The average public debt for countries in the Southern Africa Development Community increased from 39.2 percent of GDP in 2011 to 55 percent in 2019.
Because this is just an average figure, it does not tell the full story of the growing carnage. For instance, Mozambique’s debt-to-GDP ratio is 118.9 percent, and the figure for Angola is 106.8 percent.
This means that Mozambique and Angola’s gross national economic output every year is less than what they owe.
According to data provided by the African Forum and Network on Debt and Development, the situation is deteriorating at an alarming rate. Africa’s debt situation was already bad before COVID-19 struck. Now the bloodletting is just getting worse.
This week, AFRODAD told legislators under the ambit of the SADC Parliamentary Forum that, “The pace of public debt accumulation has been higher for Angola, Mozambique, Zambia, Swaziland, Namibia and South Africa, exceeding the regional average of 30 percent.
“Botswana, the DRC and Zimbabwe experienced a decline in their debt-to-GDP ratios. In 2020, three countries were in high risk of debt distress, namely Zambia, Angola and Malawi, and two countries in debt distress – Zimbabwe and Mozambique.
“SADC market access countries – South Africa, Botswana, Namibia, Mauritius, Eswatini, and Seychelles – had debts considered sustainable.”
There are many reasons why Africa’s debt has for decades been crippling and is now becoming debilitating.
There are matters of skewed trade, foreign and overly exploitative ownership of the means of economic production; woeful continuing under-investment in local industry and value chains; suspect negotiating skills by the people we trust to contract debt on our behalf; and what can only be termed as a penchant for over-borrowing, borrowing for the wrong reasons or not putting borrowed money to good and proper use.
AFRODAD executive director Jason Braganza says “there has been a bit of lull in holding governments accountable” when it comes to how debt is contracted and how the borrowed money is used.
“There has been growing appetite for risk which has seen governments contracted debt from non-traditional lenders such as commercial lenders, whose terms and conditions may not be as favourable as those of traditional bilateral lenders such as multilateral financial institutions. The debts come with either high interest rates or harsh penalties for default,” he says.
As such, a good starting point is for African leaders to introspect and diligently consider and reconsider who they jump into bed with in the lending community. It also means Africa’s leaders need to get serious about domestic resource mobilisation and industrialisation with the attendant creation of substantial value economic value chains.
Secondly, it means legislators and civil society need to get serious about their oversight role and ensuring transparency and accountability by governments, which is commendably something that the SADC Parliamentary Forum and AFRODAD pledged to do this past week.
Thirdly, Africa needs to lobby for equitable access to instruments such as the IMF’s Special Drawing Rights.
Fourthly, Africa’s leaders, legislators, civil society, academics and related experts need to explore what options are available to secure substantive debt relief that ultimately leads to full debt cancellation.
Some may ask why make a case for full debt cancellation? After all, the argument goes, Africa borrowed and it should pay back.
Well, it is not that simple.
As Braganza points out, there are legitimate grounds to question “the manner in which some of these debts have been accrued” and also “how some of our creditors have behaved in lending to some of our governments in ways that are not in keeping with high levels of transparency, governance and accountability”.
Loes Debuysere of the Centre for European Policy Studies says “Africa’s debt crisis can be traced to the colonial period when major foreign trade defects, such as high export dependence and high concentration on a few commodities, became characteristic of Africa’s economy”.
She goes on, “These defects, a legacy of European colonialism, have laid the foundations of Africa’s debt crisis. If the EU, whose initial integration was deeply intertwined with the colonial project, and EU member states are genuine about fostering a more ambitious and equal partnership with Africa, they should use this momentum to pay back some of their own direct and indirect colonial debt through a debt jubilee for Africa.”
It is a line of thought that Vasuki Shastry and Jeremy Mark of the Atlantic Council have expounded on.
They say, “… what is needed post-pandemic is an independent review of Eurobond and other contracts signed by African governments. These contracts are heavily skewed in favour of creditors, with no flexibility to deal with emergencies like a pandemic.”
As far back as the early 1990s, well before the Jubilee Campaign to cancel debts and similar initiatives that followed, these arguments were being raised.
For instance, researcher Susan George (“Uses and Abuses of African Debt”) said, “One reason the cancer (of unsustainable debt) is metastasising is that African governments have never seriously sought to unite under a single debt-negotiating banner although they have had every reason to do so – and this is what bodies like the (African Union) are supposed to be for.
“This inability to arrive at a common stance has made it even easier for creditors to isolate and browbeat individual debtors when they take the Paris Club witness stand… The consequences of this failure are grave and have proved that disunity is a luxury Africa can ill afford.
“Many African governments still appear to be under the illusion that their countries are more important in the world scheme of things than they are. They also seem to believe that their legitimate concerns are genuinely taken into consideration by the industrialised countries.
“Sadly, neither is true. Yet many Africans, when told this bluntly by people who are basically on their side, still protest vehemently, insisting that they are important because the rich world cannot do without their raw materials and their cheap labour.”
With COVID-19, and with the benefit of decades now of experience of unsustainable debt, Africa would do well to amplify these arguments, while also taking internal corrective measures, to pull the continent out of the quagmire it is in.