AFRIPOL.ORGIDEAS HAVE CONSEQUENCES
Stevie C. Chiakwelu is the CEO of Stebil Computers Ltd. He is a Senior Fellow and developmental analyst at AFRIPOL.Org
WHY DEBT CANCELLATION FOR AFRICA? By Stevie C. Chiakwelu
In this continent, the four horsemen of the apocalypse - conquest, conflict, famine and death are no mere visitors. They have taken up residence.
-Martin Wolf (Financial Times)
In view of mismanagement of Africa’s resources and funds; even the looting of her treasury by some of her leaders, it can be said thereof, that corruption has attained an alarming proportion in the continent. In fact, it has eroded the system. It may therefore, sound incredible and laughable when one suggests that time has come for a cancellation or rather a major debt relief to Africa’s enormous foreign debt.
The cost of the foreign debt payments to the African citizens is not a child’s play. The funds that would have been used to upgrade the health care system and quality of education were diverted to debt servicing and payments. African children are paying the price for debt servicing.
These debts are owed to industrialized nations. African governments have been unable to meet up with their financial obligations and have resorted to continuous rescheduling of the loan payments as regulated by International Financial Institutions and their agents, such as IMF, London Club, Paris club, World Bank and others.
As years progress, so also the burden of the debt widens. However, all the stakeholders fully take cognizance of the fact that these loans seem impossible to be liquidated with ease.
So many figures have been thrown around, but the most recent data stated that Africa’s foreign debt currently stood at $350 billions. This is outrageous, a gigantic yoke!
To buttress the level of poverty in Africa, out of the 41 nations identified as Heavily Indebted Poor Countries (HIPC) according to World Bank, 33 of those nations are from Africa.
Africa has nothing to show for such an enormous debt but weak and dilapidated infrastructures with a very devastating low human development index.
Below are the intrinsic reasons why AFRIPOL subscribe to debt cancellation for Africa, which must go forward without much ado or conundrum:
1. Mutual Benefit: Africa and the West can share an affirmative interdependence based on mutual respect and benefit. This can only be possible when the burden of debt is released from African’s shoulder. When Africa is stable, this spells well for democracy and capitalism. This will in return stimulate trade.
2. Global Stability: A healthy and wealthy Africa will contribute to the world stability. Moreover, Africa will have the adequate resources to make impact in resolving conflicts within her continent. This is good for Africa in particular and the world in general.
3. Social Security and Freedom: Actually, the brunt of the debt payments mostly rests on children and women and not on African leaders. Those who absorb the agonizing pains are the poor masses. For them, there is no job; no food; no shelter. The leaders hide under the guise of being incapacitated because of foreign debt payment obligations, to shy away from their responsibilities and they allow the masses to wallow in abject poverty while they themselves live flamboyantly and affluently. Therefore the debt cancellation at least, if judiciously managed will affect the poor positively, when such funds are channeled to areas that will make life worth living.
4. Non Restrictions on Economic Policies: The truth is that as a result of these foreign debts, the West directly or indirectly dictates Africa’s economic policies. Africa’s economy is import driven. They rely heavily on importation. It is not always economic policies that suit African that matter but those that are favored by the foreign creditors. That is why their policies are tailored to suit foreign debt demands. If debt relief is granted, Africa can now employ policies that will be considered unique to her economic goals.
5. A Clean Slate /Economic Freedom: What Africa desperately needs now is a fresh beginning. For the fact that the debts are cancelled, it will give Africa hope and a sense of belonging. Africa will now put up confidence to bargain for what is good for the continent in the comity of nations without ego problem of being indebted.
6. Africa’s History: Yes, it is important too. This is not just to be visceral but to be realistic to Africa and again for the sake of history, Africa has suffered untold hardship via slavery and colonialism. This time around, reasonable people can conclude that Africa needs a push.
7. Principal Loan Accomplishment: The actual principal borrowed had been paid. The problem now is the accumulated interest over the years and it is still going up. It is point clear now that Africa has demonstrated concerted commitment to her financial obligations.
8. State of Health Care in Africa: Against all odds, a case must be made for a sound healthcare in Africa. There is no fund to implement Africa Union agenda on health. The cost is beyond the resources and funds at hand. AIDS, Malaria, Polio, Ebola are confronting Africa. This continent needs the funds to aggressively fight back these killer diseases.
9. Promotion of Democracy: A political paradigm based on fairness and equality with broad-based representatives known as Democracy cannot survive on an empty stomach. Democratic system of government is quite expensive to operate. For democracy to have a true light of the day in Africa, the needed resources must be available.
10. Reinforcement of Economic Capitalism: For Adam Smith’s concept of free enterprise to take hold in Africa, Africans must have good impression of capitalism. These foreign loans servicing and payments do not augur well for capitalism and laissez faire before the suffering masses of Africa. Africa’s weak and dilapidated infrastructures must be developed to international standard. This will enable industrialization and investments to be realized in the continent.
AFRICA AND FOREIGN DEBT By Stevie C. Chiakwelu
The progress of the enormous debts which at present oppress, and will in the long-run probably ruin all the great nations ...
-Adam Smith
A linguistics sociologist once defined a disaster as something one can smell, touch and feel. African foreign debt is an enormous disaster; its ugly consequences litter everywhere even along the roadsides. Yes, a great disaster indeed! You can smell it, touch it and feel it in Africa’s heartland.
Africa received $540 billion loans between 1970-2002, she paid back $550 billion (i.e. principal with interest inclusive) and she still owned $295 billion as at the end of 2002.
Africa from what we can deduce, has overtly tied herself to the apron string of foreign debt payments. Unfortunately these payments are endless. The borrowed principal has already been paid, yet the interest continues to accrue at a whopping rate. With such a trend, it is erroneous to believe that the continuous rescheduling of the debt payment by Paris club or any other allied group could proffer lasting solution but fire brigade approach. This will only succeed in delaying the great disaster that is lurking behind.
Already the disaster has arrived! The effects of the disaster have commenced amplifying and will continue to permeate to all facets of life in Africa. Without mincing words, the people that are hardly hit by the brunt of the debt services are the poor and the children. Majorities of Africans fall into these categories. It is pathetic to note that qualitative education, good health care, affordable shelter, clean and drinkable water supply, sewage system and reliable power supply have all eluded these poor people. Their government in question has failed in providing basic amenities that will affect them positively, all in the name of servicing foreign financial obligations.
Enough is enough. This abuse and torture meted out on Africa as a result of these foreign debts have diminishing impact on the well being of the continent. Without deferment or holding back, somehow, something must be done to bring this apparent disaster to an end. A sensible and constructive compromise must be reached with the western creditors and international bankers.
It is truism to acknowledge that self inflicted torture rooted in ignorance, naivety and lack of intellectual insight on the part of the greedy and corrupt African leaders, who took out the loans in the first place, created such an agonizing situation.
The western bankers and financial institutions did not twist round African leaders with their little fingers in order to compel them to borrow to their demise. It was their choice to borrow, most times, they were propelled by avaricious inclination and in the process they stole from their constituencies without minding the ensuing retardation it will have on the economy in particular and populace in general. Corruption is and has been the bane of development in Africa.
Most of these debts were accumulated during the cold war. During the era of bipolar world, African leaders were granted loans at the height of cold war for political reasons and these had nothing to do with sound financial decisions. The funds were wasted on some white elephant projects or rather siphoned to some secret bank accounts that were beyond spying eyes of an average African. Most of these loans were acquired without the consent of the citizenry, ironically now; they are the ones absorbing the greatest burden of the loan services.
In Congo, the maximum President, late Mobutu, took out so many loans that were indirectly deposited into his France bank accounts.
Nigeria was granted loans particularly because of her oil wealth, unfortunately some of those loans were more or less not put to good use that would alleviate the sufferings of her people by creating employment opportunities and enabling environment for a sustainable industrial growth. The vast majority of Africans were aware of their leaders’ misadventures but were helpless and as well powerless to compel them otherwise. Even Apartheid South Africa borrowed money without the consent of the black majority. Today who is paying the price? There is this clarion call to African citizens to pay back the loans with the shocking interest rate that was acquired without their blessing. Though this may be inimical to their psyche, the Black South Africans have to pay back the loans of apartheid era. The Congolese have to pay back loans made out to their dictator.
African governments at the expense of their peoples’ livelihood carry out debt payments and in some countries, a great chunk of their GDP is devoted to these loans services. Those funds would have been ordinarily invested in healthcare and education, the two core areas that needed immediate attention in Africa. The money owned to the industrialized nations have so much quadrupled, due to the malleable interest rate. It is beyond anybody’s wildest imagination on how these debts will ultimately be repaid in this lifetime. It will also be inconceivable and fallacy to believe that they can be repaid in this our generation or the one to come, if nothing is urgently done.