Angola: All the Mysteries of African Debts vs. China’s “no strings attached” strategy…

 

By Prof. N’gola Kiluange

Washington D.C –  African sovereign debt crisis came mainly to the surface shortly after the cold war, repressive and newly created liberal regimes previously aligned with the former Soviet Union or western blocs were forced to resort to loans from the World Bank, IMF or other western banking institutions, such as The Paris Club. And when they were turned down, all of them simply started looking East for China’s enticing aid and loans programs with “no strings attached.”  

 A consensus-building process around this issue will greatly help understand the existence of the serious economic and financial chaos most of the continent is immersed in.The aim of this literature review is to analyze the rationale behind the position level of corruption vs. extreme poverty in Africa.

As an attempt to clarify the issues at stake, the following concepts will also be addressed here: debt forgiveness, recurrence of human rights violations vs. public funds mismanagement, media’s role in fighting state resources embezzlement, civic engagement and participation in the national decision-making processes, development of social dialogue and corruption, idea of primitive accumulation of capital vs. implication to the newly rising billionaires in the continent, obstacles to secure new loans essential for the continent’s future economic growth. Question: are these African multimillionaires in a much better position to help their respective countries repay sovereign debt as opposed to their foreign counterparts?  

Are Africans able to mitigate the mysteries around the astronomical national debt on their own?

In spite of socioeconomic changes, democracy in most of the African countries has been hampered by excessive government control, unrealistic and outdated foreign aid programs which frequently “misunderstand the realities of governance in weak and fragile states”, according to Lierl, M. (2019), who is also an ardent apologist of reinforcement of the laws, regulations and governmental policies to commit to the fight against corruption nationally. 

Severe bureaucratic malfeasance, lack of civil public discourse in the decision-making process, over-centralized system or concentration of power in a few individuals, among other things, have been served as breeding ground for embezzlement of public funds, Lierl’s study reveals. Undoubtedly, if the local municipalities had had more power in allocating resources at their disposal, and distribute it transparently in accordance to specific needs, the poverty rate in several regions of the continent wouldn’t have been in such a pandemic crisis. “Decentralization would allow donors to finance local-level public services directly, bypassing central government structures that were perceived as corrupt, inefficient, and sometimes undemocratic too”, illustrates the studies of Lierl, M. (2019). 

Why  most African countries can’t secure low rate loans ?

But then how come most African countries can’t secure low rates loans, or rather they’re facing many obstacles to secure new loans essential for the continent’s future economic growth? The answer is obvious, with their natural resources and mines “collateralizing” the national debt, big annual government budget deficit, high debt-to-GDP ratios, multiple risk of default,  poor business environments, corruption eroding all over the societies,these are potential candidate stateless countries haven for terrorism. Cited by (“Chinese commodity-backed,” 2020), David Mihalyi, one of its senior economic analysts, concluded that most of the acquired “loans have often provided much-needed infrastructure, such as roads and hydro-dams, in many cases they have led to crippling levels of debt and the risk of losing collateral that is itself worth more than the value of the loan.” 

Even though several international and regional financial institutions use survey to help identify the index of corruption, there is no set rule for measuring corruption in African continent, like anywhere else, because it originates from a very complex process frequently involving “political and economic environment, professional ethics and legislation, as well as purely ethnological factors, such as customs, habits and traditions”, according to  Šumah, Š. (2017).

   Perceptions of different types of corruption 

This literature review, on the other hand, will elaborate more on the perceptions of different types of corruption to demonstrate how these and other theories are interconnected, and if it might or might not be applicable to the African continent contexts: 

1. Political and economic environment – Over regulated policies and controlled business standards tend to stimulate practice of illicit behavior “since individuals are willing to pay or offer payment in order to avoid restrictions”, reminds the findings of Šumah. 

2. Professional ethics and legislation – The absence and application of a set of laws to punish corruption practices encourages the continuation of criminal behavior and throws legal institutions to national and international discredit, as indicated by the analysis of Šumah. 

3. Habits, customs, tradition and demography – Although the implementation of these practices varies largely from country to country, the fact of the matter is that all boils down to how each society values standardized principles. “Everything is only a matter of ethics and morality; however, they can be very different in different areas and different countries,” asserts the investigation of Šumah. 

4. The impact of corruption on the economy – Gross Domestic Product (GDP) is one of the biggest primary sectors to be seriously affected to the extent that legal systems become dysfunctional through the increase of bureaucratic arbitrariness, distributive injustices and political instabilities, mischanneling taxpayers’ revenues to non-productive sector, inability of the government spending on productive projects, as a report by Ondo, A. (2017) indicates. 

 Local-level corruption, however, is being eroded merciless all over the continent with the complicity of global business investors, as Kimemia, G. (2018) findings confirm. The primary concern of the current affiliate faculty member at the Virginia Commonwealth University is to raise public awareness on uncriticized long lasting malpractice business and thus, calls into question the moral legitimacy the host nations of these multinational corporations (MNCs) have “to lecture African countries on how to deal with corruption.” 

What is the ramification of corruption in daily life of the destitute and poorest people? 

Although multiple efforts have been made to reduce corruption, many Africans believe that their governments are losing the fight against this social scourge and that their lives have  worsened more and more. Besides, many national governments aren’t the only ones failing African citizens in the fight against public funds mismanagement. Foreign companies and individual identities have been long known of playing a significant role in perpetuating and fostering corruption throughout the continent. And as laughable it may sound the destitute and poorest people tend to pay bribe twice as much as the richest and are more likely to become victims of corruption and vicious bureaucratic systems. For instance, citing José Ugaz, chair of Transparency International, Veselinovic, M. (2016) states that “corruption creates and increases poverty and exclusion. While corrupt individuals with political power enjoy a lavish life, millions of Africans are deprived of their basic needs like food, health, education, housing, access to clean water and sanitation.” 

By the same token, African continent has become marked by pervasive corruption because of “lack of independent legal, judicial and, institutional mechanisms; impunity for perpetrators; and a lack of will on the part of political leaders”(Olaniyan, K., 2018).  

Olaniyan’s remarks make one wonder why in the world some African leaders have been accepting cheap Chinese labor force in exchange for ‘debt trap diplomacy’, an issue so wisely raised in IS CHINA RECOLONIZING AFRICA? Some Views from Tanzania, written by Kinyondo, A. (2019).    

On the other hand, while the western societies were claiming victory over the fall of the ex- Soviet republics, China occupied immediately the vacuum space left by these former powers, also known as ex-members of the Warsaw Pact. For the time being, in a predator and calculative behavior, the Asian giant together with Moscow is engaging in a military and economic dominance-seeking position in a daily battle to conquer new clients and hearts across the continent. “Russia can’t compete with China in terms of their influence in Africa, so Moscow’s attempts to make inroads there do not alarm Beijing. But as China asserts itself in the role of the major power in Africa, Moscow’s dual influence (such as selling weapons to different sides of a conflict in the same country) could become an impediment to stabilization,” emphasizes a report written by Spivak, V. (2019)

China’s “no strings attached” strategy with Africa 

China’s “no strings attached” strategy with Africa is having some serious negative impact in the national combat against public funds mismanagement. In a research study, Kinyondo, A. (2019) illustrates a huge trade deficit in the Sino-African relationship and challenges the Chinese business core values in the continent by labeling it as ‘debt trap diplomacy’, while at the same time appealing to the local governments “to ensure that they demand more from the cooperation.” 

Considering the financial magnitude and damaging consequences of these matters in Africans daily livelihoods, Kinyondo’s approach should be taken seriously to help elaborate some abnormalities on the Chinese direct investment in the continent, set forth policy recommendations to ameliorate the bilateral treaty. 

 Is there any other way to tackle down African misappropriation of funds? 

Another way of tackling misappropriation of funds in the Africa public service is to make a commitment to upholding human rights obligations and implement the rule of law vigorously and unequivocally and apply these rights throughout the continent. For this specific purpose, media’s watchdog role can become an outstanding performer in the fight against white collar crime and corruption in helping educate their local audience on the impact of mismanagement of public funds on daily life. And this should have been the immediate concern of all prospective lenders interested in financial fair play across Africa.

Where are the continent newly rising billionaires?

 Amidst all these, where are the continent newly rising billionaires? Are they able to help their respective countries repay sovereign debt?   The answer is no, because Africa’s current outstanding loans are secured against resources as a form of collateral. Plus, nobody knows exactly what the terms of the contractual provisions signed by past or present national governments and its investors or lenders are. But notwithstanding this, Africa’s wealth accumulation has an historical and socio-political implications dating from the colonial era, primarily designed by former rulers to favor local  high- society after independence, which goes to show “the political elites that took over African countries in the 1960s thus saw government as a source of power and personal enrichment” Mbeki, M (2005).  

They have consistently engaged in practice of plundering thanks to the unlimited and unsupervised access of their country’s natural resources, and ability to move all individual ill-gotten gains into offshore accounts and tax benefits, including relief funds, in collusion with foreign banking sector, Mbeki’s study concludes.  

Furthermore, with total external debt amounting “nearly 150% to $583 billion in 2018 from $236 billion 10 years earlier”, as indicates a study of the World Bank cited by Adegoke, Y. (2020), the net worth of the new African billionaires will not even be enough to cover 35% of the continent outstanding debts.

Finally, it becomes visible that the best possible alternative, for a way out to the current “debt trap”, is for the continent to appeal for a comprehensive debt forgiveness without strings attached, with a single voice in international contexts systematically and objectively. It is time for some of the foreign predatory lenders to assume part of the responsibility for aiding and abetting current and former corrupt African leaders, who turned once -promising economy into calamitous financial system in their own homelands. After all, who helped create autocratic governments in the continent by providing huge amounts of unsupervised loans with high interest rates? 

Naturally, all the money hoarded from the continent public purse is not hidden in its national banks, but in foreign tax havens. And it would be a great help to repatriate these funds to its respective places, because in so doing it would feed a lot of hungry mouths and serve to build thousands of schools, hospitals and improve many basic services: clean water, food, hygiene and public transport. 

 References  

1.)  Adegoke, Y. (2020). World Bank, IMF worry on Africa rising debt to China, AfDB 

Retrieved from: https://www.msn.com/en-us/news/world/world-bank-imf-worry-on-africarising-debt-tochina-afdb/ar-BB103gLv  

2.) Chinese commodity-backed loans crippling Africa and Latin America –report (03/03/2020). Retrieved from:    

https://www.reuters.com/article/commodities-loans-africa-americas/chinese-commodity-backed-loans-crippling-africa-and-latin-america-report-idUSL5N2AP3NL

3.)  Kimemia, G. (2018). Multinational Corporations as Supplier of Corruption in Africa. Africa Insight, , Vol 48, Issue 2, p. 25-40. Retrieved from: https://www.ajol.info/index.php/ai/article/view/184300

4.) Kinyondo, Abel (2019). IS CHINA RECOLONIZING AFRICA? Some Views from 

Tanzania. World Affairs. (165). Available at: 

file:///C:/Users/Profk/Downloads/Kinyondo,%20A.%20(2019).%20Is%20China%20Recolonizing%20Africa_%20Some%20Views%20from%20Tanzania.%20World%20Affair_stamped.pdf 

5.)  Lierl, M. (2019). Promoting Good Governance in Africa – Three Popular 

Misconceptions. Available at: https://www.ssoar.info/ssoar/handle/document/63540?  

6.) Mbeki, M. (2005). Liberate Africa from Its Political Elites .Available at: 

https://www.cato.org/publications/commentary/liberate-africa-its-political-elites

7.) Olaniyan, K. (2015). Corruption and Human Rights Law in Africa. DOI: 

https://doi.org/10.1163/22131035-00401005

Retrieved from:

https://brill.com/view/journals/hrlr/4/1/article-p137_6.xml

8.) Spivak, V. (2019). Russia and China in Africa: Allies or Rivals? Retrieved from : https://carnegie.ru/commentary/80181

9.)  Šumah, Š. (2017). Corruption, Causes and Consequences.  DOI: 

10.5772/intechopen.72953. Retrieved from:   

https://www.intechopen.com/books/trade-and-global-market/corruption-causes-and-consequences

10.)  Veselinovic, M. (2016). Why corruption is holding Africa back. CNN  

Available at:  

https://www.cnn.com/2015/12/24/africa/africa-corruption-transparency-international/index.html

 Prof.N’gola Kiluange (Serafim de Oliveira)

Washington D.C

Prof. Kiluangenyc@yahoo.com  

Author: angolatransparency

-Impulsionar os cidadãos angolanos a questionarem como o erário público é gerido e terem a capacidade de responsabilizar os seus maus gestores de acordo com os princípios estabelecidos na Constituição da República --Boost the Angolan citizens to question how the public money is managed and have the ability to blame their bad managers in accordance with the principles laid down in the Constitution of the Republic-------------- Prof. N'gola Kiluange (Serafim de Oliveira)

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