Ratings bias costs Africa billions of dollars, Standard CEO says

African countries face higher costs of financing because of inflated risk perceptions from credit-ratings companies, the head of the continent’s biggest bank said. A United Nations Development Programme study last year showed that subjective risk assessments by ratings companies resulted in $75-billion of added costs and foregone revenue by African countries, Standard Bank Group CEO Sim Tshabalala said at a Future Investment Initiative Institute conference in Riyadh on Monday. He described the added costs as “preposterous” and “unconscionable.” “This perception issue does make a massive difference and needs to be addressed,” he said. Tshabalala’s remarks echo growing calls in Africa for changes to the way credit-rating companies assess risk on the continent, with leaders including Senegal’s former president and Zimbabwe’s finance minister calling for the creation of a pan-African agency. The African Peer Review Mechanism, African Development Bank, African Export-Import Bank and African Union Commission have announced plans to ensure such an entity is rolled out next year.