Why Mo Ibrahim is against Ruto's push for African credit rating agency

Entrepreneur and philanthropist billionaire Mo Ibrahim says the formation of a continental credit rating agency, as envisioned by President William Ruto, may leave the continent in a worse situation.

In a new report, he proposes other quick wins amid these reforms.

Through the Mo Ibrahim Foundation, he says an African credit rating agency (AfCRA) may work to the disadvantage of the countries that set it up, as lenders may find the ratings biased.

The report says big economic blocs like the European Union (EU), which attempted to restructure the global finance architecture, failed to overthrow the big agencies that still rule the market.

Reforming the existing global financial architecture, the report notes, is much easier than putting up a new institution to guide the credit rating of African economies.

The report dubbed, Financing the Africa We want, published in July 2025, cites potential areas for quick wins in the rating process, among them de-stigmatising the debt restricting process.

“Countries that choose to engage in debt restructuring, such as the G20 Common Framework or Debt Service Suspension Initiative, need a supportive and understanding approach that inspires confidence and coordination between creditors and debtors,” the report says.

The report adds that this process will avoid the vicious cycles, with governments avoiding restructuring to escape a rating downgrade. The other option is that African countries can have a common position on credit rating agency reforms, which South Africa should lead under its G21 Presidency.

“The continent can collectively push for methodological reform, such as the reform carried out by the European Tax Observatory (EUTO) reduce the influence of credit rating agencies, which could be commenced under South Africa’s G21 Presidency,” the report says.

When President Ruto took over the mantle of championing African Union reforms in February from his Rwandan counterpart, Paul Kagame, he spoke strongly of the global financial architecture, which he said is not responsive to African needs. He emphasised the need for a continental credit rating agency, saying the continent’s natural capital is not factored in when interest rates are being calculated.

In June 2024, at the 59th African Development Bank (AfDB) Annual Meeting held in Nairobi, President Ruto described the global financial architecture as rigid, misaligned and a barrier to the continent’s development aspirations.

“These rates are said to factor in something arbitrary called risk profile that is not applied when considering mineral extractions, even in areas of active conflict. It is safe, we are told, to mine in places where there is conflict, but risky to lend to African economies. What a contradiction,” he said.

 AfDB President Dr Akinwumi Adesina said there is a need for an AfCRA that understands the market, financial and political risks of the continent.

“If the rating for Africa was done properly, then we will save Sh9.75 trillion ($75 billion) every year in debt service,” he said. “In an environment of green financing and climate change, Africa’s gross domestic product (GDP) is undervalued.”

The report by Mo Ibrahim Foundation notes of this plan saying since the AfCRA may be able to acquire better information from African countries, some may consider its ratings more accurate.

Local expertise

It states that whether its ratings lower Africa’s borrowing costs or not, the new agency could at least boost local expertise and capacity and help governments learn how to manage the process of being rated.

“However, lenders may be reluctant to act based solely on ratings from an agency they may consider conflicted, as it would be assessing the same institutions that created it,” the report says.

For this to be resolved, the report says the AfCRA would have to be established outside of the AU. “Reforming the methodologies of existing agencies might be more impactful and will not come up against credibility obstacles and challenges in influencing global capital markets,” the report opines.

Mo Ibrahim Foundation sees the AfCRA more as a ‘domestic supercharger’, boosting local expertise and helping governments manage the rating process.

“It could follow and incorporate the example of African CRAs such as August & Co, which includes 40 per cent of qualitative data based on local knowledge,” the report says.

“This could improve legitimacy, better enforce rating schedules and build regional institutional capacity.”

It references the European Union as an example documenting how the European Securities and Markets Authority (ESMA) and the Credit Rating Agencies Regulation (CRAR) which were both established through similar disputes over ratings.

“Both ESMA4 and CRAR enforce transparency, conduct frequent supervisions and enforce information disclosure on methodologies, data sources and conflict of interests which can help prevent and correct mistakes,” the report says.

The report states that Europe, through ESMA, and India, through the Investment Information and Credit Rating Agency of India (ICRA), have tried to create and strengthen their own credit rating agencies but this has not affected the dominance of the ‘Big 3’.

The ‘Big 3’ are: Moody’s, Standard and Poor’s (S&P) and Fitch Ratings. These three agencies are said to control over 90 per cent of the market.

“In 2016, only Dominion Bond Rating Service, an agency headquartered in Canada, had more than one per cent of the market share. The rest remain under the control of the ‘Big 3’. As of 2024, the ‘Big 3’ still control more than 92 per cent of the EU credit rating market, approximately the same as they did in 2016,” the report says.

It adds that in India, of the six credit rating agencies established to counter the influence of the ‘Big 3’, only one, CareEdge Ratings, remains independent.

“The others were bought and are now controlled by the ‘Big 3’, including ICRA,” the report states.

The report adds that the ‘Big 3’ also have a track record for acquiring local African agencies. “In 2024, Moody’s acquired GCR Ratings, an African CRA with offices in South Africa, Nigeria, Senegal, Kenya and Mauritius,” it says.

The report states that the continent’s credit rating has an influence on how much it gets in business.  Most economies on the continent are deemed risky as a result of their rating by these agencies.

However, the report says, many developing economies in Africa offer strong risk diversification and attractive risk-adjusted returns that deliver comparable, sometimes superior, performance relative to developed markets.

“As of 2025, of the 36 African countries rated by one or more of the ‘Big 3’ agencies, only two are deemed investment grade – Botswana and Mauritius,” the report says.

The report says as many African countries graduated from low to middle-income status, they became ineligible for concessional financing. As such, these economies had to contract loans or bonds to finance their development or climate requirements, and thus needed access to international capital markets.

Countries usually require a minimum sovereign credit rating of BBB to access international capital markets at lower rates. “According to S&P, three African countries are in Selective Default: Ethiopia, Ghana and Zambia. According to Fitch, two African countries are in Restricted Default: Ghana and Zambia,” the report details.