The African Union continued its mission to establish the Africa Credit Rating Agency (AfCRA), which aims to illuminate knowledge on African economies to further investment into African states, which has routinely been hindered by damning credit scores from multinational credit agencies.
This makes the establishment of AfCRA crucial to the forward momentum of African investment, as more transparent financial information gives greater weight to the idea of investing in Africa and allows African states to better access international credit markets, with the African Union arguing that present limitations hinder currency growth.
This argument has been furthered by the UNDP Regional Bureau for Africa, which contended that ratings by multinational credit rating agencies directly impact countries’ finances as they influence the macroeconomic policies of African states. This is more evident when reflecting on the Covid-19 pandemic, where African states feared that financial aid would downgrade their economies.
However, the journey of establishing AfCRA is fraught with difficulties, with concerns on how to finance the initiative, informational logistics, and the ever-greater challenge of entering a market dominated by three multinational credit agencies whose credibility has been built over almost a century of operation.
The credibility of transnational credit rating agencies had also been contested by various African politicians. The President of Kenya, William Ruto, alleged that existing credit agencies held a bias against African states, leading to fiscal downfalls. Dr. Paul Kariuki, Executive Director of the Democracy Development Programme at the University of KwaZulu-Natal and Convener at the Africa Policy Circle (APC), furthered this critique by questioning the research methodology employed by credit rating agencies, deeming it inefficient:
“For an international agency to sit somewhere outside of the continent that does not meet the expectations of the countries is already flawed.”
While Dr. Kariuki criticized the credibility of international credit agencies, he emphasized that the legitimacy of the proposed Africa Credit Rating Agency could only be cemented if the organization was properly structured with competent personnel.
“It needs to be staffed properly with credible, competent human resources that are able to collect data from different countries to make an opinion that is informed by evidence so that it also does not go again through the same route the international agencies have gone through. Secondly, it needs to be strengthened politically; in other words, member states (of the African Union) must give it the impetus it needs,” theorized Dr. Kariuki.
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Photo: GovernmentZA
