The Africa Credit Rating Agency – Key to the New Global Financial Order
This side event meeting will discuss the steps being taken by the African Union in establishing its rating agency to ensure credibility and independence whilst it addresses the challenges faced by African countries in biased opinions. It will discuss how this institution will aide Africa’s access to sustainable funding options and explore alternative financing strategies available to African countries. It will further discuss the role of Africa Credit Rating Agency in developing domestic capital markets, Africa-specific direct investments and reshaping the global financing order to better suit the continent’s needs.
African countries are facing several challenges in their dealings with the ‘big three’ dominant international credit rating agencies – Fitch, S&P and Moody’s. Some of the challenges, which have been highlighted not just on the African continent but also abroad, inaccuracies in credit rating models, credit rating biases, exaggerating negative risk perception and misconceptions by foreign based credit rating analysts about African sovereigns and their entities. All these shortcomings have filtered through to the underlying credit ratings leading to perennially poor credit ratings in Africa despite a moderate economic growth and significant socio-economic improvement. The direct impact of this has been high borrowing costs, driving debt servicing cost to unsustainable levels.