help set the framework in which African finance takes place.

Perception versus Reality

Given that weight, it is no surprise Africans fret over the message in their grades. Many officials and analysts complain of a perception gap: that the grades overstate Africa’s risk relative to reality. “Why does Africa seem risky?” is a common question. Critics point out numerous improvements – from better macroeconomic management to debt relief and governance reforms – that they say the ratings often fail to capture. They note, for example, that agencies sometimes take a long time to reward good news but race to penalize small setbacks. Nigerian analysts, for instance, have observed that Abuja’s ratings barely budge after turning large budget deficits into surpluses, whereas a hint of trouble in other regions might trigger an immediate downgrade.

This sense of unfairness is widespread in African policy circles. Researchers report a “growing chorus” of African experts insisting that only a dedicated continent-led agency can break the cycle (Simons, 2024). They argue that global agencies simply don’t “get” Africa’s story and thus apply an implicit discount to every economy south of the Sahara. As one piece puts it, African critics accuse the Big Three of having “negative bias” against the continent – keeping countries on the verge of junk even when indicators improve (Aninver Development Partners, 2025). This bias, they say, effectively “denies [African countries] access to essential financial resources.”

Some empirical work supports the concern. Recent UNDP and Brookings analyses highlight the pervasive data gaps in Africa. Because hard statistics can be sparse or lagged, global analysts often end up incorporating judgment or proxies. One Brookings report notes that, without more facts, agencies must sometimes resort to sweeping assumptions – in effect “overrat[ing], underrat[ing] or even contradicting each other for the same country” (Gilpin & Sembene, 2024). Ratings analysts frequently conduct their reviews from afar, sometimes never visiting the country they are judging, which can leave blind spots. In practice, this subjectivity can actually put a price on perception. Brookings estimates that these rating quirks have cost Africans roughly $75 billion in excess interest payments and lost lending over the past few decades (Gilpin & Sembene, 2024). Another Brookings analysis puts the figure at about $70 billion (roughly $24bn in extra interest and $46bn in missed loans) (Kaba, 2025). In other words, many observers claim, Africa has been paying a “penalty” for its image – a hidden “perception premium” in finance.

Of course, part of this risk premium may simply mirror economics. It is indisputable that many African sovereigns face tough fundamentals: high debt ratios, weak export earnings and structural constraints. Empirical research finds that in most cases, African ratings have indeed fallen over time. One analysis concludes bluntly that “compared to their first sovereign credit ratings, most African countries’ credit ratings have deteriorated” (Chirikure et al., 2022). This suggests that the agencies’ caution often reflects reality – the fiscal burdens and political instability that have beset many countries. In other words, even if bias exists, some of Africa’s junk ratings may be unavoidable until growth and transparency improve.

Complicating the picture further is the global context. The discontent with credit-rating firms is not unique to Africa. European and Asian leaders also accuse the Big Three of tunnel vision or favoritism. Studies by international bodies (for example the IMF) have found that rating downgrades generally do precede defaults, and that global analysts use models focused on relative rankings of risk, not strictly on whether a country will default next year (Simons, 2024). In practice, then, agencies are trying to place borrowers into an international risk pecking order, which inherently leaves some in the lower tiers.

Nevertheless, Africans are keenly aware of the narrative that foreign investors tell themselves. One banker puts it vividly: investors often ask “in the credit rating meetings, is the tale we’re hearing about this country one of progress or peril?” Even when data improve, if the prevailing story is negative then capital will remain wary. This perception-reality gap – the difference between what the numbers say and what the market believes – is at the heart of the debate over rating agencies.

The Case for an African Agency

Proponents of reform believe that an African-led credit agency could help bridge that gap. The idea is to introduce a homegrown perspective on risk, complementing (rather than replacing) global ratings. The African Union, African finance ministers and bodies like the African Peer Review Mechanism (APRM) have backed the concept. In 2023 the AU endorsed a plan for a privately-funded agency outside the AU framework for credibility. The official rationale is straightforward: Africa needs “another perspective” – a ratings system that leverages local knowledge and addresses the continent’s nuances (Aninver Development Partners, 2025; Kaba, 2025).

Supporters list several benefits:

• Contextual nuance. A local agency would (in theory) have better access to data and country experts, producing context-specific analysis. The APRM envisions that AfCRA would “leverage context-specific knowledge, use Africa-based experts, and have better access to local data,” yielding more nuanced ratings (Aninver Development Partners, 2025). As Malado Kaba puts it, an African agency “aims to provide another perspective on risk perception” (Kaba, 2025).
• Development-centric focus. A new agency could adopt a “development-centric approach,” treating improvements in health, education, or infrastructure as credit-relevant (UNDP, 2025).
• Competition and diversity. A new entrant would break the Big Three’s monopoly. The AU emphasizes that AfCRA is not a “gift” of good ratings but a contributor to a diversity of opinions (UNDP, 2025).
• Domestic financial development. A local ratings body could expand coverage of sub-sovereign entities and companies, supporting regional bond markets (Kaba, 2025).
• Financial sovereignty and narrative control. Many African economists stress that having local agencies is a step toward financial sovereignty, telling Africa’s story in Africa’s voice (Kaba, 2025; UNDP, 2025).

The Hurdles

The proposal is bold, but skeptics abound. European attempts to launch independent agencies during the Eurozone crisis collapsed under costs exceeding $350-400 million (Simons, 2024). An African agency would likely require similar funding, raising concerns over donor influence.

The Big Three dominate 95% of global market share. Africa already has several small CRAs, but they lack influence (Simons, 2024). Sustainability is also a concern, as ratings firms rely on issuer fees. Many European agencies founded post-crisis have since closed (Simons, 2024).

Critics argue that improving African economies and transparency would yield better results than creating a new agency. Even with AfCRA, global markets may still demand high-risk premiums until fundamentals improve (Simons, 2024).

Sovereignty, Narrative and the Market

Beyond finances, this is about who tells Africa’s story. Credit ratings shape investor narratives. Advocates believe AfCRA could reframe perceptions by highlighting resilience, reforms, and regional progress (UNDP, 2025). Mavis Owusu-Gyamfi notes the need for “stronger institutional narratives that reflect the continent’s resilience and reform efforts” (UNDP, 2025).

Politically, establishing AfCRA is seen as asserting control over Africa’s financial identity. Minister Misheck Mutize emphasized that AfCRA would help “rebalance Africa’s position within the evolving global financial architecture” (UNDP, 2025).

Even if global investors remain cautious, having an African voice in credit assessments could chip away at entrenched biases. The very discussion around AfCRA has already encouraged greater dialogue on fairer ratings (UNDP, 2025).

Conclusion

Africa’s credit rating dilemma is complex. A new agency would face significant challenges, but the push for AfCRA has highlighted critical issues of transparency, perception, and sovereignty. Even if it never launches, the effort signals a desire for Africans to reclaim control over their financial narrative.

At the very least, African leaders are demanding a seat at the financial table—not just a scorecard. Whether through AfCRA or improved dialogue, it’s a step toward rewriting Africa’s own story in global markets.

---

References:

• African Union (African Peer Review Mechanism). 2023. “An Africa Credit Rating Agency (AfCRA) – Brief”.
• Aninver Development Partners (2025). “Credit Rating Agencies in Africa: Catalysts for Foreign Investment and Infrastructure Growth” (blog, Apr 2025).
• Chirikure, N., Abimbola, O. and Chelwa, G. (2022). “How are the ‘Big Three’ rating agencies impacting African countries?” Africa Policy Research Institute, 19 Apr 2022.
• Gilpin, R. and Sembene, D. (2024). “Making Africa’s credit ratings more objective,” Africa in Focus (Brookings, 29 May 2024).
• Kaba, M. (2025). “How an African credit rating agency can tame risk perception,” African Business, 17 Feb 2025.
• Simons, B. (2024). “Give credit where it is due – Africa’s fight with the Big Three rating agencies is overblown,” ODI (Nov. 2024).
• UNDP (2025). “Experts Convene in Washington to Advance Dialogue on an African-Led Credit Rating Ecosystem,” Press Release, 25 April 2025*.