The African Export-Import Bank (Afreximbank) has described launch of the Africa Credit Rating Agency (AfCRA) on Thursday by African leaders as an important milestone in strengthening Africa’s financial architecture and expanding the continent’s capacity to generate credible, independent analysis of African credit risk.
A news report from African Press Organisation (APO) Group circulated on behalf of the merchandize trade finance bank indicates that credit ratings play an important role in determining access to capital, influencing investor perceptions and shaping the cost at which governments, institutions and businesses can finance development, hence it becomes essential that assessments of African credit risk are independent, rigorous and evidence-based, while reflecting a complete understanding of the structures, institutions and economic realities being assessed.
The online medium reports: “The establishment of AfCRA adds an important African-led source of credit opinion to the market. Its value will not be measured by whether it produces more favourable ratings, but by the credibility of its analysis, the quality of its data and transparency of its methodology, and its ability to deepen understanding of African sovereigns, sub-sovereigns and corporate credit.
“This is particularly important given that many African issuers remain unrated, while local-currency and sub-sovereign markets continue to have limited rating coverage. Expanding credible rating coverage can improve the information available to investors and support the development of deeper domestic and regional capital markets.
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“Alongside fellow members of the Alliance of African Multilateral Financial Institutions (AAMFI), Afreximbank has consistently maintained that African Multilateral Financial Institutions should be assessed on the basis of their fundamentals, performance, legal frameworks, mandates and operating models. Ensuring that these institutional characteristics are properly understood is essential to achieving informed, balanced and credible assessments of African risk”, it added.
Commenting on the uniqueness of the African market, and need for AfCRA’s rating methodology to reflect this, Senior Executive Vice President, Afreximbank, Mr Denys Denya, said: “The rating methodology AfCRA develops must recognise the uniqueness of our environment and its institutional structures. The Agency must set its own standards and not follow those set elsewhere — it must build a unique identity that conforms to an ‘African best practice.
“Most importantly, AfCRA must set a new benchmark for the continent, maintain its independence, and remain wholly owned and controlled by Africans. We must all use it, and in return expect a complete assessment of where we (Africa) stand: the strengths the market has ignored, and the weaknesses we still need to fix”, the banker added.
He maintained that AfCRA should therefore be seen as complementary to existing international and regional rating agencies, broadening the range of credible analysis available to investors and issuers while strengthening competition, transparency and analytical capacity within Africa’s credit markets.
APO Group further reported that as Africa seeks to mobilise the scale of capital required for industrialisation, trade, infrastructure and economic transformation, credible African institutions that improve information, strengthen market confidence and deepen the continent’s financial markets would become increasingly important.
The Afreximbank board and management congratulated the African Union, the African Peer Review Mechanism (APRM) and all those involved in bringing AfCRA from concept to launch, and looked forward to the contribution the agency will make to deeper, more transparent and more efficient African capital markets.
