By Enyichukwu Enemanna
The African Union (AU) says it is planning the unveiling of a new African credit rating agency next year, citing unfair ratings given to countries on the continent, Reuters report says.
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.
Ravi Bhatia, S&P’s lead analyst for sovereign ratings, told Reuters recently that the agency applies the same criteria consistently in 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.
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.
AU finance ministers had passed a resolution 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 February next year.