A recent expert panel convened by the African Center for Economic Transformation (ACET) spotlighted critical challenges and opportunities in the continent’s credit rating landscape, focusing on how African credit rating agencies can close the persistent risk assessment gap. 

Methodology vs. Approach: The Fundamental Challenge

Experts highlighted that while African and international agencies may share similar methodologies, their approaches differ sharply. Global agencies tend to apply a hard currency lens, prioritising foreign exchange reserves and external balances — a bias that disadvantages commodity-dependent African economies despite strong domestic performance. African agencies, by contrast, focus on local currency capacity, offering a view that better reflects countries’ actual debt-servicing strength. This divergence helps explain why many fast-growing African economies still carry speculative-grade ratings driven largely by foreign reserve constraints rather than underlying economic realities.

Data Quality and Availability: The Persistent Hurdle 

Data constraints continue to weaken credit assessments across Africa. Financial statements may be available, but uneven reliability and weak oversight mean analysts must probe beyond reported figures. Qualitative insights are often lacking, with many institutions unable to clearly define their market position or strategy. The problem is even sharper for subnational governments with limited records, while the vast informal sector remains largely invisible in formal data — further distorting risk evaluations. 

Pathways to Strengthen African Credit Rating Capacity

The panel outlined a multi-pronged framework to bridge these gaps:

• South-South Knowledge Exchange: Systematic collaboration with agencies from China, Latin America and other emerging markets to share best practices, particularly in informal sector evaluation and navigating relationships with major global agencies.
• Operational Partnerships: Encouraging international and continental agencies to collaborate with local agencies, leveraging their contextual insights alongside international credibility for more accurate ratings.
• Professional Development: Building regional training programs, certification processes and forums for methodological harmonization to elevate the skills and standards of African rating analysts.
• Data Infrastructure Investment: Governments must prioritise robust economic data collection, supported by initiatives like the African Union’s African Debt Observatory, to generate authentic and reliable financial narratives.
• Local Financial Market Development: Promoting local currency bond markets to reduce foreign exchange risks and making local currency ratings more relevant through capital market deepening.
• Regulatory Recognition and Policy Coherence: National regulators need to formally recognise local rating agencies within capital adequacy frameworks, while development finance institutions should incorporate African ratings into financing decisions consistently. 

Experts emphasised that moving from rhetoric to concrete policy actions and partnerships is vital. African development hinges on closing this risk assessment gap, enabling access to sustainable financing and economic transformation without undue reliance on uncertain concessional funding.