Stakeholders, experts, development actors, and research institutes gathered in Nairobi on the margins of the 2024 African Development Bank Annual Meetings to discuss innovative credit rating solutions aimed at empowering governments to access critical financing for development initiatives.
Highlighting the significance of credit ratings in shaping the development trajectories of African countries, Ahunna Eziokanwa, Assistant Secretary-General and Director of UNDP Africa Bureau, emphasized, “Credit ratings impact the development trajectories of African countries by defining the cost of development financing. They influence how much development partners can support critical investments on the continent.”
In this context, Africatalyst and the United Nations Development Programme (UNDP) Africa Bureau launched a Credit Rating Platform designed to help African countries navigate their credit ratings processes more effectively. The platform’s development follows findings from the 2023 report titled “Lowering the Cost of Borrowing,” which identified biases in credit rating methodologies that lead to higher borrowing costs for African countries. The report estimates that more objective assessments could save these countries up to $74.5 billion
“We are proud to launch the Africa Credit Ratings Initiative in collaboration with Africatalyst, which aims to strengthen the capacity of African countries to navigate complex global credit rating systems effectively. This initiative includes a dedicated online platform for policymakers, to support our end goal to lower the cost of borrowing for African countries. So yes, the task is daunting, but we believe we can help transform Africa’s development landscape,” Ahunna Eziakonwa stated.
The event brought together experts from government, academia, research, finance, the private sector, civil society, and development partners. Hannah Ryder, CEO of Development Reimagined, emphasized the necessity of aligning financial solutions with development needs: “The important context about finance on the African continent should be about development; it has to be related. Financial needs for the continent are extremely high. We need to find solutions.”
Chief Economist at UNDP, Raymond Gilpin, highlighted the urgency of preparing for a future with declining official development assistance (ODA): “More countries across Africa are consistently looking for concessional funding. Looking into the future, the reality is ODA is going to continue to decline in Africa—we need to prepare African countries.”
Guy Deslondes, Managing Director and Head of Financial Services, Structured Finance & Governments, EMEA at S&P Global, addressed the transparency in the credit rating process: “There is openness in the credit rating process for governments. However, the expectations go beyond what we do as a rating agency. We don’t define the cost of funding—it’s now for the investors to make the call on what they want to do with the rating.”
Daouda Sembene, Chief Executive Officer of Africatalyst, underscored the importance of understanding credit ratings: “When you talk about credit ratings, you are talking about the bearing on the cost of development goals. We need to take it seriously. Many don’t know what the role of credit ratings is, and those that do are usually silent. This event has demystified what credit ratings are and was also a good opportunity for African countries to be better prepared as they seek increased market access amid declining ODAs.”
This collaborative effort marks a significant step towards creating a fairer and more efficient credit rating environment for African nations, ultimately supporting their economic growth and development objectives. The event concluded with a shared commitment to advancing innovative credit rating solutions to support Africa’s sustainable development agenda.
By Jallow Alpha