Present credit score rankings could drawback the continent, however would not an African company quantity to Africa ‘marking its personal homework’?
Can Africa itself right the bias it says the Massive Three credit standing businesses show in grading African sovereigns? The African Union (AU) and different voices on the continent consider this bias provides African international locations unfairly low rankings, pushes up their borrowing prices and slows improvement.
So in February 2025, the AU introduced the creation of its personal Africa Credit score Score Company (AfCRA), headquartered in Mauritius. ‘Africa is now not content material to be a passive observer on this discourse,’ AU African Peer Evaluate Mechanism Chief Govt Officer (CEO) Marie-Antoinette Rose-Quatre mentioned final September. ‘We’re taking possession of our narrative and driving ahead significant, homegrown options.’
Definitely, African sovereigns on common obtain decrease rankings from the Massive Three – Customary and Poor’s (S&P), Moody’s and Fitch, all personal American corporations – than developed international locations do.
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In 2025, solely Botswana, Morocco and Mauritius had investment-grade standing, whereas South Africa, Côte d’Ivoire and Benin have been rated just under funding grade. The remaining 49 have been rated effectively under. A number of African international locations aren’t rated in any respect, remaining excluded from capital market entry.
Nonetheless, to say the Massive Three have typically rated African sovereigns decrease than developed international locations isn’t essentially proof of bias. The three corporations insist they grade all states in response to the identical standards and that African international locations occur to attain decrease.
The Massive Three publish these standards, that are roughly the identical. They embrace financial, institutional and governance energy, the energy of civil society and the judiciary, and the effectiveness of financial and macroeconomic coverage.
An April report by the Konrad-Adenauer-Stiftung (KAS) and the Leibniz Institute for Financial Analysis famous that whereas among the measures – like gross home product (GDP) and debt ratios – are goal, others, like institutional and governance energy, are extra subjective. Along with the weighting credit standing businesses give to the assorted standards, this may enable for bias.
The report discovered that even among the goal indices have been inherently unfavourable to African international locations. For instance, the Massive Three’s emphasis on GDP per capita as a measure of financial energy successfully meant poorer international locations have been punished for being poor and weren’t supplied an incentive to flee poverty.
The report famous a variety of per-capita incomes globally. In 2023, these ranged from US$511 within the Democratic Republic of the Congo (DRC) to US$98 700 in Eire on the higher finish. On this mannequin, the authors mentioned, most African international locations ‘would want to boost their per-capita revenue to the extent of Mauritius [US$10 552] … to attain a one-notch enchancment of their score (all different components held fixed).’
Equally, a 2025 United Nations Commerce and Growth report revealed that the Massive Three positioned higher emphasis on creating international locations holding ample reserves than they did for developed international locations. That compelled creating international locations to take a position extra in conservative, low-yielding belongings, constraining their skill to take a position at increased returns.
The KAS-Leibniz report utilized an advanced mathematical method and concluded that there was a bias. This resulted within the Massive Three underrating African governments by a mean of 0.5 to 1 notches or rungs. Not enormous, however vital.
Final month, a Chatham Home and KAS seminar requested how an African credit standing company may enhance the continent’s financing circumstances. Moody’s Marie Diron implicitly denied any rankings bias by her firm.
She mentioned Moody’s had studied 40 years of debt defaults worldwide, and that ‘If our rankings have been biased, you’d anticipate to see, for a given score degree, that the likelihood of default for an African sovereign is decrease than for a sovereign elsewhere on this planet.’ Moody’s discovered a ‘excellent alignment’ between African sovereigns and others, she mentioned.
The larger query is: no matter whether or not there’s bias within the Massive Three’s rankings of African international locations, may an African credit standing company resolve this downside?
Chatham Home Senior Analysis Fellow David Lubin mentioned portfolio managers and others allocating capital used credit score rankings to assist them resolve whether or not to spend money on, say, the DRC or the Philippines. The AfCRA appeared to assist them solely resolve amongst completely different funding prospects in Africa.
He requested whether or not AfCRA was not primarily Africa ‘marking its personal homework’? Why would pension fund managers, firm CEOs and others consider an African credit standing company would charge African sovereigns objectively?
Growth Reimagined CEO Hannah Wanjie Ryder, nonetheless, mentioned credit standing businesses ought to think about different standards – together with the extraordinary efforts African governments go to, to keep away from debt defaults. She mentioned an AfCRA would even have a greater understanding than outdoors businesses of the peculiarities of African economies, such because the significance of the casual sector.
However precedents for the success of a brand new, regional credit standing company aren’t encouraging. In 2012, the KAS-Leibniz report notes, the European firm Scope started issuing credit score rankings in Europe to supply a Europe-based various to the Massive Three.
The three corporations have been ‘perceived as biased towards Europe and insufficiently attuned to European specifics.’ In different phrases, related motivations as for AfCRA’s creation. But the KAS-Leibniz report notes that Scope’s world market share stays under 1% ‘and it … has not but succeeded in reducing the credit score value of European issuers.’
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Because the AU, KAS-Leibniz report and Chatham Home dialogue all agreed, for the AfCRA to have any hope of success, it should be scrupulously unbiased and clear. It must function as a purely personal firm with no trace of AU or African authorities funding, and should subject credit score rankings that bear full exterior scrutiny.
And even when it does not enhance monetary circumstances for African international locations by its credit score rankings, it may nonetheless accomplish that by serving to African governments and different entities enhance their prospects of reaching increased credit score rankings – together with from the Massive Three.
That could possibly be achieved by making certain the Massive Three higher perceive the circumstances of African international locations, and are extra open and unbiased of their rankings of African credit score threat, which already appears to be occurring.
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Peter Fabricius, Marketing consultant, ISS Pretoria