The launch of the African Credit Rating Agency (AfCRA) is poised to transform Namibia’s credit assessment landscape, reducing dependence on global agencies such as Moody’s and Fitch, experts say.
Analysts argue that AfCRA has the potential to provide fairer, more regionally attuned evaluations, but only if it maintains credibility and independence.
The initiative, spearheaded to counterbalance the dominance of Western credit rating firms, aims to enhance transparency and offer assessments that more accurately reflect Africa’s economic realities.
FNB Namibia economist Helena Mboti sees AfCRA as a positive development, provided it can establish trust and deliver impartial assessments.
“While African professionals already contribute significantly to international rating agencies, an Africa-centric institution could provide a more nuanced perspective on our diverse economic realities. This could influence investor confidence, especially given the perception of heightened risk in Africa,” Mboti explained.
She pointed out that only Botswana and Mauritius currently hold high investment-grade ratings, underlining the need for more precise and regionally informed assessments.
For Namibia, AfCRA could provide a more balanced evaluation of its fiscal position, economic potential, and structural reforms. According to Max Rix, Head of Investments at Simonis Storm, the country is often rated conservatively by global agencies, which tend to emphasise external vulnerabilities over domestic policy improvements.
“A local agency could recognise Namibia’s relative fiscal discipline, its mining sector’s potential, and the benefits of the African Continental Free Trade Area (AfCFTA),” Rix said.
However, experts caution that AfCRA’s effectiveness hinges on its ability to maintain independence and avoid political influence.
“The credibility of the agency will be paramount. Any perception of bias or corruption will severely undermine its influence in the markets,” Mboti said.
A United Nations Development Programme (UNDP) study estimates that African nations overpay by US$75 billion in interest costs due to what analysts deem unfair credit ratings. An African-led credit rating agency could address potential biases in global agencies and ensure that Africa’s creditworthiness is assessed with a deeper understanding of regional economic dynamics.
“If executed properly, an African credit rating agency could reshape global perceptions by offering a fairer, data-driven representation of African economies. Many African nations, including Namibia, suffer from ‘perception risks,’ where investors price in uncertainty due to a lack of regional expertise among international agencies,” Rix noted.
Despite AfCRA’s potential, he cautioned that global investors will still rely on established agencies such as Moody’s and S&P in the short to medium term.
“Dual recognition where both international and African credit ratings hold weight would be the best-case scenario for Namibia,” he said.
Lower ratings from global agencies often translate to higher borrowing costs, making it more expensive for African nations to secure funds for infrastructure, social services, and development projects. Analysts have long argued that African nations are frequently penalised for external debt and foreign currency exposures, even when their debt-to-GDP ratios are lower than developed nations with better ratings.
Rix stressed that AfCRA is not about replacing global agencies but rather complementing them.
“Africa’s push for its own credit rating agency is a bold and necessary step toward financial sovereignty. If executed well, it can reduce investor perception risks and empower African nations with greater control over their financial narratives,” he said.
While AfCRA presents a promising opportunity for Namibia and the continent, its long-term success will depend on building credibility, securing investor trust, and ensuring its assessments are recognised in global financial markets.
“If international institutions like the IMF and World Bank incorporate AfCRA’s ratings into their assessments, its influence could grow significantly,” Mboti added.
