CARE Ratings (Africa) Private Limited (CRAF), the leading credit rating agency in Mauritius and a subsidiary of CARE Ratings Ltd, and the African Peer Review Mechanism (APRM) signed a Memorandum of Understanding on 25 April to unite their efforts in the development of credit risks in Africa, as the first step towards the creation of the Africa Credit Rating Agency.
The signing ceremony, which was held at the Hennessy Park Hotel in Mauritius, was graced by Dr. the Hon. Renganaden Padayachy, Minister of Finance, Economic Planning and Development of Mauritius, and H.E. Mrs K. Nandini Singla, High Commissioner of India, and was witnessed by a high level audience of diplomats, institutional and industry representatives.
The collaboration between CRAF, the leading rating agency in Mauritius, and APRM, an autonomous entity responsible for promoting good governance, expands the prospects for economic growth, particularly on the African continent.
APRM’s mandate is in line with the policies of the African Union aimed at helping member states improve their credit ratings. This support for the development of national financial markets includes promoting an environment conducive to the creation and growth of national rating agencies, increasing the number of countries and instruments rated, accelerating the development of local capital markets, and improving governments’ access to affordable capital.
The African Union aims to collaborate with credible institutions of systemic importance to promote coherent economic integration, which includes the establishment of a Pan-African Credit Rating Agency, under Article 19 of the AU Constitutive Act of 2002.
The areas of collaboration include working together on the creation of the Africa Credit Rating Agency, which will help ensure objective and accurate assessments of African countries, thereby facilitating access to financing at competitive rates and supporting the development of local capital markets. Impartial and credible credit risk assessments in Africa could be beneficial for investors and institutions, providing them with valuable information for informed investment decisions.
“With the establishment of the Africa Credit Rating Agency, we are promoting transparency and confidence in the continent’s financial markets, paving the way for new investment opportunities and sustainable growth,” said Mr. Mehul Pandya, Managing Director and CEO of CareEdge Group.
Currently, sovereign risk ratings in the African Union are assigned by three major international rating agencies, whose approach is not very transparent. As a result, the nuances of developing countries and African realities are not fully explained. CareEdge Group, with its expertise, will help develop methodologies and rating models for sovereign ratings, taking into account the complexities and dynamics of emerging economies.
Minister Padayachy: “This is the time for Africa to shine”
As the Chief Guest of Honour at the signing ceremony, Dr. the Hon. Renganaden Padayachy, Minister of Finance, Economic Planning and Development of Mauritius, hailed the signing of the MoU for the setting up of the Africa Credit Rating Agency as a “significant milestone” for the African continent.
He described the strategic decision taken by the African Peer Review Mechanism to institute an Africa Credit Rating Agency as “perhaps one of its most ambitious and important initiatives”. He saw that it was “very timely” in the light of the Spring Meetings he had recently attended at the IMF and World Bank, and assured the audience that “the focus is Africa”. He emphasised that “this is the time for Africa to shine”.
The Minister asserted that “today’s signing ceremony not only represents a collaborative effort to develop a credit rating system that reflects the specificities of African economies, but is also a demonstration of our commitment to find African solutions for African challenges”.
“By pooling our resources, expertise and insights, we aim to create a framework that is transparent, objective and relevant to the needs of our nations. It is about asserting our worth and our vision for the future. It will provide investors with a more accurate and nuanced understanding of the investment opportunities available across Africa. By aligning our ratings with the realities of our economic landscape, we can foster greater confidence and trust among investors, thereby unlocking the full potential of the continent’s vast resources and human capital,” the Minister underlined.
Commenting on the position of Mauritius, which will play host to the new Africa Credit Rating Agency to be established, the Minister noted that “despite the challenges posed by the global economic environment. Mauritius has successfully maintained its investment grade status, providing investors with confidence and stability. The establishment of an African credit rating agency represents an additional opportunity for Mauritius and for the whole continent to highlight its strength. It will be of paramount importance to create the level of confidence required by investors. By working together and leveraging our collective strength, we can build a future where African nations are empowered to chart their own path towards prosperity and self-reliance. We, Africans, can lead our own destiny and set great standards for the benefit of our people and our economies,” he concluded.
About CARE Ratings Ltd. (CareEdge Ratings)
CARE Ratings (Africa) Private Limited (CRAF) was established by CareEdge Group in 2014 and is licensed by the Financial Services Commission of Mauritius and the Capital Markets Authority of Kenya, bringing with it over three decades of expertise. The agency is well positioned to support the development of capital markets in Africa. By evaluating the sovereign ratings of 40 countries, including 7 African countries in addition to Mauritius, CareEdge Ratings aims to significantly contribute to the transparency and credibility of markets.
