https://en.sputniknews.africa/20241006/africa-needs-alternative-voice-au-pushes-for-independent-rating-agency-to-counter-bias-1068565850.html
Africa Needs Alternative Voice, AU Pushes For Independent Rating Agency to Counter Bias
Africa Needs Alternative Voice, AU Pushes For Independent Rating Agency to Counter Bias
Sputnik Africa
Credit ratings act as a guide for investors, both individual and institutional, by providing information about an issuer's ability to fulfill their financial... 06.10.2024, Sputnik Africa
2024-10-06T12:56+0200
2024-10-06T12:56+0200
2024-10-06T17:50+0200
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The African Union member states need support due to unfavorable ratings from Western agencies, Dr. Misheck Mutize, lead expert on credit ratings in the African Union told Sputnik Africa.He noted that most institutional investors solely relying on rating agencies for information about Africa tend to react negatively to pessimistic commentary, leading to higher interest rates for African countries. This, despite the fact that Africa has one of the lowest rates of countries defaulting on their obligations.Speaking of the BRICS countries establishing an independent rating agency for the global South, Misheck Mutize stated that the African Union has been discussing this since 2020 and has reached a consensus: they need an alternative rating agency. He believes that an independent agency would offer a different understanding of the risks associated with African investments.Mutize strongly advocated for the independence of this institution from any government or sovereign to avoid conflicts of interest.
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africa, african union (au), sputnik africa, brics, brics plus, brics summit, cooperation, finance, global south, trade, economy
Africa Needs Alternative Voice, AU Pushes For Independent Rating Agency to Counter Bias
12:56 06.10.2024 (Updated: 17:50 06.10.2024) Ekaterina Shilova
Writer / Editor
Credit ratings act as a guide for investors, both individual and institutional, by providing information about an issuer's ability to fulfill their financial obligations on bonds, debt instruments, and fixed-income securities.
The African Union member states need support due to unfavorable ratings from Western agencies, Dr. Misheck Mutize, lead expert on credit ratings in the
African Union told Sputnik Africa."We have got statistical evidence to show that there are some biases from the level of the methodology that is applied and also the analytical processes that are undertaken. Also from the general view of the analyst that undertake the process of rating that there are some biases that manifest in the outcomes of the ratings that are assigned to Africa," Misheck Mutize stated.
He noted that most institutional investors solely relying on rating agencies for information about Africa tend to react negatively to pessimistic commentary, leading to higher interest rates for
African countries. This, despite the fact that Africa has one of the lowest rates of countries defaulting on their obligations.
Speaking of the
BRICS countries establishing an independent rating agency for the global South, Misheck Mutize stated that the African Union has been discussing this since 2020 and has reached a consensus: they need an alternative rating agency. He believes that an independent agency would offer a different understanding of the risks associated with African investments.
"A rating needs to be a neutral opinion. It doesn't need to be politically driven, because the market in this case sees this as a reaction to some political dynamics or their understanding from that sphere of being disgruntled by countries in the Global South. So, it is very important to incubate this institution from the legitimacy of wanting to provide a fair opinion rather than a favorable opinion, which might not be acceptable by the market," the expert said.
Mutize strongly advocated for the independence of this institution from any government or sovereign to avoid conflicts of interest.
