The recently completed full acquisition of Global Credit Rating Limited Company (GCR) by Moody’s is beneficial for Africa as it enhances the reputation of both entities. For GCR, the ownership by Moody’s brings an international brand, while for Moody’s, it reinforces its position not only as a global but also as an African rating agency. This strategic move allows both organizations to improve their scope within the credit ratings space.

Moody’s, a global organization known for international ratings including those of African sovereigns, major domestic banks, and African multilateral institutions, will now gain valuable insights from GCR’s extensive presence and expertise across 20-24 African countries. GCR, with physical presence in South Africa, Mauritius, Kenya, Senegal, and Nigeria, provides national ratings on corporates, financial institutions, insurance, public sector issuers, and structured transactions. This acquisition allows Moody’s to tap into GCR’s local networks, offering better information flows and a deeper understanding of the political, regulatory, and economic environments in these regions. This integration is a vote of confidence in Africa’s potential and will likely facilitate Moody’s discussions with international investors regarding African markets.

Will the new ownership influence GCR’s methodology?

The full ownership of GCR by Moody’s is unlikely to affect GCR’s methodology. Historically, rating agencies like Moody’s have allowed their overseas acquisitions to operate independently within their own regulatory jurisdictions, fostering natural cross-fertilization over time through staff exchanges and interactions. Moody’s seldom interferes with the criteria of its local affiliates in Asia and Latin America and is thus expected to adopt a similar approach in Africa. GCR’s methodologies and rating scale will continue to be managed independently by GCR management, maintaining the use of a National Rating Scale for comparability within jurisdictions, with the option to simultaneously assign an international rating.

What implications will this have for other African countries and the geographic presence of Moody’s in Africa?

Moody’s could leverage GCR’s networks and relationships to increase its international ratings for African sovereigns and entities seeking access to the global investor base. This acquisition is expected to enhance Moody’s geographical presence in Africa, promoting deeper market penetration for both Moody’s and GCR over time. The local expertise provided by GCR will enable Moody’s to offer more nuanced and region-specific ratings, further solidifying its presence and credibility in the African market.

How will this impact the African Union’s plans to establish a Credit Rating Agency?

The acquisition of GCR by Moody’s is not expected to significantly impact the African Union’s (AU) plans to establish a credit rating agency (CRA). The AU initiative aims to address the perception that international rating agencies overestimate African risk. If the AU CRA is deemed credible and independent by investors, their goal will be to offer "more accurate" and higher ratings for African countries, thereby lowering borrowing costs. However, this may be challenging if the AU CRA is perceived as lacking independence, given that it would rate its own member states.

Furthermore, GCR’s presence is not universal across all African countries, whereas the AU CRA would likely aim for broader coverage. The AU could adopt a strategy similar to GCR’s by utilizing a National or Regional Rating Scale, particularly in regions with a common central bank like UEMOA and CEMAC. This approach would aid in developing domestic capital and credit markets and attracting both local and foreign investment, enhancing the overall financial ecosystem within Africa.

Note

In 2024, UNDP established a new initiative on credit ratings to respond to the rising cost of borrowing on global capital markets and the increasing difficulty of financing development in Africa. Implemented in partnership with Dakar-based think tank AfriCatalyst, the objectives of the initiative are to support knowledge and capacity building efforts on the continent by providing timely and targeted technical assistance to guide policymakers through the complexities of credit ratings agencies. The three main components of the initiative – an online resource platform, a Concilium of experienced advisors and a community of practice – will be complemented by demand-driven capacity building workshops, research products, needs assessments, gap analyses and an advisory desk. 

The views expressed in this analysis reflect the perspectives of the Concilium, and do not necessarily represent the official views or positions of the United Nations Development Programme (UNDP).