Regulatory exemptions of international credit rating agencies is a huge setback for Africa

The challenges of low credit ratings and downgrades of African governments have been well-documented over the past decade. It has significantly affected investment flow into Africa and its competitiveness at the global scale. One of the instruments that has been suggested by policymakers to address some of Africa’s challenges with rating agencies is effective regulation. However, there is a huge legislation gap in Africa, with only four countries – Ghana, Nigeria, South Africa and Zambia – having enacted primary legislation on credit ratings. The majority of African countries do not have primary legislation on credit ratings, instead they have adopted the international code of standards on rating agencies developed by the International Organization of Securities Commissions (IOSCO). Despite adopting the IOSCO standards, they are not enforceable without domesticating them through enactment of legislation. Amongst the few countries that have legislative frameworks in place, either their regulatory authorities have capacity challenges to enforce the legislation or their legislation exempt international credit rating agencies from regulation.