Rating Africa: The power to define risk
For years, Africa’s diplomatic demands have centred on representation, another seat, a stronger voice and a fairer share of decision-making power, writes Beatrice Mujuni
Beatrice Mujuni.
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OPINION
By Beatrice Mujuni
Am I an economist? Not by a long shot. But financial matters are far too consequential to belong only to economists. Decisions made at national, regional and international levels eventually reach every one of us. AAA. BBB. B. To most people, they are simply grades. In financial markets, AAA signals the strongest capacity to repay, BBB falls within investment grade, while B indicates much greater credit risk. Behind these rankings sits an entire country, its politics, institutions, resources, failures and even its promises. If a country moves down the scale, borrowing usually becomes harder and more expensive.
A personal credit score can determine whether someone gets a mortgage. A sovereign credit rating operates on a much larger scale, it can influence whether a country can afford, for instance, a power plant and how much remains for hospitals after paying for it. The score does not build roads, hospitals or create jobs, yet it can influence how much a government has left to do all three. So, should Africa give itself a pat on the back for establishing its own credit-rating agency? Certainly. But before the applause becomes a standing ovation, it is worth asking what has really changed and who still gets to decide what Africa’s risk is worth.
On 7th October, the African Union launched the Africa Credit Rating Agency (AfCRA), in Mauritius. It is the continent’s first continental agency created to rate governments, financial institutions and companies. Its launch follows years of complaints that the dominant international agencies do not always assess African economies with enough local context. Moody’s, S&P and Fitch deny that their ratings are biased and say they apply comparable standards across markets.
I know what you are thinking, something along the lines of whether AfCRA will give Africa fairer ratings, right? Well, here is what I think could be more interesting to focus on: the question of who gets to define risk in the first place. That question belongs in foreign policy. International power is usually pictured at summits, in treaty negotiations or behind a flag at the United Nations. Yet it also sits inside the standards used to decide which countries are dependable, whose debt is safe and whose uncertainty deserves an extra premium. Rating agencies do not sign treaties, but their judgements can narrow the choices of those who do.
South Africa became the first African country to receive a sovereign rating in 1994. In 2002, then US Secretary of State Colin Powell called a sovereign rating a country’s “ticket” to global capital. The United States helped fund early assessments by Fitch, while UNDP supported ratings by S&P. African governments gained access to international bond markets, and sub-Saharan countries went on to borrow nearly $200 billion over two decades.
The ticket, as it turned out, came with a rather expensive fare. Commodity shocks, poor financial management and costly refinancing exposed the weaknesses beneath some of that borrowing. Countries like, Ghana, Zambia and Ethiopia eventually defaulted.
It would be dishonest to place every financing difficulty at the feet of foreign rating agencies. African governments have sometimes borrowed badly, hidden liabilities and neglected the institutions that build investor confidence. Evidence suggests that the “Africa premium” also reflects weak budget transparency, limited financial depth, large informal economies and gaps in public data. A new marking scheme will not help if governments refuse to show their data.
This is where the diplomacy of measurement begins. For years, Africa’s diplomatic demands have centred on representation, another seat, a stronger voice and a fairer share of decision-making power. AfCRA points towards something deeper. Influence also comes from shaping the evidence and standards used before the meeting even begins. Sometimes the person defining the scale carries more power than the person standing on it.
Building that authority will take time. AfCRA must earn the confidence of African governments, investors, regulators and development banks. It will need transparent methods, timely data and the independence to publish conclusions that may not please everyone. While African ownership alone will not make its assessments influential, African knowledge could make them more precise.
Over the coming decade, success may be visible when AfCRA’s ratings become difficult to sideline. If its analysis identifies strengths and risks that others repeatedly miss, established agencies will have to respond. Investors will have another serious reference point, and African borrowers may gain more room to negotiate. If AfCRA merely reproduces existing models under an African name, the launch will remain symbolically important but financially modest.
But most importantly, the real stakes will be felt far from bond markets and finance ministries. Interest payments compete with employment programmes, healthcare, education and climate resilience. When risk is misread, citizens eventually pay for the error, and when governments conceal weaknesses, citizens pay for that too.
So yes, an applause is in order for the formation of AfCRA. Bravo! Africa will continue to be rated, of course, participation in global finance makes that unavoidable. The change is that the continent may finally gain greater authority over what is measured, whose evidence counts and how the judgement is reached. The way I see it, this is more than a financial reform, it is foreign policy exercised through knowledge and a quiet claim to power.
The author is an international development and strategic communications specialist who writes on diplomacy, sustainable development and global affairs.