The African Development Bank will launch an initiative to help African countries better prepare for sovereign credit ratings, with a focus on improving economic data and transparency, AfDB President Sidi Ould Tah said on Thursday.

Speaking at the S&P Emerging Markets Conference in London on Oct. 1, Tah said gaps in data and financial infrastructure can contribute to perceptions of higher risk, increasing the cost of borrowing for African governments.

“What is missed in Africa is the data and the infrastructure,” Tah said, adding that opacity in some markets can contribute to perceptions of high risk and higher borrowing costs.

The initiative will be implemented through the African Legal Support Facility, an AfDB institution that provides legal support to African governments. It will help countries prepare for credit assessments by improving the quality and transparency of information available to ratings agencies.

The AfDB said improving sovereign credit ratings is a common objective across the continent. Tah noted that only three of Africa’s 54 countries currently have investment-grade ratings.

Higher borrowing costs have been a longstanding concern for African governments. The United Nations Development Programme says low sovereign credit ratings can contribute to higher interest costs and reduced access to sovereign bond financing.

Africa also moves toward a continental rating agency

The AfDB initiative comes as African institutions move toward establishing the Africa Credit Rating Agency, or AfCRA.

The African Union-backed agency is intended to provide an Africa-focused assessment of sovereign, sub-sovereign and corporate creditworthiness. The AU says AfCRA is designed to complement existing global credit rating agencies by using African data, expertise and economic context.

The African Development Bank’s initiative and AfCRA are therefore separate efforts. While the AfDB programme focuses on helping governments improve their preparation, data and transparency for credit assessments, AfCRA is intended to provide an additional, Africa-focused perspective on credit risk.

The UN Economic Commission for Africa and the African Peer Review Mechanism have also called for greater transparency and for rating methodologies to better take into account African economic conditions, while supporting the operationalisation of AfCRA.

The AfDB is also working to strengthen domestic capital markets and mobilise local financing, including through engagement with pension funds and banks, as part of broader efforts to increase domestic resource mobilisation across Africa.