Africa’s Own Credit Rating Agency: The Case for AfCRA

22 May 20269 min readBy Derry Thornalley

AfCRA is not about giving Africa better ratings — it is about giving Africa accurate ones, built from data that reflects the continent’s real economic structure.

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In February 2025, at the 37th Ordinary Summit of the African Union in Addis Ababa, African heads of state gave formal political endorsement to an idea that had been building for years: a continental credit rating agency, owned and operated by Africa, headquartered in Mauritius, and designed to assess African sovereign and corporate creditworthiness using methodologies grounded in African economic realities. The African Credit Rating Agency — AfCRA — is scheduled to begin operations in the second quarter of 2026.

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The backdrop to this decision is decades of frustration. Three agencies — Moody’s, S&P Global Ratings, and Fitch Ratings — rate approximately 95 per cent of the world’s debt. Their methodologies were developed primarily for the institutional and regulatory contexts of advanced economies, and their on-the-ground presence in Africa has historically been thin. African sovereign borrowers have consistently paid higher spreads than their ratings would suggest is appropriate when compared with similarly rated issuers in other regions. The UNDP estimates the resulting excess cost at $74.5 billion per year across the continent — capital that could have funded infrastructure, education, and health instead of servicing a risk premium that does not accurately reflect default probability.

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What AfCRA has actually committed to do

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AfCRA is structured as a privately governed, commercially viable entity. African governments will not hold equity. The shareholding will be driven by African private-sector institutions, a design choice intended to prevent political interference and protect the independence that any credible rating agency requires. The African Peer Review Mechanism serves as a strategic partner, offering governance frameworks and technical support, while Mauritius-based MCB Capital Markets has been selected as the transaction adviser for the agency’s establishment.

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The agency’s initial focus will be on local-currency sovereign debt, an area where the gap in coverage is most acute. Approximately 40 per cent of African governments currently hold no rating from any of the Big Three. For African corporations, the coverage gap is even starker — more than 90 per cent of African businesses operate in a ratings vacuum that effectively prices them out of formal capital markets. AfCRA’s mandate is to begin filling that gap with assessments built on region-specific data and socioeconomic indicators that reflect African structural realities rather than importing a methodology designed elsewhere.

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The timeline has slipped before — an initial September 2025 launch target was not met, and first sovereign ratings have been pushed to mid-2026. That delay matters, but it also reflects the genuine complexity of establishing a credible institution from scratch in a domain where credibility takes years to build. What cannot slip is the underlying logic: if Africa’s access to international capital is to be governed by risk assessments, those assessments should be as rigorous, as current, and as contextually accurate as possible.

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Why this matters beyond the rating itself

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The argument for AfCRA is not simply that global agencies are biased — that claim is contested, and there is evidence that African sovereign default rates broadly align with those of similarly rated peers elsewhere once structural governance factors are accounted for. The more compelling argument is about coverage, competition, and context. A $74.5 billion annual premium may or may not be explained by bias alone, but it is certainly shaped by information asymmetry, methodological rigidity, and the absence of local analytical capacity embedded in the rating process.

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AfCRA’s most immediate continental value may not be in its first-year sovereign ratings at all. It will be in the subnational, utility, and corporate ratings that the Big Three have never bothered to produce. When a municipal government in Ghana or a cooperative bank in Tanzania can obtain a credible credit rating, it unlocks access to formal capital markets for the first time. That is the kind of market-deepening impact that changes the structure of African finance from the bottom up.

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There is historical precedent. India’s Credit Rating Information Services Limited — CRISIL — was established in 1987 and played a foundational role in expanding India’s domestic corporate bond market by providing granular, locally relevant ratings that spurred domestic institutional participation. Africa’s situation is different in important ways, but the mechanism is the same: better local information lowers the cost of local capital formation.

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Why Veri is committed to this kind of moment

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Veri exists because we believe African capital markets deserve institutional-grade infrastructure — built for them, not imported to them — and because we are convinced the next twenty years of growth on this continent will be written in part by the people who build that infrastructure.

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The launch of AfCRA is a direct expression of the same conviction. Africa has reached a point where it can no longer afford to have its economic narrative written by institutions that do not have deep roots in the continent’s data, governance structures, or developmental trajectory. Veri’s work in indexation and methodology sits alongside AfCRA’s work in ratings in a complementary relationship: ratings tell investors what risk they are taking; indices tell them what they own; data architecture tells them whether both signals are trustworthy. None of those functions should be left to institutions for whom Africa is a peripheral market.

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What we are building at Veri — disciplined, Africa-specific index methodologies, clean and timely market data, benchmarks that reflect the actual investable universe rather than an approximation of it — is the infrastructure that makes AfCRA’s ratings actionable for institutional allocators. A rating without a corresponding index is a signal without a vehicle. The two need to be built together, and they need to be built here.

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How this adds value at every level of the finance sector

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For policymakers across the continent, AfCRA represents the most significant structural change to Africa’s sovereign financing architecture in a generation. If the agency earns credibility and achieves regulatory recognition in key African financial centres, it can begin to reduce the systematic borrowing cost disadvantage that constrains the fiscal capacity of most African governments. The macroeconomic consequence of even a 50 basis-point reduction in average sovereign borrowing costs, replicated across twenty-plus rated sovereigns, is transformational in terms of the public investment it makes possible.

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For corporate and subnational issuers, AfCRA’s coverage of entities that the Big Three do not reach is the more immediate prize. A development bank in East Africa, a power utility in West Africa, or a municipality in Southern Africa that can obtain a credible, Africa-grounded credit rating for the first time gains access to institutional investor capital that was previously inaccessible. The bond markets that result from that access are deeper, more liquid, and more representative of Africa’s real economic activity.

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For institutional investors — pension funds, insurers, and asset managers with mandates to invest in Africa — AfCRA potentially provides an additional layer of credit analysis calibrated to local conditions. That does not replace global agency ratings in the near term; institutional investor mandates and regulatory frameworks in major financial centres still reference the Big Three. But AfCRA creates a supplementary signal that experienced Africa allocators will value, particularly for credits that global agencies under-cover.

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For the private economy and the small businesses that form the backbone of most African economies, AfCRA’s rating coverage of micro-finance institutions, cooperatives, and SME-lending vehicles opens a pathway to formal capital market financing that is currently closed to most. A credible local-currency rating for a community development financial institution is not a trivial intervention. It is the difference between that institution funding itself through informal channels at high cost, and accessing bond market capital at a rate that reflects its actual creditworthiness.

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What this contributes to African growth — short term and long

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In the near term, AfCRA’s most important contribution is signalling. The decision by fifty-four African Union member states to back a continental rating institution is a statement to global capital markets that Africa is serious about financial sovereignty, data quality, and the transparency that institutional investors require. That signal alone will begin to shift the narrative around African risk, even before the first AfCRA rating is published.

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Over the medium and long term, if AfCRA executes well — building transparent methodologies, hiring qualified analysts, publishing consistent and reviewable assessments, and avoiding the political interference its governance structure is designed to prevent — it can meaningfully compress the African risk premium. Even a partial compression of the $74.5 billion annual excess cost would represent one of the largest transfers of economic value to Africa’s development agenda in the continent’s history. No aid programme, no foreign direct investment flow, and no multilateral lending facility has the structural leverage to deliver that outcome. Only a change in how Africa is perceived and priced by global capital markets can.

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Closing — what AfCRA actually represents

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AfCRA is not a political gesture. I understand why some observers — particularly those sceptical of institutions that might rate their own members too generously — are cautious about its potential. Those concerns are legitimate and should be taken seriously by AfCRA’s governance from day one. The agency’s credibility will be built or destroyed by the quality and independence of its analytical work, not by the political backing that enabled its creation.

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But the underlying premise is correct. Africa does not have an accurate credit risk problem. It has an information asymmetry problem — a gap between what African economies actually look like from the inside and what they look like to analysts who are reading them from London or New York through methodologies built for different contexts. AfCRA is the institutional answer to that gap. Veri is part of the data infrastructure that makes the gap smaller. Both are necessary. Together, they are part of how Africa builds a financial architecture that belongs to it.

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#Africa #CreditRatings #AfCRA #SovereignDebt #Veri

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