Africa’s debt crisis: Who is to blame? | Africa | DW | 08.12.2018 https://www.dw.

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Africa’s debt crisis: Who is to blame?

While domestic corruption and mismanagement are part of the problem, activists say the situation is complex. The
international community is also to blame for the enormous mountain of debt threatening African economies.

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Ugandan military

Mozambique's population knows what a debt crisis feels like. Teachers aren't getting paid; schools can't provide furniture for the students. "In
our hospitals the doctors tell the patients: You came here for nothing. We don't have the drugs," says Eufrigina dos Reis, a Mozambican human
rights activist.

Mozambique's coffers are empty, drying up all funding for education or health. In 2017, the country's debt made up 102 percent of its gross
domestic product (GDP). According to the International Monetary Fund (IMF), even having a debt worth of 50 percent of a country's GDP is
dangerous. According to the 2017 figures, Africa's average debt equaled nearly 46 percent of its economy. Almost half of all African countries
on the continent are therefore at risk. "We are very concerned," says Julius Kapwepwe form the Uganda Debt Network.

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Africa’s debt crisis: Who is to blame? | Africa | DW | 08.12.2018 https://www.dw.com/en/africas-debt-crisis-who-is-to-blame/a-46648628

With the high debts, Mozambique has little money left for health and education

Billions bypass parliament

But who is to blame for the debt crisis? At first glance, the answer seems straightforward. In Mozambique, state firms borrowed almost €2
billion ($2.27 billion) from international banks. Part of the money was supposed to be allocated to building a fishing fleet, but large amounts of
that money disappeared. Neither the public nor parliament were aware of the loss. But Mozambique also has other debts connected to major
infrastructure projects.

Read more: Panama Papers: Africa's elite are plundering their countries

"Foreign countries also have a role to play in this," says Fanwell Bokosi, who heads the African Forum and Network on Debt and Development
(AFRODAD). Most of the money was, after all, borrowed by African governments from private creditors. Directly after the credit crunch in
2008, borrowing money became much easier. "So on one hand, you had creditors who had capital that was lying idle in the banks and on the
other hand, you had a continent that needed a lot of development in terms of infrastructure," explains Bokosi. Africa became an attractive
investment location. According to AFRODAD, at least 12 African countries placed government bonds on the market. Last year, they received
$27 billion (€23 billion) through this.

Yet the creditors also want their money back with interest. So while the interest rates rise, and prices of raw materials fall, more and more
countries are caught in the debt trap. Bokosi argues that the creditors should have taken such risks into account. "African sovereign bonds
didn't become attractive because the countries became better at managing their debt. They became attractive because there were no other
lucrative markets available to investors."

Read more: Tackling migration — An African perspective

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Africa’s debt crisis: Who is to blame? | Africa | DW | 08.12.2018 https://www.dw.com/en/africas-debt-crisis-who-is-to-blame/a-46648628

Germany hopes to tap into Africa's infrastructure business

More risk through "Compact with Africa"?

However, public lenders have also made mistakes, say the activists. "There should only be credit for countries which are well-governed," says
dos Reis. "Each country has a parliament, a civil society and courts. If the government doesn't respect these institutions, more credit won't
help."

Her colleague Kapwepwe holds a similar view. "We are in Germany to alert you, the Germans: Do not simply deal with the governments
through secret mechanisms," he says. "The rest of us, the citizens, need to know what is happening so that we can have the meaningful
conversation."

The activists have a particular focus on Germany because of its "Compact with Africa" initiative that is trying to strengthening business ties
with Africa. In October 2018, Chancellor Angela Merkel invited 11 African heads of state to Berlin.

The Compact program specifically aims to strengthen private investment in Africa, as well as focus on infrastructure projects — roads, bridges
and railway lines.

Read more: Angela Merkel's African business summit marred by protest

The activists, however, are skeptical about Germany's enthusiasm. "You have huge infrastructure projects that will be done through public-
private partnerships," Bokosi says. "We know that even in Europe, public-private partnerships have huge problems and eventually for
government to meet its part of the obligations, they will have to borrow. The problem than is that if the project works, the profit goes to the
private player, but if the project fails, all the risks and the costs come back to the public."

DW RE COMME NDS

Germany's new Africa policy builds on old solutions

Germany's new coalition government wants to make Africa a priority, and is promising more private investment and development aid. For many, these are
the same empty promises of the past. (14.03.2018)

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