Africa Must Set Up Its Own Credit Rating Agencies?

An eminent member of the National African Peer Review Mechanism Governing Council (NAPRM-GC), Laud Mansfield Baddoo, has emphasised on the need for Africa to establish its own credit rating agencies. This, according to him, will provide fair and balanced assessments of its economies.

Speaking at the Credit Rating Methodology Transparency Workshop press briefing in Accra yesterday and reported by The Chronicle today, Mr. Baddoo highlighted the adverse impact of global rating agencies on developing economies and called for the creation of indigenous financial institutions to support African nations during crises.

“At the height of Ghana’s economic crisis, these agencies downgraded the country’s creditworthiness to junk status, effectively blocking Ghana from accessing the capital market and exacerbating the liquidity crisis into a solvency crisis,” he emphasised.

Mr. Baddoo pointed out the significant improvements in creditworthiness across Africa reported by the African Sovereign Credit Rating Review, with nine countries receiving positive sovereign credit rating actions in the second half of 2021. This progress was largely due to faster and stronger economic recovery efforts amid the COVID-19 pandemic.

“Good corporate governance is inextricably linked to robust credit ratings. A well-governed company not only manages its internal and external risks effectively, but also fosters a business environment that is sound and predictable,” Baddoo said.

First of all, having Africa’s own credit rating agencies is not a bad idea and The Chronicle fully supports that. We are, however, not happy with the basis upon which Mr Baddoo is making this request or suggestion.

According to him, at the height of Ghana’s economic crisis, these agencies downgraded the country’s creditworthiness to junk status, effectively blocking Ghana from accessing the capital market and exacerbating the liquidity crisis into a solvency crisis.

Much as some of these ratings are a pain in the neck of most African countries, the big question we all have to answer is whether data or numbers provided by these rating agencies are true or not. If Mr Baddoo can provide the evidence to back any claim that the numbers they churn out are not accurate, then he has a valid point.

However, if this is not in contention, except that African countries are just worried with what the rating agencies are doing, then we are afraid his call for Africa to set up its rating agencies has no merit. Clearly we can extrapolate from Mr Baddoo’s call that when Africa has its own agencies, they can manipulate the figures to suit them.

Here in Ghana, it was alleged some years back that a government at the time gave the World Bank cooked –up figures to make the economy look good in the eyes of the Breton Wood Institutions. Unfortunately, the latter was able to detect the lies government officials told them and this seriously affected us as a country.

We are not naysayers, but should Africa have its own rating agencies like Fitch and others, they would be putting out figures that will have no correlation with realities on the ground, because as they have always been doing – they want to look good in the eyes of their people.

In our view, therefore, instead of seeing what Fitch and partners are doing as a disgrace to the black continent, it should rather challenge African leaders to pursue right economic policies that will inure to the benefit of their people.

If you are in an economic mess and yet an African rating agency is giving you credit for your so- called good economic performance, the realities on the ground will definitely expose such lies to the international world. Fitch has downgraded the creditworthiness of most African counties to junk status, because truth be told, this is where they belong.

As it happened in Ghana, which we have already referenced, the Breton Woods Institutions are not fools – they are being run by competent Economists who can easily detect if the figures we are supplying to them are wrong or otherwise. In view of this, setting up Africa’s own rating agencies with the apparent aim of making our governments look good in front of the international community will not work.

Our leaders in Africa must instead do their homework well and stop accusing international partners from trying to thwart their efforts.

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