Debt is the chief reason why Africa is at pains developing herself. Debt curtails the African States from taking up development initiatives that can sustain their economies. The international money lenders have deliberately tied the African States to arduous debt traps. This move was actuated by the desire to maintain neo-liberalism in which the African States depend on international financial institutions for their development.
Normally, debt should be used to activate development and propel the industry. In a strict sense, debt without development is a wasted debt. Similarly, public debt aimed at repaying other debts leads to economic regression and perpetuation of debt dungeons which are difficult to get rid of. This is so because sovereign debts are characterized by an unfavorable change in exchange rates and an overly optimistic valuation of the payback from the projects financed by the debt makes it difficult for developing countries to repay sovereign debt.
What is public debt?
Public debt is money that a country borrows on behalf of its citizens from various money lenders, credit houses such as the International Monetary Fund, or from other governments in form of bilateral agreements. The term public debt is often applied interchangeably with sovereign debt. These are called sovereign debts because they are accumulated by independent nations on behalf of the citizens with a view to investing the debt into productive initiatives in the medium to long-term The Investopedia describes this form of debt as issuance of foreign currency in order to finance the issuing country’s growth and development. The debt is usually associated with credit ratings that are often used by investors to assess the creditworthiness and the risk factor for future lending. The need to conform with this condition often places African countries on the periphery of development. This is because public debt is usually associated with high-interest rates and a high debt-servicing cost regime.
Arduous African debts
Zimbabwe is an example of a country that bears an illegitimate debt. According to Jones, a Banker, and economic analyst, Zimbabwe inherited an arduous debt in the sum of USD$700 million from the then colonial Smith regime. This debt was accumulated by the Smith government with a view to ward off uprisings from the black Africans during the armed struggle of liberation. It can therefore be construed that, according to the Lancaster House Constitution, the debt which was contracted for the purposes of harming African civilians was imposed on the same Africans through tax and revenue collection. Morally, it would have passed the justice requirement for such kinds of debt to be canceled in order for developing nations to kick start debt-free economies. Tying these nations to colonial debts is akin to modern-day imperialism and a failure to acknowledge the independence of African States.
Debt as a threat to African development
Most African States have an insatiable thirst for borrowing huge amounts of money without necessarily investing it in development projects. Most of the debt is often used for funding partisan political agendas and programs. The nexus between debt and development is often ignored in most African States. For Zimbabwe, sovereign debt has been high fluctuating to the unsustainable tune of USD$11 billion which constitutes 71 per centum of its GDP. Of this amount, only 55 percent constitutes the principal debt. This was partly because Zimbabwe stopped repaying its debt in the early 2000s when the then President, the late Robert Mugabe cited Western-imposed sanctions as the chief perpetrator of the economic nose-dive experienced by the country in the late twentieth century.
The debt was never canceled such that it sky-rocketed, making it difficult to till today. The ultimate effect of this was to make Zimbabwe's credit unworthy and as a result, the Bretton Woods institutions closed credit lines for her. With a change in government and the assuming of power by the Second Republic under President Emmerson Mnangagwa, the country has sought to service its long-standing debt and re-engage the global capital markets with a move to open Zimbabwe for business. However, such re-engagement efforts have not been a stroll in a park since one of the conditions set by the International Monetary Fund is for Zimbabwe to first clear her debt before any re-engagement efforts take shape. This has led to an imposition of posterity measures and a reduction in the national fiscus in a bid to expedite the repayment plan. Out of frustration, the Second Republic has maintained the look East policy characterized by deep ties with the Chinese government.
The ‘look East policy’ and the Chinese debt
China is viewed by most African States as an “all-weather friend”. This has been a result of her ideology of political non-interference and the infamous issuance of zero interest-bearing loans. Countries such as Zambia, the Democratic Republic of Congo, and Ethiopia have flocked into China’s ‘friendly’ arms seeking financial rescue. However, these loans are not without future consequences. Bending to the whims of the Chinese ‘friendly’ gestures in form of aid has proven to be catastrophic for African governments. Research done by the African Forum on Debt and Development (AFRODAD) has proven that the debt that Africa owes to China is veiled in obscurity yet enormous in quantity. China enters into bilateral treaties with the African States on the condition that the actual amount of the funds she lends is privileged to the public domain. Thus the actual debt Africa owes to China is usually an estimate. There is always an assumption on the actual amount that African countries owe to China. However, economists agree that Africa has in the recent past, immensely knocked on China’s doors for funding.
The cancer associated with Chinese loans, however, is the mortgaging of African natural resources. In African countries such as Angola, which is the most indebted country in Africa, it is reported that most of its oil sales are diverted towards loan repayment at the expense of developing the nation and fulfilling economic and social rights. In Zambia and Zimbabwe, the Chinese are known for their exploitation of local people as cheap labour and their environmentally unfriendly extractive projects. Most of the African gold and diamond fields in Southern Africa have been preferred to China which now holds a number of mining claims over a certain period of time in exchange for loans. This has, in most circumstances waived the capacity of African States to harness the domestic resource for furthering national development as per the Banjul Charter.
Lessons from the debt dungeon
It is salient to note that, debt in Africa often reaches egregious levels due to corruption and poor public finance management. In Kenya for example, much of the debt owed benefitted few political bureaucrats. The African States have to learn that, they need not borrow for them to realize development in the long run. Borrowing cripples the African potential to emerge as an economic giant.
The scramble for natural resources by Asian and Western countries in exchange for credit facilities should function as a warning to the African fathers and mothers. The genuineness of these credit facilities ought to be taken with a pinch of salt. Prominent African Economist and scholar Dambisa Moyo aptly puts it that, aid in Africa should be described as a dead aid. It is only meant to mutilate the prospects of African development and to coerce her into buying the idea that she cannot make it on her own without resorting to aid.
If Africa is not careful, developed nations will rip her off her natural endowments within a blink of an eye. This will undermine the prospects of the African youth and governments to follow since debt is a contract in which contractual obligations underlie and thus, it ought to be repaid.