Entebbe, Uganda — When policymakers, economists and civil society leaders from the East African Community (EAC) and the Southern African Development Community (SADC) converged recently in Uganda’s lakeside town of Entebbe for a regional symposium on domestic resource mobilisation, the mood was one of introspection.
The two-day (Nov.25-26) event, convened by the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI)-Uganda, had a familiar theme-a push for fairer global financing rules and stronger domestic tax and debt governance.
But what dominated the conversations, both in formal sessions and in the hotel’s quiet corners, was Africa’s strained relationship with the three big global credit rating agencies: Moody’s, Standard & Poor’s and Fitch.
To many African governments, these agencies continue to handicap the continent’s economies through harsh, sometimes opaque assessments. But to the economists and analysts who spoke in Entebbe, the problem is not so easily located. It is not simply a story of bias from the U.S-based global rating agencies. It is also a story of domestic vulnerabilities; institutional weaknesses and a global financial system tilted against countries seen as risky before they even speak.
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In response, the African Union has already proposed to create a homegrown alternative; the Africa Credit Rating Agency (AfCRA). Its supporters see AfCRA as a long-overdue solution to Western dominance in global finance. But others are far more cautious. And none more so than development economist Dr. Fred Muhumuza, who delivered a keynote address on the second day of the symposium titled, “Credit Rating System and the Case for an African Credit Rating Agency.”
Challenging the African consensus
When Dr. Muhumuza who teaches at Makerere University Business School stood to speak about rating agencies, many in the audience probably anticipated a familiar diagnosis; that the global rating agencies misunderstand African political economies, over-penalize instability and fail to appreciate transformative reforms. But what they received instead was a sober, inward-looking warning that unsettled the room.
“Africa may probably not be ready for its own rating agency,” Dr. Muhumuza said, pausing long enough for his words to land. “A rating agency must be independent, technically credible, and free from political interference. Without these conditions, we will simply create an agency to give ourselves the ratings we want, not the ones the market believes.”
The statement jolted the audience because it challenged a prevailing sentiment; that Africa’s financial marginalization is primarily the fault of foreign actors. Instead, Dr. Muhumuza redirected attention to the continent’s own policy inconsistencies, institutional weaknesses and fiscal behaviour.
His candour sharpened further when he added, “If I worked at one of these rating agencies, I might rate some African countries even lower.” Nervous laughter rippled across the room, followed by a heavy silence, the kind that signals both discomfort and recognition.
Inside the rating machine
To explain his position, Dr. Muhumuza walked the audience through how sovereign credit ratings are actually produced. Ratings, he said, combine quantitative indicators with qualitative judgement-and the qualitative component, while often criticized, is indispensable.
“They look at numbers, yes — debt, revenues, growth, reserves. But numbers do not speak by themselves,” he explained. “There is a qualitative side. Analysts must judge the credibility of policies, the stability of institutions, the consistency of reforms.”
This qualitative dimension is precisely where African governments accuse agencies of bias. Yet Dr. Muhumuza argued that such judgement is unavoidable. “No two countries are the same. Analysts must interpret context. This is not bias; it is part of the work,” he said.
He emphasised that rating agencies rely heavily on data provided by African governments themselves- budgets, audit reports, central bank statements, debt registers. When these documents reveal fiscal pressures or governance problems, agencies have little choice but to incorporate such risks.
Uganda’s own situation, he said, illustrates the connection between domestic realities and external assessments. The Auditor General’s reports, for instance, have repeatedly highlighted ballooning domestic arrears which are now said to be exceeding Shs 13 trillion. Thousands of government suppliers remain unpaid. Businesses continue to collapse under the pressure, while commercial banks restrict credit to firms dependent on government contracts.
“We have over Shs 13 trillion in arrears,” he reminded the participants. “Suppliers are not paid. Firms collapse. Banks stop lending to companies whose main client is government. And we expect rating agencies not to see a risk?”
To drive his point home, he offered an analogy that participants repeated long after he left the podium: “There is a well-known doctor in Kampala who ignored medical advice from several specialists when he got a problem with his leg. He refused (the diagnosis) but when he went to India, they told him the same thing and eventually he lost his leg (got amputated). Facts do not change because we dislike them.”
The AU’s determination and the unresolved questions
Still, the African Union seems determined to proceed with the AfCRA. Proponents argue that the big three maintain limited presence on the continent and rely too heavily on remote analysts who “fly in and fly out,” missing deeper political and socioeconomic dynamics. The AfCRA, they say, would anchor its analysis in African institutions, use region-specific indicators and offer cheaper ratings.
One senior official at the symposium described AfCRA as “a necessary instrument for financial sovereignty.” Another insisted that “Africa cannot keep borrowing based on someone else’s misunderstanding of our realities.”
Yet the credibility question looms over the initiative. The greatest risk is that AfCRA could come under political pressure to produce favourable ratings. Even the perception of influence could undermine its legitimacy among global investors.
As Dr. Muhumuza warned, “A rating agency cannot succeed simply because it is African. It must be trusted. If investors believe our agency is influenced by political pressures, then we will not solve the problem, we will deepen it.”
“Markets won’t accept a rating they don’t trust”
Skepticism about the AfCRA also comes from outside the continent. A day before Dr Muhumuza’s lecture, Chatham House’s David Lubin had highlighted the deeper structural problem in a blog post. Lubin, a Michael Klein Senior Research Fellow, Global Economy and Finance Programme at Chatham House, a UK-based policy thinktank, said global capital markets operate within frameworks shaped by decades of investment data, liquidity trends and global risk sentiment.
Lubin argued that even if the AfCRA assigns higher ratings to African countries, international investors will continue relying on Moody’s, S&P and Fitch because their ratings provide the cross-country comparability that global markets require.
“A region-specific rating cannot unlock global money,” one participant summarized. “Investors want comparability, not continental solidarity.” Lubin’s conclusion was stark. “A fair rating from Africa will not change the risk premium investors charge if the global environment is unfavourable.” His argument reframed the debate entirely. Africa’s difficulties stem not only from rating methodologies but from how global finance perceives, and prices, African risk.
Bias or market perception?
The evidence presented in Entebbe did not settle the question of bias. Moody’s has argued that default rates for African sovereigns with similar ratings match those of other regions, implying that Africa is not systematically underrated.
But the International Monetary Fund (IMF) findings complicate the picture. African bonds consistently attract higher spreads than those of equally rated peers in Asia and Latin America. South Africa, even after gaining an upgrade, still pays more to borrow.
“If we have the same rating but pay more, then the bias is not only in the agency, it is in the market,” one participant said bluntly. This so-called “Africa premium,” whether driven by stereotypes, liquidity concerns or investor unfamiliarity, means the bias debate will linger.
Improving engagement with the big three
Aware that Africa cannot ignore the existing agencies, the United Nations Development Programme (UNDP) and Africatalyst have launched a joint rating advisory initiative. The platform offers governments technical assistance, data support, and strategies for more effective engagement with rating agencies.
The initiative was partly inspired by a 2023 study suggesting that Africa could save over US$70 billion in borrowing costs through more objective assessments. Critics argue the estimate may be inflated, but the study shifted public sentiment, strengthening arguments for both better governance and fairer global treatment.
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Dr Muhumuza acknowledged the dual responsibility: “Part of the problem is us. We sometimes delay data. We sometimes change policy midway. Rating agencies become cautious because they need predictability.”
Even AfCRA supporters agree that transparency, timely reporting and strengthened institutions matter more than simply creating a new agency.
Afreximbank’s downgrade is sobering reminder
The recent downgrades of Afreximbank, Africa’s leading development finance institution, sent shockwaves through the symposium. Fitch argued that the bank’s non-performing loan ratio had crossed high-risk thresholds; Afreximbank disputed the figures.
“If our own regional bank cannot align internal reporting with external assessments, how will AfCRA convince global markets it is credible?” one analyst asked. The episode underscored that credibility cannot be assumed, it must be earned, institution by institution.
By the time Dr. Muhumuza’s deep-dive came to a close, a reluctant consensus emerged: Africa must do both; create the AfCRA and continue engaging with the global agencies. In other words, an African agency may improve regional cooperation and reduce costs, but global investors still rely on Moody’s, S&P and Fitch. “We cannot shout at the mirror,” Dr. Muhumuza concluded. “The mirror will not change. We must change the image.”
Until Africa strengthens governance, stabilizes institutions, improves fiscal discipline, and ensures reliable data, rating agencies, African or global, will only reflect the underlying realities.
A continent confronting its reflection
. The final takeaway from the symposium was that AfCRA may become a vital tool in Africa’s financial landscape, but it will not erase fiscal indiscipline, institutional fragility, or policy unpredictability. Until African governments confront these realities at home, the continent’s fight with credit ratings will remain both an external challenge and an internal reckoning.
