How would you react today if someone told you that sometime in the foreseeable future, some billionaire individuals or corporations will start buying off the debt of heavily indebted African countries and hire some superior military force to enforce the takeover of such bankrupt states? Drunken talk? Or should Africans start thinking of ways to prevent such an eventuality?
If someone had told you during the New Year festivities that in a few weeks a country would invade another in Europe with a view to forcefully take charge of it for whatever justifiable reason, you would probably dismiss the person making such a prediction as being irresponsibly drunk. Even after it happened, commentators on international media said that such could not happen to a civilised nation of blue-eyed blonde-haired people. What about Africans who have not such physical features that would prompt the sympathy and protection of western powers?
For context, let us trace the history of Africa’s international debt. At the time of independence, some of the young states acquired loans for some key projects either from the former colonial power or from a multinational agency but underwritten by the said power. These loans were strictly evaluated in accounting terms, proper amortization schedules were drawn, properly serviced, and duly retired in about a decade. In another article or forum, we can discuss the injustices in those ‘proper’ loans, as some of the borrowed money actually comes from the borrower.
As the independence euphoria wore off, African governments started finding borrowing increasingly ‘normal’ and even justified it in jest with sayings like “even the United States depends heavily on borrowing”, without giving inconvenient details (which, like the truth, can spoil a good story) of how the US borrows by ‘issuing paper’ to citizens of all the world who want to save.
Until about a decade or so ago, poor countries’ governments were indeed under the illusion that they could borrow infinitely as long as the decision makers of the day knew that they wouldn’t be there when pay up time came. There was even a dubiously glorious club of HIPC (Heavily Indebted Poor Countries) that qualified for forgiveness of debt, and indeed they were forgiven. With most of their debt written off, you would think they learnt something? Like an alcoholic who goes into rehab and comes out looking healed and then hits the bottle much harder than ever before, the freshly cleaned up HIPC members went on a borrowing binge.
Under structural adjustment programmes, they acquired new loans on conditions that the lender closely monitored the monies, of course after initiating the loans, designing the projects and overseeing their implementation. Much of the money was lent under “budget support”, which left the borrower governments some good money to (mis)handle without being told how. It was a bit like drug dealers who recruit youngsters by giving them small but increasing doses of narcotics until the kid becomes so hooked and can sell anything for money for servicing their craving.
Long story short: many countries some of them in East Africa, became dangerously indebted. Being macho, they got fed up with the tiresome lectures on accountability by the donors and started looking to a willing lender who gave no lectures – China. However, unlike the World Bank/IMF which used to lend at concessional rates as low as 1% but have since Covid-19 times gone much lower to even 0% and with longer grace periods before repayment starts, Chinese loans are as expensive as those from other banks because, it is Chinese banks, not the government, that lends without lecturing.
With time, the inevitable has happened. Some countries can no longer raise enough revenue money to pay their debt. Their loans are beyond half of their GDP. They started getting debts externally and domestically to pay debts – digging a hole to fill a hole.
They are trapped. At least, some of their citizens feel trapped. For countries whose economies are largely informal and which cannot raise enough revenue in taxes, the national debt is considered unsustainable when it reaches 50% of GDP. In Kenya, civil society intellectuals are dragging the government to court over procuring a debt with they think is no longer sustainable – now at a jaw-dropping 68% of GDP. Tanzania’s is hovering around 50% but the country was recently ‘relieved’ that the multilateral lenders who had become hostile on account of late former President John Magufuli’s rebelliously independent attitude, have now become more positive and are ready to heap more debts on its head. Uganda’s is around 52% and Members of Parliament keep squealing that it is unsustainable but addictively approve loan proposals tabled by the Executive.
What the Chinese banks spare you in lectures, they more than compensate by terms which can even collateralize the loan. The Chinese lender can take over ‘management of’ a project, as already provided for in the loan agreement.
So, the recolonization can/will actually occur lawfully, not by China but by auctioneers putting the unpayable debts on sale.
The question is, are Africans going to sit around and keep telling themselves that they cannot be recolonized when they are already signing away their key infrastructures to foreign money lenders? Do the African countries have the capacity to forestall the justifiable, lawful recolonization?
The good news is that the answer is Yes!
Indebted countries can lawfully take steps to buy back their debt before someone else does. They have valuable assets that they can sell and pay the loans and take charge of their lives. There may be different ways to do it and the leaders can do the thinking for their people and choose the best approach. One approach is to use the regional economic blocks – after all, they were set up for economic advancement purposes.
Take the example of the East African Community. It has now expanded to include DR Congo which has vast deposits of precious minerals, a tiny fraction of which it can use to buy all EAC partner states’ external debt which is about $95billion. EAC can pre-emptively opt to buy its debt using a third of DRC’s Cobalt, currently valued at about $300billion. The idea is not new and has been experimented before. For instance, the late president Magufuli stopped all trade in cashew nuts for which farmers were being paid ‘peanuts’ and deployed the army to buy them at a good price and then called bidders who paid a couple of hundred million dollars for the consignment. If Magufuli commandeered nuts that didn’t belong to the government but bought them from the farmers, EAC states can negotiate with Kinshasa to buy their debt by commandeering a third of its Cobalt, auctioning it to the highest bidder and negotiate how they can pay DRC their fellow EAC member. Cobalt is what the world’s fastest growing industry –electric cars- needs most, and DRC has enormous amounts of it.
Seriously, if EAC already has a military arrangement which administers the East African Standby Force; it has a Parliament called EALA; is working hard on a single monetary system currency and central bank, what is impossible about managing a few selected minerals together for purposes of financial liberation? A ceiling on values of joint minerals management can even be set at, say, $200billion.
This may not be the smartest suggestion for forestalling recolonization. Better suggestions can be tabled. The alternative is to descend to ostrich intelligence and bury our heads in the sand pretending that nobody out there is thinking about recolonizing the continent which has most of the world’s arable land, unpolluted soil and strategic minerals – ‘wastefully’ inhabited by ‘black-haired brown eyed’ natives, some of whom have already handed themselves by failing to pay their debts anyway.