Date
30 August 2022
Midrand, South Africa- August 30, 2022.The African Forum and Network on Debt and Development (AFRODAD) asked the Pan-African Parliament (PAP) to consider establishing a Pan-African accountability mechanism on debt and economic recovery during the PAP Permanent Committees’ meeting themed “Building resilience in nutrition on the African continent: Accelerate the human capital, social and economic development”, held in Midrand, South Africa on 30th August 2022.
In his submission, Mr. Jason Braganza- AFRODAD’s Executive Director, highlighted that since the outbreak of the COVID-19 Pandemic, many countries had seen their economies shrink to nearly negative percentages and resultantly had been forced to borrow to get themselves out of this challenge. This is mainly because Africa has not been allowed to industrialise and move up the value and supply chains in her production line. The model of development is still very much extractive which means that the continent remains on the lower end of the production chain and thus remaining unable to generate and create value for her products and her natural resources.
Mr. Braganza focused on three main points in his presentation. First of all, he highlighted the need to understand the political economy of development and indebtedness as a fundamental basis to understand Africa’s Public Debt Situation. He posited that COVID-19 and its impacts to the African continent were not isolated events. “Undoubtedly, we were moving ever so closely towards a debt crisis on this continent, only that the global pandemic accelerated us even closer to the edge of the precipice of a debt crisis” he said. During COVID-19, heads of state made several statements requesting debt relief, debt service suspension, and even to some extent debt cancellation to free up fiscal space and allow governments to create room to allocate resources toward the health crisis. However, there is something even more perverse taking place – that is the political economy that guides how the continent is interacting within the global system. Indeed, the global architecture whether it is trade, health, or finance, has not moved a tune with Africa’s development and progress because rules that govern global finance, global trade, or global health have not adjusted, reformed, or been reflective of Africa’s growing position in all these sectors, and even on the political dimension.
Secondly, the ability of our national revenues to grow commensurate to the type of borrowing that our governments get into has been wanting. Without a doubt, the type of advice given to our governments regarding where to invest and the kinds of investments they ought to make using debt financing is questionable. Further, we have seen that several African governments are being asked to invest in mega infrastructure projects that are heavily reliant on debt financing and have extremely long periods of return on investment. This means that governments and citizens are forced to subsidise this kind of debt for a long time before these investments begin to provide revenue returns in a way that is not punitive to citizens.
“So, we ought to ask ourselves the following questions in the context of the COVID-19 pandemic, the Ukraine-Russia Crisis, and the Climate Emergency: What do we need to invest our borrowing in? Do we still need to go down the track of mega infrastructure projects that are extremely pervasive and turn the repayment burden on citizens? Or, should we be looking at investments that are geared more towards strengthening education, industry, water, or health services to protect our citizens whenever a crisis ensues?” Mr. Braganza asked.
Third, the issue of Africa’s development has become a profit-maximising matter. Several industries and businesses see opportunities in making profits at the expense of the poverty of African Citizens, and this needs to stop! This dimension is exactly what is being seen in the COVID-19 pandemic, during the Ukraine-Russia conflict and certainly with the climate emergency.
There are few investments that have been made in ensuring that vaccines are availed to the African continent. At the global level, several of our African leaders, led by the Republic of South Africa wanted to request a trip waiver to allow for vaccines to be manufactured and distributed across the continent. Unfortunately, this was blocked by wealthier countries. Moreover, regarding the issuance of 650 billion USD of Special Drawing Rights (SDRs), about a year ago, from the International Monetary Fund (IMF), the entire African continent only got 33 billion USD. Fifty five (55) African nations, 33 billion USD! Not a single African country reached 1 billion in terms of SDRs. This is because those who make the rules at the global level are the ones who fund their organisations. The IMF rules are proving to be biased against poorer countries and tend to favour wealthier countries because SDRs are issued by voting rights. This means that the wealthier countries have greater voting rights and therefore, they get more of these resources.
Fourth, we must never forget that Agenda 2063 came before Agenda 2030. Therefore, it is very much important and incumbent on us as Africans to support Agenda 2063 because it has within it, the call for the establishment of an African Financial Architecture which is very important for two reasons:
- It cements the agency of the African continent in being responsible for its finances and being responsible for its ability to create and generate its internal revenues & mobilisation of domestic resources.
- It is an opportunity to challenge the existing status quo of the neoliberal/ neo-colonial extractive architecture that continues to leave Africa in a state of poverty, a state of begging, and a state of a habitual cap in the hands to wealthier countries.
Note that the African Architecture is important because it will allow us to implement the high-level panel report on Illicit Financial Flows by the former South African President His Excellency Thabo Mbeki, where he explicitly provides recommendations for African Union member states to implement to stop the leakages of financial resources from the continent through Illicit Financial Flows and harmful tax practices. Therefore, the implementation of the Abuja Treaty that calls for the establishment of an African Financial Architecture could not come at a better time – at a time when we will be able to take care of our debt issues, we will be able to take care of our food security issues emanating from the Ukraine-Russia Conflict, and we will be able to take care of the financing of our issues concerning the climate emergency.
In his conclusion, Mr. Braganza asked members of PAP committees to consider the idea of how to establish a Pan-African accountability mechanism on debt and economic recovery that runs in parallel with the African Peer Review Mechanism. One that will allow the strengthening of our relationship with our creditors, one that will allow us to have a common position on issues of public debt when it comes to dealing with issues such as the Covid-19 pandemic, the Ukraine-Russia Conflict, and finally, it is one to support the aspirations and the ambitions of the Harare Declaration that was launched in 2021 during a civil society gathering in Zimbabwe during the African Conference on Debt and Development. This Harare Declaration calls for a complete overhaul and looking at the kind of economics and development policies that we as a continent should be embarking on. AFRODAD’s Executive Director requested also requested PAP committee members to take a deeper look at how we are signing, negotiating & agreeing with our development partners, and stamp their authority on supporting the establishment of an African Financial Architecture that would put the African Continent back on the map as a Rule Maker, not a Rule Taker.