TANZANIA, Dar es Salaam AFRICA Peer Review Mechanism (APRM) is strengthening a network of regulators as the continent seeks to take action on negative ratings by overseas firms which are adversely affecting Africa's economies.
Speaking at a workshop which brought together representatives from financial sector, good governance and accountability stakeholders in Dar es Salaam, APRM Credit Rating Advisor Dr Misheck Mutize queried why findings of sovereign credit rating actions by the three overseas firms in the post-Covid-19 are not reflective of the current global post recovery phase.
In his presentation, Dr Misheck also asked why ratings in Africa are not reflective of its high economic growth during Pre-Covid-19 and why agencies were quick to downgrade Africa before the fundamentals set in during Covid-19 pandemic.
He said since APRM started venturing into credit rating, thanks to a mandate bestowed upon the organisation by the African Union (AU) audience, periodic knowledge outputs have exponentially grown over the past two years and are now generating debates and conversations on the inaccuracies of rating agencies.
According to him, a number of governments, international organisations, including the rating agencies, concur with observations on the regular factual inaccuracies and omission in the overseas firms' ratings.
"We have a number of member states we are working with to build capacity, in preparation for future rating reviews and we are seeing an improvement in both the engagements and outcomes," he stated.
Another APRM's positive impact on the area, according to the expert, is that more member states are moving to enact legislation on credit rating services.
On his part, an economist from the Ministry of Finance Abeid Mzee said Tanzania and other African countries have been affected by reports from the foreign credit rating agencies which are rigid to update their stories whenever the growth changes positively.
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"We, the government experts, know very well about our economy, we know where we come from and the growth trend. So, when we say our economy goes this direction, we reach at that conclusion after taking on board various issues," Mzee said.
The economist said that a lot of credit rating reports by the international firms have brought confusions various rated countries in and outside Africa due to the fact that their economies got downgraded, a problem that hiked the cost of borrowing.
He said the main challenge of having local rating agencies is that major investors are coming from Western countries who tend to trust ratings conducted by firms originating from their own countries.
Mzee went on to say reports from local rating agencies might be credible but lenders coming outside Africa might not trust them. He concurred with the APRM advisor that Africa needs to boost its markets so that their countries can be able to raise finances from within.
"So, if you have a lot of investors from within African continent and then you have an African rating agency, its rating reports will automatically get users since they will be trusted," he added.
