The current African Union (AU) Chairman, Macky Sall, has urged African countries to consider forming their own credit rating agency to offset “arbitrary” ratings by western financial institutions.
Speaking about the continuous controversial reports by foreign bodies; the AU Chairman claims that there is a need to immediately begin to counter unflattering reports from foreign agencies about the economies of African states.
It has since become obvious that African authorities are concerned about the habit of international financial institutions generating their own studies to determine the economic status of African countries.
Experts are concerned that such publications create financial perceptions of inflated economic problems; discouraging investors from conducting business in these countries.
Leaders across Africa have begun making dramatic declarations against these ratings. They consider them alien to economic reality and have spoken up as part of a recent drive to address the issue.
Unflattering Economic Reports
While addressing the issue, the AU chair said; “The need to have a pan-African rating agency in the face of injustices; ratings that are sometimes very arbitrary {…}
“In 2020; while all economies were suffering the effects of Covid-19, 18 of the 32 African countries rated by at least one of the major rating agencies had their ratings downgraded.”
Macky Sall explained that these figures, “represent 56% of downgrades for African countries compared to a global average of 31% during the period.”
Sall, who doubles as the Senegalese President and AU Chair, stated that; the criteria for rating the African economy have been based mostly on “subjective factors of a cultural or linguistic nature;” which he claims are unrelated to the expected criteria that truly weighs on economic growth.
Sall explained the negativity that this rating presents in Africa. He touched on the subject of investment; reacting to the risks often portrayed in these ratings and how they invariably scare off investors.
“We end up paying more than we should in insurance premiums; which makes it more expensive to lend to our countries,” Sall noted.
“We need to guard against the continuing consequential strangle of the rating agencies; which has affected the costing; access to capital markets for African countries,” he said.
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