The African Union plans to launch a new African credit rating agency next year to address the group's concerns that ratings given to countries on the continent are unfair, an official told Reuters.
The agency, which would craft its own assessment of the risks in lending to African countries, would be based on the continent, said Misheck Mutize, lead expert for country support on rating agencies with the African Union.
It will also add context to the information investors consider when deciding whether to buy African bonds or lend privately to countries.
"We already have quite a huge interest in the private sector to support the implementation of this," Mutize said, adding they are targeting a launch in 2024.
The AU, and leaders of member nations from Ghana to Senegal to Zamia, allege that the "big three" ratings agencies – Moody's, Fitch and S&P Global Ratings – do not fairly assess the risk of lending to African countries, and say they are quicker to downgrade them during crises such as the COVID-19 pandemic.
All three ratings agencies have denied bias and say their ratings follow the same formula across continents.
Moody's and S&P Global Ratings did not immediately respond to a request for comment. Ravi Bhatia, S&P's lead analyst for sovereign ratings, told Reuters recently that the agency applies the same criteria consistently all regions.
A Fitch Ratings spokesperson said all sovereign rating decisions use "globally consistent and publicly available criteria" and that all rating drivers were clearly identified.
OUTSTANDING BONDS
Broadly speaking, credit ratings are designed to gauge a borrower's risk of default, and factor in the terms on which banks and others will lend to them. More than a dozen African countries have outstanding international bonds.
A United Nations Development Programme study in April showed that African countries could save up to $74.5 billion if credit ratings were based on less subjective assessments, citing "idiosyncrasies" in the frequency of ratings actions for African countries as an example.
Mutize said the new agency was a push to change the narrative.
"Our goal has not been to replace the big three...we need them to support access to international capital. Our view has been to widen diversity of opinions," he said.
"We know the big three follow the opinion of other smaller ratings agencies. They've acknowledged that other smaller ratings agencies have got an edge in understanding domestic dynamics."
AU finance ministers passed a resolution over the summer to endorse the plan for the new agency, an effort spearheaded by the African Peer Review Mechanism (APRM), a branch of the AU formed last year to improve governance across the continent. The full AU executive council is expected to adopt the same resolution in February.
The agency would be self funded and private-sector driven with AU oversight, Mutize said.
"Investors have been quite positive. They want to see what will be the output of this," he added. "Any investor will pay attention to anything that brings them information."
Latest Stories
-
Teen earns doctoral degree at 17 after defending her dissertation
26 mins -
Ghana receives ICAO Trainair Plus Silver Membership Award
47 mins -
A-Plus apologises to businessman
2 hours -
North East Regional House of Chiefs commends Bawumia for civility of his campaign
2 hours -
Emmanuella Sarfo-Ntow: My 8-hour traffic experience from Monday’s downpour
2 hours -
IMANI’s accusations that we disenfranchised SALL baseless – EC
2 hours -
Filth crisis grips Aboabo lorry station in Kumasi
2 hours -
Struggling Korase M/A Basic School receives intervention from Amponsah Efah Pharmaceuticals
2 hours -
Shatta Wale’s son hosts mother on Joy Prime’s edition of Mother’s Day
2 hours -
Training of government PROs on tackling information disorder underway
3 hours -
Dialysis crisis: NHIA to introduce scheme to subsidise dialysis cost
4 hours -
Pack your equipment and leave immediately – Upper East REGSEC to illegal miners
4 hours -
Ghana’s fundamentals are weak – Lecturer explains cedi depreciation
4 hours -
Praise for the President: What the Chief Justice actually said (verbatim)
4 hours -
Cedi free-fall is a disaster for us – Food and Beverages Association
5 hours