South Africa shy away from Talks to Suspend African Debt
- A wall of debt looms in 2024 when more than $11bn of these bonds mature.
- Expanding debts in Africa with reduced Economic output to pay for it cannot be ignored.
- The World Bank expects global economic output to shrink by 5.2% in 2020.
|Africa’s debt can be likened to “kicking the can down the road.” Of the African countries which qualify for the G20 scheme, a dozen face bond payments totaling $3bn over the suspension period, according to figures from the Jubilee Debt Campaign.
“There is no question of anybody defaulting and not paying,” says Ngozi Okonjo-Iweala, a special envoy for the African Union (AU) and former finance minister of Nigeria. “But we need a standstill across the board to give us the breathing room.”
The room may have just gotten a bit claustrophobic as South Africa won’t join collective negotiations with creditors to suspend or write off African nations’ debt, says Trevor Manuel, a special envoy to the African Union.
He opined that South Africa’s position was complex because most of its debt is held locally.
Some African governments are pushing for a moratorium to repay international creditors after coronavirus-induced lockdowns damaged their economies.
“The bulk of the debt is actually held by South African pension funds,” the former finance minister said. “Once you enter into these kinds of agreements you might actually be compelled to say to South African pension funds, we are sorry but [we] can’t deal with your pensions.” Fund have indicated they would negotiate with each country individually and not as a bloc, he said.
“Debt in foreign currency is not only an economic problem but also a political problem,” notes Ndongo Samba Sylla, a Senegalese economist.
The World Bank warned in April that sub-Saharan Africa will suffer its first recession in 25 years, with gross domestic product in the region probably shrinking between 2.1% and 5.1% in 2020.
|South African President Cyril Ramaphosa said in late May that the continent could get more than $200 billion in additional support after the United Nations called for a global response package for the virus.
Is Africa gasping for air?
Credit rating agencies have warned that a restructuring of debt owed to private creditors could constitute a default, causing some governments to break a sweat over been shut out of debt markets.
If African leaders cannot revive their economies they will not just be living on borrowed money – they will be living on borrowed time too.
“ Our leaders have two choices, you either pay obligations to the bondholders or you buy medicine, food, and fuel for the population”. - The Head of UNECA, Vera Songwe