Judicial Courts as a Third Line of Defence Against Irresponsible Lending and Borrowing in Africa

The extent to which any country can effectively manage and sustain its debt stock equally hinges on
the adequacy of its legal and institutional frameworks that govern the same. While African countries
have put in place a range of laws to improve their public debt management, the limited success of
these legal instruments thus far, as illustrated by the unsustainable ratios of public and publicly
guaranteed debt against the GDP over the past 5 years, is alarming. In most instances, such
unsustainable ratios are a result of irresponsible borrowing practices, despite the existence of laws,
policies and procedures guarding against the same. Cases of blatantly flawed debt contraction
processes have been replete within many jurisdictions. The flagrant abrogation of domestic legislation
on debt management has been accentuated through public interest litigation cases that have been
brought before the courts for recourse. In a number of African countries, the courts have been tasked
with deciding on issues to do with transparency and accountability, particularly on matters flagging
issues to do with unsanctioned and irresponsible borrowing.

This article assesses some of these legal cases, enabling the exploration of the question of litigation and the role of the judiciary in the administration and realisation of debt justice in Africa. A closer look at the successful cases of Zimbabwe and Mozambique posit the courts as potential arena for societal change. A focus on the cases of Kenya and Zambia, which represent a poignant attempt at litigating debt justice, highlights the fact that the judicial system’s capacity to deliver justice is not always guaranteed due to not only different interpretations of the law, but also the political power dynamics/struggles within the judicial process. As such, the article explores the use of strategic litigation as an advocacy tool, and spotlights the role of the judiciary in upholding the rule of law and concept of constitutionalism in matters to do with public debt and government borrowing.

The Judiciary

The judiciary plays a fundamental role in society and for the upholding of social order. In actuality, its principal duty is to resolve disputes by applying pre-existing norms or, in some situations, precedents issued through lawful methods recognized by the democratic system. Judges are subject to the law while adjudicating conflicts, which means that their judgements are based on the application of the law, as prescribed by Parliament and/or other authorized sources allowed for by the political system. As a result, the law is a product of society and, in theory, reflects societal expectations rather than government or political expectations.

The Judicial Process and the Idea of Litigating Debt Justice

The judicial process is the process by which the courts of a country, state, or other jurisdiction interpret and apply the law. The formation of legal principles from statutes, case law, and other sources, the identification of facts in individual instances, and the application of the law to the facts to reach a reasonable outcome are all part of this process. Due process, the rule of law, and the separation of powers underpin the judicial process. The ultimate goal of judicial process, undoubtedly, is to ensure political, economic, and social order. Hence, the law cannot be effective and useful without taking recourse of judicial process to maintain order. In this regard, judicial process has played a significant role in order to deliver social justice in many jurisdictions, by eliminating socio-economic imbalance and social injustice from the society.

Many legal scholars have studied the idea of using the judiciary as a tool to eliminate injustice in society, with an emphasis on the necessity to ensure the judiciary’s independence, impartiality, and professionalism. For courts to be effective in delivering justice, the general public must have confidence in their ability to do so. This implies some important questions relating to judges’ legitimacy and public trust, judicial accountability, and efficient administration of justice, which are essential conditions for judges to serve the society effectively and efficiently.
With the legislature and other governmental entities appear to be stepping back and leaving urgent debt-related problems unaddressed, the courts have been petitioned to intervene and appear to be responding favourably. As a result of the socioeconomic genesis of judicial rulings on the African continent, courts have been portrayed as social engineers in the debt discourse. While the procedure is credited for offering a platform for peaceful resolution and the unbiased application of the law, it is frequently criticised for its expensive financial costs, protracted nature, and propensity to favour the status quo.
It is satisfying to see that achievements of judicial process in respect of social and economic ordering have been significant. In most debt-related matters, the judiciary has not shied away from its responsibility. Ultimately, the courts have been called to confront and deal with the ambiguity ensconced in domestic pieces of legislation around debt and public finance management, as well as the apparent disregard of prescribed procedure. In such cases, the courtroom truly functions as an arena for (smaller or larger) societal change. This article spotlights the most recent case from Zimbabwe, and briefly highlights similar cases from Mozambique, Kenya and Zambia that have been heard in the recent years.

Zimbabwe

In March 2023, in the matter between the Zimbabwe Coalition on Debt and Development vs Minister of Finance and Economic Development, the High Court of Zimbabwe gave an order in favour of AFRODAD’s Zimbabwe in-country partner, ZIMCODD, in a case where the Coalition sought to compel the Minister of Finance and Economic Planning and Development to amend the Public Debt Management Act and strengthen Parliamentary oversight role in public debt management. In its current form, the Zimbabwe’s Public Debt Management Act does not set limits to Ministerial powers and has no provision for the involvement of Parliament in the approval of loans. ZIMCODD, together with three other Applicants, successfully contended that the practice of debt contraction without parliamentary approval is unconstitutional.

The Zimbabwean judiciary is applauded for upholding the rule of law in this matter; ensuring that the vast powers of the Minister of Finance are curtailed, and loan contraction process is done within the established laws, procedures and guidelines with clear purpose, terms, and conditions. It is important to note that the Order was by consent, reflecting that the Minister of Finance, Parliament, and the Attorney General were not in dispute with the applicant’s prayer.
The High Court ruling comes at a very opportune and apt moment as Zimbabwe’s Debt Relief and Restructuring Strategy is under discussion and review. To be eligible for IMF resources, Zimbabwe has designed an international re-engagement strategy. This international re-engagement is critical for debt resolution and access to external financial support for Zimbabwe.

It is prudent to note that Zimbabwe’s creditors have conditioned Zimbabwe’s debt resolution plan by calling for reforms as a prerequisite. Through a three-part central-pin strategy, the Government of Zimbabwe is expected to address economic reforms, governance reforms, and respect for property rights including the payment of USD3.5 billion for white farmer compensation. On the governance-reforms front, the key asks are inclusive of the delivery of justice, respect for constitutionalism, the promotion of the rule of law, democracy, and good governance. This High Court ruling can be argued to be well in line with the governance reforms.

Mozambique
The Zimbabwe High Court ruling follows the 2022 Mozambican court verdict in a $2bn corruption case involving a $2 billion “hidden debt” and a wide range of financial crimes connected to illicit state-backed loans that crashed the nation’s economy. The scandal arose after state-owned companies in the impoverished country illicitly borrowed $2bn in 2013 and 2014 from international banks to buy a tuna-fishing fleet and surveillance vessels. Several failures have been identified with the loan process, including the failure of parliamentary oversights that should have prevented the government from agreeing to this loan unilaterally and in secret and the role of the banks in agreeing to loans for these companies regardless of the viability of the guarantees.
The Mozambican government masked the loans from parliament and the public. In the interest of public accountability, the citizens have the right to access to information on debt-related matters within their jurisdiction. It is especially instrumental in evaluating how the government performs against any objectives that have been set by the legislature and with the debt management strategy approved by the executive.

Kenya
In 2020, in the case of Okiya Omtatah Okoiti vs Attorney General Kenya’s Court of Appeal decided on the Standard Gauge Railway (SGR), the largest capital-intensive infrastructure project ever constructed in the country, which presents a clear case of blatant disregard of access to information provisions at law and procurement procedures on the part of the government. In the case, the applicants sought to have all contracts, agreements and studies related to the construction and operations of the SGR made public. They argued that keeping the documents confidential violates the law and discourages transparency in governance.
The Court of Appeal ruled in their favour, emphasizing that public officers have a constitutional duty to make information available to Kenyans, and that any restriction on access to information from the government must have a genuine purpose and demonstrable effect of protecting a legitimate national security interest. Additionally, the Court of Appeal found that the China Road and Bridges Corporation (CRBC) procurement contracts for the railway were illegal. The 2020 ruling found out that the procurement process did not meet the statutory standards put in place to ensure that projects are reasonably priced and of sufficient quality. In part, the ruling reads: “We substitute therefore an order declaring that Kenya Railways Corporation, as the procuring entity, failed to comply with, and violated provisions of Article 227(1) of the Constitution and Sections 6(1) and 29 of the Public Procurement and Disposal Act. 2005 in the procurement of the SGR project”.

However, the Supreme Court of Kenya in June 2023 overturned the Court of Appeal ruling on the SGR, thereby declaring that the SGR loan contract was legitimate and enforceable. While this addresses

the legality of the loan, it does not completely alleviate concerns about the contract’s viability and transparency which is, primarily, the major crux of this matter. According to the Apex Court bench led by Deputy Justice Philomena Mwilu, “The procurement process for the Standard Gauge Railway (SGR) project was undertaken in conformity with the provision of Article 227 of the Constitution. The SGR procurement was undertaken as a government-to-government contract hence exempt from the provisions of the Public Procurement Disposal Act, 2005 by virtue of section 6 (1) of the said Act.”
While it is interesting to note that there exists a remarkably stark contrast between the interpretation by the Court of Appeal and the Supreme Court on the same legal provisions, it is important to note that according to Article 163 of the Constitution of Kenya 2010, the Supreme Court is the highest court in the jurisdiction and its decision on any matter is final and binding on all the judicial bodies below it, including the Court of Appeal. This matter has therefore been conclusively settled as such.

Zambia
In the case of Zambia, one of the country’s debt reform efforts worth noting on the legal front is the Dipak Patel vs Attorney General case, which was heard by the Constitutional Court in 2020. The case centred on whether the Zambian government needed parliamentary approval for external borrowing, and it had significant implications for the country’s debt management practices. The petitioners argued that the government had violated the Constitution by borrowing without the approval of the National Assembly and contended that the Constitution required such approval, and that the government’s failure to seek it was a breach of the law. However, the Constitutional Court, by a majority decision, dismissed the petition, finding that the requirement for National Assembly approval was not mandatory. Despite the Constitution of Zambia clearly stipulating that parliamentary approval is required for external borrowing, the Court erred by ruling that parliamentary approval was not mandatory. For instance, Article 63(2) of the Constitution provides that “the National Assembly shall have power to authorize by resolution, the raising of loans.”
The related implications of such a decision involve the explicit undermining of the role of the National Assembly in approving external borrowing. It is trite that Parliament ought to be given the necessary latitude to exercise its constitutional mandate to review and provide a more effective legislative scrutiny of public debt management. The court’s decision goes against the spirit of the Constitution and could set a dangerous precedent for future debt management practices in Zambia. Notably, the court’s decision lacks reason and was without judiciousness as it is ultra vires the Constitution.
Conclusion
The potency of the use of strategic litigation as a tool of judicial social engineering has therefore been put to such test. Over the years, AFRODAD has intensified advocacy around the importance of due regard of Parliamentary approval in debt contraction and loan ratification processes, disclosure, and publication of information on public debt management as these procedures are especially imperative to the determination of the legitimacy (or otherwise) of the debt. Undoubtedly, the majority of the highlighted Court rulings set a good precedent for other African countries and promotes the legal basis upon which to continue with such debt advocacy across the continent. While the rulings occurred in different contexts and under different circumstances, the rulings, in unison, resoundingly affirm AFRODAD’S position as laid out in the African Borrowing Charter and the Harare Declaration; borrowing powers, ceilings, approvals, and authorization procedures must all be anchored on
constitutional provisions and included in predictable debt management rules and regulations. In this light, the more independence the courts exhibit, the greater the level of public trust in judicial institutions to uphold the rule of law and promote constitutionalism in public debt management matters.