Image Credit: CSL UpdateAugust 28, 2026/CSL Update
The African Union is preparing to launch a continent-wide credit rating agency in October, operating through the African Peer Review Mechanism (APRM), as reported by Reuters. We note that the move forms part of a wider strategy to tackle the persistently high cost of sovereign borrowing across African markets, with policymakers questioning whether the methodologies used by global credit rating agencies fairly capture the credit risk of lending to African governments.
It is worth mentioning that the push for an African credit rating agency has been in development over the last three years, with the African Union and leaders from member states such as Ghana and Kenya repeatedly raising concerns that global rating agencies move too quickly to downgrade African sovereigns when economic conditions deteriorate. We note that this action tends to weigh heavily on bond valuations, especially for debt issued in foreign currencies.
We highlight that the financial impact of an African credit rating agency which takes into consideration idiosyncratic consideration of African issuers are significant, with the United Nations estimating that African countries could save up to US$74.5 billion if credit ratings were grounded in less subjective assessments.
The African Union has pointed to consistently strong investor interest in the planned agency as a sign of momentum. That said, concerns about the credibility of its future ratings remain unresolved, in our view. We believe that much of the elevated borrowing costs faced by African issuers reflect a premium associated with higher political and liquidity risk amongst others relative to developed and more mature emerging markets, and these underlying risks will not be eliminated by the establishment of a new rating agency.
We note that for the African credit rating agency to earn genuine trust from international investors, it will need to demonstrate operational and financial independence, free from political interference and structured to avoid conflicts of interest. On that front, the African Union has disclosed plan to build a self-sustaining business model, charging issuers for ratings in line with the practices of established global agencies.
Whether that model can deliver the independence and rigor needed to change how international markets price African risk will likely determine the agency’s long-term credibility and impact. Beyond governance and funding structure, the credibility of the agency will ultimately be tested by the transparency and robustness of its rating methodology, and whether international investors view it as genuinely capturing the risk profile of African issuers over the medium to long term.
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