By Adeoye O. Akinola

The establishment of continental institutions, such as the African Credit Rating Agency (AfCRA) on 8 October in Mauritius, often generates hope and scepticism.

Indeed, Africa is not short of continental protocols, policy frameworks and institutional innovations. From creating the African Peer Review Mechanism (APRM) to launching the African Continental Free Trade Area (AfCFTA), the African Union (AU) has repeatedly shown its capacity to articulate ambitious visions for continental transformation.

Yet, the persistent gap between policy commitments and practical outcomes across many African countries raises legitimate questions about the effectiveness of continental initiatives. Thus, its launch raises a pertinent question: should its emergence be greeted with optimism?

Such scepticism is understandable. Although the AfCFTA seeks to advance intra-African trade and the APRM promotes good governance and accountability, the continent continues to face economic inequality, governance challenges, limited industrialisation and infrastructural deficits. These recurring difficulties highlight the gap between institutional ambition and tangible outcomes. Accordingly, AfCRA’s significance should be judged not by its creation alone, but by its capacity to address structural inequalities in Africa’s engagement with international financial markets.

As highlighted during the launch, the significance of AfCRA lies in the relationship between credit ratings and the cost of financing development. Sovereign credit ratings influence how investors perceive a country’s capacity and willingness to meet its financial obligations. These assessments affect borrowing costs, access to international capital markets and the terms on which governments and businesses secure finance. They can also influence banks’ and other financial institutions’ assessments, which may use sovereign ratings as benchmarks when determining their own risk exposure. Therefore, credit ratings are not simply technical judgements: they have material consequences for fiscal policy, investment decisions and development prospects.

A key concern for African countries is that sovereign credit ratings may not adequately reflect the continent’s diverse economic realities. African economies differ significantly in fiscal performance, growth prospects, resource endowments and institutional capacity. When rating methodologies rely on incomplete data or insufficient contextual understanding, they risk misrepresenting actual economic conditions. Such inaccuracies can reinforce negative investor perceptions, inflate borrowing costs and constrain governments’ ability to finance essential infrastructure, public services and productive investments, thereby undermining broader development objectives.

At the heart of the argument for AfCRA is the need to correct these shortcomings through credible, independent and context-sensitive assessments.

As Denys Denya, Senior Executive Vice President for Finance, Administration and Banking Services at Afreximbank, noted during the launch, African credit ratings have historically been shaped by incorrect assumptions, misrepresentation and misunderstanding. Whether these concerns apply uniformly across countries and rating assessments is a matter for empirical investigation. Nevertheless, they raise a legitimate question about whether existing methodologies sufficiently account for Africa’s distinctive economic circumstances and development trajectories.

The economic stakes are substantial. Estimates associated with the African credit-rating reform agenda suggest that the continent could save approximately US$74.5 billion if credit assessments more accurately reflected underlying economic fundamentals and avoided unjustified risk premiums. Claims that Africa has lower default rates than other developing regions warrant careful examination using reliable comparative evidence. While such findings may expose shortcomings in existing risk assessments, default rates alone cannot determine whether African economies are unfairly rated. AfCRA must therefore incorporate broader fiscal, institutional and economic indicators to deliver rigorous, transparent, and context-sensitive assessments rather than simply more favourable ratings.

This distinction is imperative. AfCRA is not designed to replace or compete directly with renowned global credit-rating agencies such as Moody’s and Fitch, but to complement existing frameworks through local expertise and context-sensitive assessments. The African Development Bank offers a useful parallel: established to address Africa’s development priorities, it did not seek to replace the World Bank or IMF. Similarly, AfCRA can diversify financial assessments, improve market information and strengthen investor confidence while supporting Africa’s financial sovereignty.

The decision in September 2025 to locate AfCRA’s headquarters in Mauritius marks a significant institutional milestone. Nevertheless, its success will depend on more than its continental mandate. AfCRA must demonstrate methodological rigour, institutional independence and market credibility through transparent assessments, reliable data and verifiable analytical processes. Its ratings must reflect objective economic and financial fundamentals rather than political interests or predetermined narratives about Africa’s financial sovereignty and development prospects.

This is where African agency must be understood in its proper sense. Agency does not mean rejecting external assessments simply because they originate outside the continent. Nor does it mean insisting that African countries deserve better ratings by virtue of their continental identity. Rather, it entails the capacity to generate credible knowledge, challenge demonstrable analytical gaps and participate more effectively in determining how African economies are understood and financed.

Locally generated socioeconomic indicators can contribute to this objective by capturing dimensions of economic performance that conventional datasets may overlook. Yet, such indicators must be robust, comparable and independently verifiable if they are to command international credibility.

African governments also bear significant responsibility for AfCRA’s success. As Ahunna Eziakonwa, United Nations Under-Secretary-General and Special Adviser on Africa, emphasised during its launch, the agency requires enabling conditions beyond institutional design. These include timely and reliable data, independent financing, adequate infrastructure, regulatory competence and credible institutional records. Governments must also accept successive ratings outcomes, even when unfavourable, rather than selectively cooperating or exerting political pressure to influence assessments.

The AU’s emphasis on AfCRA’s independence is therefore fundamental. Independence is not merely a formal organisational attribute; it must be demonstrated through governance arrangements, transparent appointment procedures, sustainable funding and the consistent application of innovative methodologies. An agency that is perceived as politically controlled or financially dependent on the countries it assesses would struggle to command confidence. However, an institution willing to issue unfavourable ratings when economic fundamentals warrant them could gradually establish the credibility necessary to challenge inaccurate or incomplete external assessments.

Ultimately, the danger is that AfCRA could become another instrument for celebrating African agency without materially advancing it. Institutional symbolism has value, but it cannot substitute for measurable outcomes. AfCRA must demonstrate that its assessments improve the quality of market information, encourage more accurate risk differentiation, strengthen African financial institutions and contribute to better-informed economic policymaking. Its performance should be evaluated against these practical objectives rather than the mere fact of its establishment.

Is there, then, room for scepticism? Certainly. Africa’s institutional history provides sufficient grounds for caution, particularly where ambitious continental commitments have encountered implementation difficulties. AfCRA offers an opportunity to address a consequential weakness in the relationship between African economies and international finance. Its success will depend on whether African governments and institutions are prepared to uphold the standards of independence, transparency, accountability and methodological discipline that the initiative requires.

African agency is ultimately measured not by the number of institutions the continent establishes, but by their capacity to transform the conditions under which Africans govern, produce, trade and finance their development. AfCRA must therefore aspire to be more than an assertion of financial sovereignty. It must become a credible institution whose evidence, methods and judgements withstand scrutiny. If it achieves this, the case for pessimism will weaken, not because Africa has escaped its institutional challenges, but because it will have demonstrated the capacity to confront them with practical and accountable solutions.

Adeoye O. Akinola is an Associate Professor in Politics and International Relations at the University of Johannesburg.