eBusiness Weekly
Énacy Mapakame
Regional finance and economic experts have called on African leaders at the African Union (AU) 37th summit to step up regional integration, which is key in pushing for debt reforms and an overhaul of the global financial architecture.
This comes as the region is heavily burdened by an unsustainable debt overhang, which affects social service delivery and plunging the region into poverty and dependency syndrome.
Despite being endowed with vast natural resources, the global financial architecture was initially set to serve the superpowers and does not favour African countries or other developing nations. It has stringent terms that keep the region in a difficult situation.
For example, Treasury pegs Zimbabwe’s total public and publicly guaranteed (PPG) debt at US$17,7 billion, as of end September 2023, of which external debt amounted to US$12,7 billion and domestic debt of US$5 billion.
Late last year, the International Monetary Fund (IMF) released a list of 10 African countries with the highest debts to the institution, with Egypt topping the list with a US$11,9 billion debt, followed by Angola at US$3 billion.
South Africa, Cote d’Ivoire, Kenya, Ghana, Nigeria, Morocco, Democratic Republic of Congo (DRC), and Tunisia complete the top ten with debts ranging from US$2 billion to US1 billion.
Speaking on the sidelines of the African Union summit in Addis Ababa, Ethiopia, where African heads of state convened last week, the experts noted that over 30 countries in Africa are in debt distress largely due to structural traps that keep the continent locked at the bottom of the value chains.
“The continent is largely an exporter of raw commodities and an importer of finished goods, and this means we will always be in a liquidity crunch and cash shortfall. This necessitates having to go for loans,” said Jason Braganza, executive director of the African Forum and Network on Debt and Development (AFRODAD).
He said the only way to address these structural deficiencies would be for Africa to have a coherent and coordinated approach that underscores the value that the continent brings to global trade and commerce as a net creditor to the world.
Mavis Owusu-Gyamfi, vice president of the African Centre for Economic Transformation (ACET), called for a global financial architecture that is responsive to Africa’s current realities and complex challenges.
“The international financial systems were set up 80 years ago when most African countries were colonised, and the system locked them out of industrialisation,” she said.
“Given what Africa has given to the world as a provider of natural resource capital, it is not too much to ask for an increase and a fair share of allocations through public goods such as the International Development Assistance (IDA) and the Special Drawing Rights (SDRs),” Gyamfi said.
Speaking at the same briefing, Hannah Ryder, CEO of Development Reimagined, said that Africa still needs a lot from the rest of the world.
“While a lot is being done domestically and new lenders such as China and private sector actors have brought in resources, we have to go back to the 1980s when African governments realised that their aspirations such as infrastructure building would not be met by domestic resources only,” she said.
“Their economies had been effectively decimated by colonization, among other factors. At Development Reimagined, analyses from studies across multiple reports looking at 13 countries in Africa showed that for these countries to meet Agenda 2063 aspirations and the SDG targets, these countries would need between US$100-150 billion per year,” Ryder said.
“If they were to do that through external finance the way it works at the moment, they would be crashing their debt sustainability thresholds within a few years, and many countries have done so,” she said.
Dr Patrick Ndzana Olomo, acting head of the economic policy and research division at the Department of Economic Affairs of the African Union Commission, said: “Africa’s admission to the G20 is an opportunity to build comprehensive frameworks within the G20 to stem illicit financial flows that see the continent lose US$90 billion a year.
‘‘It is extremely important for Africa to go to the G20 to discuss the strategic issues that are pertinent and that serve the interests of the continent.”
