Rethinking risk in African finance

Carlos Lopes argues that risk frameworks often misread African economies, raising financing costs and imposing a material burden on development. A 2023 United Nations Development Programme study estimates that African countries incur up to $74.5 billion in excess interest payments and lost financing opportunities compared with peers with similar macroeconomic indicators. African sovereigns are often downgraded quickly during periods of stress but upgraded more slowly or less extensively during recovery, while ratings actions can amplify market volatility. Lopes notes that Moody’s, Standard & Poor’s and Fitch control about 95 per cent of the global ratings market, and their models do not always fit African economic structures.