Senegalese president Macky Sall called for the creation of a pan-African credit ratings agency, saying that the “very arbitrary” nature of the system of assessment by international organisations made it more expensive for African countries to borrow on global debt markets.
Sall, who is currently head of the African Union, told private radio RFM that there was a need — “given the injustices, the sometimes very arbitrary ratings” by international agencies — “to have a pan-African” body.
His comments came on the eve of the Dakar Economic Conference 2022, organised by African economists.
“In 2020, when all economies were suffering fallout from the COVID-19 pandemic, 18 of the 32 African economies rated by at least one of the big agencies saw their ratings downgraded,” he said.
That meant that 56% of African countries saw their credit ratings downgraded, compared with 31% of countries globally over the same period, Sall argued.
“Studies show that at least 20% of the ratings criteria for African countries are based on more subjective factors, cultural or linguistic ones for example, which bear no relation to the parameters used for measuring economic stability,” he said.
As a result, “the perception of investment risk in Africa is always much higher than the real risk. That means our insurance premiums are higher and that makes our credit more expensive.”
African countries continued to pay much higher interest rates as a result of this unfair system, Sall said.
AU’s move
Meanwhile, the Africa Union’s (AU) quest to establish an African Credit Rating Agency for the continent through the African Peer Review Mechanism (APRM) is likely to be instituted this year, CEO of the organisation Professor Eddy Maloka has said.
Prof Maloka was addressing participants at a sensitisation meeting on APRM support to member-states on international credit rating agencies Thursday (18 March) in Accra, and said: “Our latest study has found that it is feasible to establish such an institution as an independent entity of the African Union to provide alternative and complementing rating opinions”.
The study was necessitated after the APRM was tasked by the Specialised Technical Committee of Finance Ministers in 2018 to explore such options against what the AU termed “consistent bias toward African countries” by foreign rating agencies including Moody’s, Standard & Poor’s and Fitch.
Regarding timelines for the continent’s own rating agency, Prof Maloka said: “We are in the process of working on the legal, structural and financial implications of establishing the agency, which will be an entity of the AU; and we will be reporting the outcomes to the Ministers Committee later this year, 2022”.
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