Africa prepares to launch own credit rating agency
An eminent member of the National African Peer Review Mechanism Governing Council, Laud Mansfield Baddoo, has urged African nations to support the creation of the African Credit Rating Agency (ACRA) to provide a credible and reliable credit rating system for African countries.
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He said the creation of the ACRA would allow countries on the continent to better access global capital markets and achieve sustainable economic growth.
Speaking at the Credit Rating Methodology Transparency Workshop in Accra last Tuesday, Mr Baddoo said there was a need for Africa to develop its own financial institutions to support economies during crises, rather than relying on global agencies that had been described as "reckless and unfriendly".
The creation of ACRA is part of the AU's Agenda 2063, a development blueprint aimed at achieving inclusive and sustainable socio-economic development in Africa over the next 50 years.
Creditworthiness
Mr Baddoo said the creation of Africa’s own credit rating agencies would help counter the harmful practices of global rating agencies.
“President Nana Addo Dankwa Akufo-Addo has recently highlighted the detrimental impact of global rating agencies on developing economies, describing their actions as "reckless and unfriendly."
“At the height of Ghana's economic crisis, these agencies downgraded the country's creditworthiness to junk status, effectively blocking Ghana from accessing the capital market , exacerbating the liquidity crisis into a solvency crisis,” Mr Baddoo noted.
Such situations, he said underscored the need for Africa to develop its own indigenous financial institutions to provide support during such crises.
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He highlighted the progress made in creditworthiness across Africa, with nine countries receiving positive credit rating actions in 2021, but noted that this progress was not uniform across the continent.
Mr Baddoo called for comprehensive reforms and capacity-building in governance and risk management, and emphasised the importance of good corporate governance and robust credit ratings in attracting investment to foster economic growth.
The workshop aims at addressing the disparities in credit ratings across Africa and exploring ways to enhance the effectiveness and efficiency of credit rating agencies, with a focus on promoting financial autonomy and resilience.
The Director of Governance and Specialised Reporting APRM, Dr McBride Nkhalamba, underscored the significance of the event and the need for collaboration towards the establishment of the ACRA.
“This technical retreat is a platform for our experts to engage in meaningful discussions on credit rating improvements. By collaborating and learning from each other’s experiences, we can develop robust frameworks that will benefit all our member states,” he said.
He added that the APRM’s efforts were bolstered by its collaboration with the United Nations Economic Commission for Africa (UNECA) and other stakeholders.
For her part, a representative of UNECA, Sonia Patricia Jenny, expressed the support of the Commission for the creation of the ACRA.
“UNECA is proud to partner with the APRM in this crucial endeavour. Improving credit ratings is essential for sustainable economic development, and our joint efforts will help African countries achieve greater financial stability and growth,” she said.