In credit rating process, the Big Three collect – S&P Global Ratings, Moody’s Ratings and Fitch Ratings – masses of reliable, standardised data, information that is hard to come by in many African nations with large, untracked informal economies.

Nearly all agency analysts work in capital cities or financial centres outside of Africa – places like New York, London and Hong Kong. And ratings can be undercut by the lack of government transparency, endemic corruption, political instability and civil strife that afflict parts of the region.

Fitch has no offices in Africa. On their websites, Moody’s and S&P list only offices in South Africa; combined, the two companies have a handful of affiliates operating on the continent. In the European Union, regulations require that agencies assessing countries and key institutions have a physical presence in the bloc.

Friederich, the Fitch executive, said it’s not feasible to have an office in every African country, and that given the continent’s infrastructure challenges, it’s not “always easier to fly from one place in Africa to another, than from outside of Africa.”

At the UN Development Programme, the agency instrumental in the push to get credit ratings for sub-Saharan nations, senior economist Raymond Gilpin disagreed, saying it was “unconscionable” that the Big Three didn’t have a larger presence on the continent. At the same time, he said he saw no bias in the way the Big Three apply their methodologies, and he echoed other officials and academics when he told said that the rating agencies’ work can be hampered by local realities.

He and others familiar with the ratings effort said that many African countries lack the basic requirements for the process, such as sophisticated, reliable datasets. Rating agencies are “not going to get the clear sense of what risk actually is in those contexts,” said Gilpin, head of the UNDP’s strategy, analysis and research team for Africa. “That’s not the fault of the agencies. It’s just the landscape in which they operate.”

Early in the initiative, Gilpin said, doubts about the African nations’ ability to meet the demands of the rating process were outweighed by the belief that “having their sovereign ratings done is a positive thing” for meeting development goals.

When asked about the US role in securing sovereign credit ratings for Africa and what ensued, Joy Basu, a US deputy assistant secretary of state for African affairs, said in a statement: “The international rating agencies play a critical role in unlocking private credit.” She added: “It is important that the ratings’ inputs are objective and transparent – and applied fairly amongst regions.” She did not specifically address claims of Big Three bias.

Some Big Three executives said that from the start, they saw trouble coming. These were countries with an uneven borrowing history, said David Beers, S&P’s global head of sovereign ratings when the initiative began with the UN Development Programme. “I never doubted that there were going to be defaults,” said Beers, now retired.

He and Fitch’s Friederich pointed out that their firms provide a ratings service for a fee, and it’s up to nations and investors to take it from there.

About 30 years ago, the Heavily Indebted Poor Countries Initiative, spearheaded by the World Bank and the IMF, began the process of wiping more than $100 billion of debt off the books for nearly 40 countries, most of them in sub-Saharan Africa, through a combination of loans, grants and buybacks. In return, the debtor nations had to commit to policy changes and poverty reduction.

To fund development moving forward, the Eurobond market, where money can be raised quickly, was widely seen as the natural choice, said Zephirin Diabre, a Burkina Faso economist who worked on the ratings push while at the UNDP. Eurobonds – debt securities denominated in a currency other than that of the issuer’s home country, usually US dollars — accounted for at least $113.5 billion of bonds issued by sub-Saharan countries since 2004, according to JPMorgan figures.

“The World Bank can’t give them all that money in concessional loans” — that is, loans at lower-than-market interest rates, Diabre said.

The US government championed the idea of credit ratings for sub-Saharan Africa. At a 2002 State Department conference in Washington, DC, then-Secretary of State Colin Powell told an audience that included many African officials: “A sovereign credit rating can be your country’s ticket to the benefits of the global economy and to the capital flows that exist in the global economy, and we are here today to help you earn that ticket.”

The US government partnered with Fitch, picking up the initial tab for country evaluations. The UNDP did the same with S&P.

For an African nation, ratings “would signal to various types of investors around the world that the government was prepared to be more forthcoming” about its economy and public finances, said Beers, the former S&P executive. Many investors are prevented by regulations from buying bonds of issuers that don’t have Big Three ratings.

For the Big Three, the programme bore little downside. From 2003, S&P initiated ratings for more than 20 sub-Saharan nations – business that Beers said enriched the firm’s bottom line.

Early attention focused on two of the region’s largest economies: Ghana, a source of oil, gold and cocoa, and Nigeria, Africa’s top oil exporter and most populous nation.

Ghana was one of the first to get a rating under the programme. In 2003, S&P gave it a B+ with a stable outlook. That’s four rungs below investment grade, but given the nation’s bright prospects at the time, its leaders were enthusiastic. “To ask if Africa is ready for portfolio investment is to ask a starving man if he is ready for food,” Ghana’s finance minister said at a 2003 event in New York organised by the UNDP with the New York Stock Exchange.

Four years later, Ghana made its market debut, raising $750 million through a sale of Eurobonds. Investors were drawn to the 8.5 per cent coupon, almost twice the rate on the benchmark 10-year US Treasury notes; demand for the Ghanaian bonds was four times greater than the amount offered.

In 2006, S&P gave Nigeria a rating of BB-, one notch above Ghana’s. In 2011, the country issued its first Eurobond, for $500 million. It was more than 2.5 times oversubscribed. Nigeria then raised $1 billion more in two separate bond issues that were also oversubscribed.

“Bondholders really welcomed them with open arms,” said Giulia Pellegrini, senior portfolio manager for emerging market debt at Allianz Global Investors.

The enthusiasm seemed justified. Ghana’s economic growth hit 14 per cent in 2011, the fastest in the region. Nigeria’s growth was at a strong 5.3 per cent and showing signs of improvement.

Diesel-run generators are seen in front of United Bank of Africa (UBA) headquarters in Lagos

By this time, Moody’s — the last among the Big Three to expand its portfolio of sovereign ratings in sub-Saharan Africa — had begun to seek a bigger footprint in the region.

In August 2010, Moody’s hired Nigerian economist Weyinmi Omamuli to join its sovereign risk team as a London-based vice president and senior analyst. Omamuli had degrees from the London School of Economics and experience at a Nigerian investment firm and at Britain’s finance and international development ministries. She was initially assigned to cover Nigeria, Kenya and other countries.

Omamuli soon came to believe that Moody’s slow start in sub-Saharan Africa resulted in part from ambivalence toward the continent, according to her witness statement in a race and disability discrimination claim she brought against Moody’s and one of its executives in a London tribunal. The case was settled in 2015; terms were not disclosed.

In her witness statement, Omamuli – now a senior economics adviser at the UNDP – wrote that senior Moody’s staff expressed negative views of countries in the region. In 2010, she wrote, Michael Korwin, then a Moody’s business development executive, told her that when the firm was first approached about rating sub-Saharan nations around 2002, “the proposal was ‘laughed out of the door,’ or words to that effect” and that it seemed “utterly ridiculous” at the time to think sub-Saharan countries could access global capital markets.

Omamuli wrote that Korwin told her Moody’s began its push into sub-Saharan Africa only because the firm “was now keen to find new revenue sources.”

Around the same time, a senior Moody’s analyst recounted that her husband travelled to Lagos, Omamuli’s hometown, and said it was “a dump,” she wrote.

Contacted by phone, Korwin, now retired, called Omamuli’s recounting of his remarks “pure myth.”

“I, as a marketing person, would not have been privy to senior management discussions where anyone in New York or London would make the decision,” said Korwin, who left Moody’s in 2017. He was not the executive against whom Omamuli filed her discrimination claim.

Korwin said that Moody’s, while slower than its competitors to expand in sub-Saharan Africa, ramped up its efforts in response to investor demand. “At the end of the day, you serve a purpose to the investor community, which drives your business plan,” he said.

A former Moody’s executive who requested anonymity echoed the scepticism Omamuli described. Countries in the region “didn’t have a clue what we were doing,” this person said. “It was definitely too early” for the region’s governments to quickly take on and manage masses of private debt, which they might struggle to repay when interest rates went back up. But for many countries, the former executive said, being wooed by big-name investors was “just intoxicating.”

• A Reuters report