As more African countries join the ranks of middle-income states and lose their eligibility for concessionary loans, their financing needs are being met by bond issues, local and foreign direct investment, domestic taxation and customs revenue. Yet there are big risks in the new financial landscape. Nearly a quarter of Africa’s 54 countries have floated Eurobonds: Angola, Côte d’Ivoire, Gabon, Ghana, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Seychelles, South Africa and Zambia. Most wanted to take advantage of the historically low interest rates and improving perceptions of Africa’s economies. They borrowed on better terms than Greece or Portugal but few think this era of low-cost borrowing is sustainable in the medium term.

Borrowing costs are determined mostly by the international ratings agencies, whose shortcomings prior to the West’s financial crisis in 2008 have been well rehearsed. If they don’t understand the industrial economies for which they have full financial data, it’s a safe bet that, with some exceptions, their grasp of African economies is still more deficient. Yet these agencies, with their capacity to downgrade or upgrade sovereign risk ratings of economies, will determine the costs and even the availability of borrowing. More independent analysis could improve the quality of assessment. Perhaps it is time for Africa to launch its own ratings agency, backed by the African Development Bank and perhaps in partnership with another international agency.