Africa’s economic growth and intra-continental trade could receive a significant boost if governance reforms help to address persistent challenges in the continent’s credit rating landscape.
Experts explored how better governance, data integrity, and context-specific analysis can reshape perceptions of African economies and unlock capital for trade and development during the 6th African Governance Seminar on October 30.
African countries have long faced chronic downgrades from the three major international credit rating agencies —Moody’s, Fitch, and Standard & Poor’s (S&P) —whose assessments carry significant weight in global finance. These ratings often fail to reflect local realities, according to Peter McBride Nkhalamba, the Director of Governance and Specialized Reporting at African Peer Review Mechanism (APRM), a continent-wide governance assessment mechanism instituted under the African Union.
“Countries with comparable economic fundamentals in other regions may receive more favourable ratings than African nations, leading to higher borrowing costs and limiting access to capital.Analysts from these agencies are often not based on the continent. They lack access to reliable local data and do not fully appreciate the African context, both of which introduce bias into their assessments. This affects trade, investment, and ultimately the cost of borrowing for African governments and corporates,” he said.
Developing capital markets by making sure that corporates in each country are appropriately ratedand have access to capital, both domestic and foreign, is crucial for trade finance.
“When businesses can borrow or raise funds more easily, they can invest in growth, expand operations, and trade more efficiently. This, in turn, stimulates the wider economy, creating jobs, increasing productivity, and boosting national economic development. Improving capital markets in Africa requires addressing both external perceptions and internal governance. We are not just looking at the rating agencies’ deficits. We are also helping African governments improve data collection, financial transparency, and communication strategies, which can enhance their creditworthiness and reduce borrowing costs,” Nkalamba explained.
One key recommendation emerging from the seminar is the establishment of an African Credit Rating Agency. Such an institution could provide ratings that better reflect local realities, while also offering regulatory guidance to ensure consistency and integrity in the assessment process.
“This initiative is expected to create a level playing field for African countries, making borrowing more affordable, encouraging private sector growth, and facilitating intra-African trade through the African Continental Free Trade Area (AfCFTA). By aligning governance standards, improving data quality, and creating credible homegrown assessments, African economies can challenge the perception of higher risk and unlock long-term capital,” said Nkalamba.
The seminar also served as a platform for academics and practitioners to exchange knowledge on global trends in credit rating, trade finance, and capital markets. By examining international methodologies and comparing them with African contexts, participants aim to develop actionable policy recommendations that can strengthen both the rating industry and African governance systems.
Speaking during the Seminar, the Chief Executive Officer of the Rwanda Governance Board (RGB), Doris Picard Uwicyeza, underscored the importance of this shift, linking it directly to Africa’s broader governance and economic independence agenda.
“It is time for Africa to craft its own ratings agency that develops its own assessment of the risks and conditions on lending and other key functions that would be beneficial to African economies. The initiative represents a great achievement for Africa and a step towards creating ownership of an important institution that defines how the continent is seen in global finance,” she said.
The proposed African Union Credit Rating Agency aims to address the long-standing bias and limited contextual understanding that have characterised ratings from Western agencies. For instance, global agencies often fail to account for strong governance reforms, infrastructure investment, and regional stability mechanisms that have steadily improved across the continent in recent years.
“By developing local credit systems and ensuring that corporates within member states are rated, African economies could build credibility, transparency, and a more efficient capital market. Such systems would not only attract foreign investors but also make it easier for African businesses to access domestic finance, a crucial component of sustainable trade growth,” said Uwicyeza.
“Effective governance and accurate assessment go hand in hand. When local realities are understood and reflected in credit ratings, countries can negotiate better borrowing terms, develop stronger trade systems, and boost investor confidence,” said an economic governance analyst at the event.”
Cash Daniel, a researcher at Aston Law University, noted that many African economies are performing well, with strong growth and better fiscal management. However, they still face higher borrowing costs when seeking funds from international investors.
He explained that this is mainly because global investors and credit rating agencies perceive African governments as less transparent and less predictable in managing public finances, debt, and economic policies.
“When international credit rating agencies rate countries with similar economic fundamentals, African nations are often ranked lower than their peers. Even when issuing Eurobonds, we end up paying much higher interest rates, not because of weak numbers, but because of perceptions,” he said.
The researcher argued that Africa’s credit rating problem is not purely economic. Instead, the so-called “African premium” reflects deeper issues of governance and institutional capacity, as well as how effectively countries coordinate, share data, and communicate their fiscal decisions to the world.
He explained that a country’s credit rating depends on its technical capacity —the ability to produce reliable, timely, and internationally comparable economic data. Institutional capacity, which involves systems and structures such as inter-ministerial committees or liaison teams that coordinate how governments engage with credit rating agencies to ensure consistency.
Accountability, maintaining data transparency, and clarifying policy changes quickly to prevent misinformation.
Together, these three elements determine whether a country merely provides data or actively shapes how its credibility is perceived, he said.
“Africa has learned to perform creditworthiness, but it has not yet mastered how to govern it. That’s the next stage of our development if we are to project real sovereignty on the global stage.”
He recommended that, instead of launching new projects each time, African nations adopt a framework for permanent credit governance —a system in which information flows feed into accountability structures, ensuring continuity, coordination, and credibility.
