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Africa gradually saddled with massive debt

2018-08-20  Alvine Kapitako

Africa gradually saddled with massive debt
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WINDHOEK - The United Nations Executive Secretary of the Economic Commission for Africa, Vera Songwe, has cautioned SADC leaders to be mindful about the increasing debt trap in financing infrastructure development, saying Africa is slowly creeping into a huge public debt.

Songwe, who spoke at the opening of the 38th SADC Summit of Heads of State and Government on Friday, said Africa is gradually creeping back into a huge debt situation, a phenomenon which previously undermined its development in the 1980s and 1990s.

Songwe also noted that in the SADC region, many countries have made progress in reducing their debt burden over the last two decades, however,in the last few years debt levels have gradually started to rise.

In 2017, the region had an average debt to GDP ratio around 55 percent but countries like Mozambique, Zimbabwe and Angola have already crossed the 70 percent threshold.
Namibia recorded a government debt equivalent to 41.50 percent of the country›s gross domestic product in 2017.

South Africa recorded a government debt of 53.10 percent of the country’s GDP in 2017, Botswana recorded government debt equivalent to 22.30 percent of the country’s GDP in 2017, while Angola recorded a government debt equivalent to 65.10 percent of the country’s GDP in 2017.
Zambia recorded a government debt of 55.60 percent of the country’s GDP in 2017, while Zimbabwe recorded a government debt of 82 percent of the country’s GDP in 2017.

Tanzania recorded a government debt of 37.40 percent of the country’s GDP in 2017, while the Democratic Republic of Congo recorded a government debt of 117.70 percent of the country’s GDP in 2017.

Seychelles recorded a government debt equivalent to 62 percent of the country›s GDP in 2017. 
Mauritius recorded a government debt equivalent to 64.90 percent of the country›s GDP in 2017, according to the Trading Economies website.

“And of course, as we explore ways for raising resources to finance infrastructural development we must be equally concerned about fighting corruption which undermines all our efforts in this regard,” Songwe told SADC leaders. She said corruption in public expenditure management significantly affects public spending outcomes.

A recent Economic Commission for Africa report notes that corruption affects around 70 percent of public procurement contracts in Africa and inflates the cost of contracts by about 20-30 percent.
Songwe also said the African Development Bank has noted that hidden costs of corruption in government procurement can result in the delivery of poor quality infrastructure.
“Despite various efforts on the continent, available statistics on corruption are not very favourable for African countries. Corruption is a governance problem,” she said.

Furthermore, Songwe said she was pleased with the theme of the summit, which was ‘Promoting infrastructure development and youth empowerment for sustainable development’.

She said the theme combines two critical areas in the SADC region and the African continent, namely the need to scale up efforts on building infrastructure and the dire need to take deliberate and systematic steps to include youth in all areas of development efforts.

“You have rightly raised industrialisation to the top of the region’s economic development priorities. This is essential for achieving the African Union’s Agenda 2063 and the UN’s Agenda 2010 for Sustainable Development,” said Songwe.

Clearly, Africa must industrialise to end poverty and generate employment for the 12 million young people who join the labour force every year, she added. “To realise this objective, the theme of this summit talks to one of the significant factors curtailing faster industrialisation which is insufficient stock of productive infrastructure,” Songwe said.

Infrastructure represents a direct input into production through the services it provides such as transport, energy and information technologies, added Songwe. Indirectly, it can also alter the composition of other inputs and play a role through economies of scale and scope that allow firms to thrive in industries with strong comparative advantages, Songwe explained.

She said poor infrastructure undermines industrialisation and also the entire regional integration project. “Regional infrastructure is key to facilitating regional trade and integration,” Songwe added. Hard infrastructure such as electricity, roads and railways and soft infrastructure which can be defined in broad terms as all trade-related services and regulations, for instance standards and customs procedures, often work together to achieve the objective of facilitating trade and decreasing the cost of doing business, said Songwe.

“Beyond industrialisation and adequate support infrastructure we still have a long way to go to realise the full implementation of the 2010 Agenda for Sustainable Development. In this context, I note that a vast majority of SADC member states are yet to undertake Voluntary National Reviews as part of the follow-up implementation mechanisms,” Songwe said.

2018-08-20  Alvine Kapitako

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