Could the launch of the continent’s first pan-African credit rating agency finally open the door to fairer borrowing terms for Africa, including Kenya? Last month, the Africa Credit Rating Agency (AfCRA) was launched in Mauritius, promising to offer a homegrown assessment of African economies and challenge the dominance of established global rating agencies such as Moody’s, Fitch Ratings and S&P Global Ratings.
By bringing a more localised understanding of the continent’s economic realities to credit assessments, AfCRA could help reshape how African countries are perceived by international lenders and potentially reduce the high borrowing costs they face. But while the promise of fairer credit is significant, whether the new agency can earn investors’ confidence and change the way Africa is rated remains an open question.
Credit rating agencies hold significant sway over governments’ access to global finance, and the terms of that access. Drawing on research into how able and willing a country is to repay its debts, they assign a rating, formally just an opinion, that tells lenders whether it is “investment grade” or not. Most African countries with a rating, Kenya included, fall below that line. A downgrade typically raises borrowing costs, leaving less room for public spending, a burden that ultimately falls on citizens. Importantly, these ratings are produced overwhelmingly by three firms, Moody’s, Fitch, and S&P, which together cover more than 95% of the world’s rated debt.
Judgements this consequential should rest on well-informed, localised research. When it comes to Africa, critics argue, they often do not. Ratings combine numerical data, such as growth, debt ratios and foreign reserves, with more subjective judgements about institutions, policy and politics. The agencies publish their methodologies, but final decisions are made in closed committees whose reasoning is never fully disclosed. That opacity matters most when data is limited. African statistics are often incomplete or out of date, and standard models struggle to capture features like large informal economies. Meanwhile, few analysts are based on the continent, and some rate countries without ever visiting them. Thin data and assessments made from afar lead analysts to err on the side of caution, which usually results in lower ratings.
This debate comes at a time when Kenya is grappling with the rising cost of servicing its burdensome public debt, with President William Ruto and his administration facing growing pressure over the country’s borrowing costs and debt sustainability. Ruto has previously warned that global credit rating agencies often treat African countries as a single risk, regardless of their individual economic circumstances. Addressing the African Development Bank’s 2024 Annual Meetings in Nairobi, he said: “Kenya faced higher interest rates due to geopolitical conflicts far removed from its borders, such as the conflict in Niger. Niger is 4,585 kilometers away from Kenya, but perceptions in places like Washington link our fates.”
The result is what critics call the “Africa premium”. S&P’s own data shows that African governments pay nearly twice the risk premium of Latin American ones, and the gap remains even between countries with the same rating. A 2023 UNDP report estimated that subjectivity in ratings has cost African countries over $24 billion in excess interest and $46 billion in forgone lending. This comes despite evidence that Africa is, in some respects, less risky than its reputation. As former African Development Bank president Akinwumi Adesina puts it, “perception is not reality”: Moody’s own analysts have found that Africa has the lowest default rate on infrastructure debt of any region, well below Latin America and Eastern Europe. The agencies deny any bias, and a Reuters investigation found none in their models. But even without bias, ratings based on limited data and little local knowledge can misjudge a country’s risk, and raise its borrowing costs as a result.
Kenya’s leaders have embraced this critique. Treasury CS John Mbadi has blamed “unfair and ill-informed” ratings for inflating borrowing costs, and the AU’s peer review body has described Moody’s judgements on Kenya as “premature”. But blaming the rating agencies is also convenient. Public debt has risen from Sh8.7 trillion when Ruto took office in 2022 to over Sh13 trillion, despite his promises of belt-tightening.
The launch of AfCRA may mark the start of something different. Unlike the Big Three, its analysts will be based on the continent, with headquarters in Mauritius and regional offices planned, and it will use a framework built specifically around African economies. On its website, the new independent agency states it aims to assess borrowers on “the full body of relevant evidence”. In practice, that could mean weighing factors the Big Three tend to overlook, such as a country’s ability to refinance through regional banks, domestic markets or diaspora bonds. AfCRA also plans to rate sub-national governments and companies, the vast majority of which currently have no rating at all. That could support the growth of domestic capital markets.
According to Reuters, AfCRA is currently in talks with 15 sovereign borrowers on the continent, including Kenya, and aims to release its first ratings by March 2027, its interim CEO, Sifiso Falala, said.
While AfCRA could be beneficial to African countries, the road to its widespread adoption is long. Perhaps the most important obstacle is credibility. AfCRA is aware of this, as its website explicitly warns lenders not to trust it simply “because it is African”, but rather to trust it “when the evidence is relevant, the method is transparent, the conclusion can be explained and performance can be tested against outcomes.” Investors will lose interest quickly if the agency appears to flatter African borrowers. As Hannah Ryder of Development Reimagined argues, unless AfCRA publishes its methodology in full, critics will say Africa is “effectively grading its own homework.” Ryder has urged it to aim higher still: to become the most transparent and most localised sovereign rating agency in the world, measuring actual African risk rather than perceived risk.
The agency’s independence will also shape its credibility. For now, AfCRA is owned by a research firm co-founded by its interim CEO, though a planned share sale would hand two-thirds of the agency to African investors.
Change will not come quickly. As AU Commission chair Mahmoud Ali Youssouf cautioned at the launch, a rating agency “will certainly not significantly reduce the cost of capital in the near future.” AfCRA will not replace the Big Three. At best, it can offer a second, better-informed reading of African economies, one that investors can set against the established view.