EYEGAMBIA

EYING GAMBIA, AFRICA & BEYOND.

African Debt Crisis: How, Why and When?

If there is anything to be concerned about is Africa’s debt portfolio; by day, Africa’s debt is rising-the debt is rising at alarming rate-which threatens future development in Africa.

According to Overseas Development Institute (ODI), “about 40% of sub-Saharan African countries are in danger of slipping into major debt crisis.” For several decades, debt to multilateral financial institutions in Euro-American world has been Africa major problem; debts, most African nations could barely state-their origin or explain reasons for them-as some could be traced to colonial bills charged to colonies on the eve of independence some sixty years ago.

Now the questions, Africans want answers to are:

• How much does Africa owe?
• Who are African nations’ creditors?
• What types of loans are coming to Africa?
• Are they loans or traps to hold Africa down?

HOW MUCH DOES AFRICA OWE?

Between 2006 and 2017, Africa’s debt portfolio stood at $583 billion dollars, about a fifth of $2.58 trillion of African nations combined GDP. Of this amount, 20-29% about $132 billion or more is owed to China; a major power on global stage. From mid 80s, Chinese aggressive venture into Africa began; just twenty years after it transitioned from a centrally planned economy to market oriented-economy that changed China dramatically and even, fundamentally.

Today, China has a different story to tell, with $14.3 trillion (99 trillion Yuan) GDP; China has world largest total banking assets of $40 trillion and a $23.39 trillion in deposits, which should not be idle, but be working or invested somewhere as loans, projected-funded instruments, soft loans to foot imports, grants, decoy and wheedle in Africa.

WHO ARE THE CREDITORS?

Who are African nations’ creditors? None other than those already known; they’re yesterday’s ex-lords or colonial masters, who are today’s old wines in new bottles. Even though they’re no more viceroys, but through certain institutions-modern day, viceroys honk.
Euro-American multilateral and bilateral financial institutions are Africa’s major creditors; mainly, the World Bank, which the continent owes $106 billion, International Monetary Fund (IMF); Paris and London Clubs; European Investment and Development Banks, individual banks across Europe; and Islamic Development Bank, which is very popular in the Maghreb.

It is interesting to know that 32% African government external debt is owed private lenders, which London Club front for; while 35% is owed multilateral institutions, mostly, International Monetary Fund and its twin sister, the World Bank, and public creditor, which Paris Club represents; and 55% of external payment to private creditors.

JUST GUESS WHAT CONSTITUTE AFRICAN LOANS:

Over the years, many different things, which would not have qualified or passed the test for LOANS have been foisted on Africa, including but not limited to eleven Acts/Terms in FRENCH PACT imposed on her African colonies more than sixty years ago; some of the conditions are as follow:

  • Colonial Debts, which newly “free” nations will to pay France for all infrastructure provided during colonial days.
  • Compulsion to submit countries annual balance and reserve report to France, without which independent French countries would not get funds.
  • Former French colonies are required to keep at least 65% of their foreign reserves in an “account of operations” with French Treasury, which invests the funds with a shroud of secrecy; and another 20% to cover financial commitments.
    France controls the $500 billion African Silver in its currency; and sadly, this money is not available to French former colonies.
  • France allows African nations just 15% of their a year; and if they need more, African nations will have to borrow 65% of their money at commercial rates; there is a cap on amount of money, French former colonies can borrow, which is 20% of previous year’s public income.

Unfortunately, the French Pact without human heart became a TEMPLATE for several Loans and Grants that came to Africa over the years and decades, which stunted growth and development, bred political instability, created social dislocation in sub-Saharan Arica.

It is not surprising that China has taken same pathway; already, China has taken possession of Zambian ZESCO (Electricity Company), Zambian National Broadcasting Company (ZNBC), other critical assets-such as Lusaka International Airport may go, if not gone; just as China is asking for Mining Assets as collateral for loan restructure agreement. If China succeeds, Konkola Copper Mine, African second-largest copper mine may go, and for sure, it will prepare the ground for other national assets being liquidated.

Should Zambia cave in under Chinese debt trap, these African nations-Ethiopia, Democratic Republic of Congo, Angola, Djibouti, and Kenya with weaker economies, but owing China so much may go Zambia and Sri Lanka routes.

Share on facebook
Share on twitter
Share on whatsapp