The African Union will inaugurate the continent’s first credit rating agency on Wednesday, seeking to provide an alternative to the “big three” global ‌ratings agencies as debt burdens weigh on many African economies.

The Africa Credit Rating Agency will be inaugurated in Port Louis, the capital of Mauritius, where the agency will be based. The project has been nearly a decade in the making, with African leaders endorsing its creation in 2018.

“AfCRA complements existing global credit rating agencies by offering a perspective rooted in African data, expertise and realities,” the AU said in a statement.

African leaders have long accused Western ratings agencies of failing to fairly assess the risk of lending to African countries and of moving too quickly to downgrade them during crises such as conflicts and pandemics.

The agencies rejected that criticism, saying they apply the same methodologies globally.

A 2024 Reuters investigation into Africa’s debt crisis found no evidence of systemic bias in the sovereign ratings assigned to the region by the three major global credit rating agencies.

AfCRA, which will rate sovereign borrowers, financial institutions and private companies, will operate independently ‌and be funded through shareholder capital and its operations, according to the African bloc.

AU did not provide details about the shareholders. The AU said the agency should help improve African countries’ access to capital markets and give investors more balanced, context-specific assessments of economies across the continent.

The drive to improve borrowing terms for the continent has become more urgent after years of increased government borrowing, which has pushed some countries into debt distress in recent years.

“The stakes are significant,” AU said, adding that the continent’s annual external debt service surged to $163 billion in 2024, from $61 billion in 2010.

In many countries, interest payments have exceeded the annual budgets for key social sectors such as health and education.

“AfCRA aims to reduce such burdens by improving investor confidence and market transparency,” it said, adding that the agency will also rate non-African entities where appropriate.

The AU said the new agency is also expected to boost coverage, with 23 economies on the continent lacking a rating from the three big agencies.

(NAN)