If you follow the economics of Africa, in some article or book you might have stumbled upon the concept of Debt Trap. In the lens of this concept, where is the African challenge and what future can we make for Africa?
Capitalism as an economic system has exponentially grown over history in its sophistication of exploitation, simultaneously, it has grown to make sense in the world system and trade as a norm eliminating potential alternative systems. With the consequent fall of the British finance dominance post-World War two, the United States (US) emerged imperialist leader building global institutions (Bretten woods Institutions) that made capitalism more sophisticated and making sense as a system. The fall of the Berlin wall meant the US rise had no match, fuelling democracy and capitalism.
Where is Africa in all this development? Well, Africa at the time was accepting democracy as a government system also decolonising themselves just to fall into a trap of neocolonialism. The world systems theory by Immanual Wallerstein and the dependency theory by Samir Amin capture almost perfectly how we can make sense of the organization and relations of economies in the global network that prove neocolonialism.
However, in this historic development background, the concept of Debt Trap is related to post-colonial setting defining the economic relations of countries. Most African countries had to have a welfare state program to development themselves and spread their wealth evenly. A similar state program built by the racist Afrikaner administration of apartheid from 1948 to 1994 in South Africa (SA). Neocolonialism made this state welfare program possible for African countries to pursue only through donor aid, loans from western countries, and privatising the economy. Donor aid helped but it turned Africa into beggars and a bargaining chip for western imperialism in trade deals. Privatising the economy made inequality worse especially with a racial proliferation, i.e SA.
Loans are a bigger problem. They are systemic and tie down the entire economic system advancing exploitation. An opposing argument could be that western countries lend to each other too but check on what terms.
Credit rating agencies basically grade what we call ‘risk’. If you are familiar with how capitalism works, high risk-high reward/Huge loss, therefore fat interest on loan. It is far more profitable for the western world to borrow African countries funds than it is to borrow another imperialist colleague.
The rating of African countries isn’t fair, and it hinders the ultimate economic growth of African countries. Most of African governments nowadays are concerned with the servicing of debt than the actual debt. You can then term this the debt trap but there’s more meat on the bone. Secondly, Africa is wealthy not rich. The dispersion of western imperialist corporations who are borderless disguised under ‘globalisation’ have made sense of capitalism milking Africa dry of its mineral wealth. Some even believe Africa is resource cursed, shame, I believe it’s the other way round.
Servicing Debt:
South Africa will spend R389.6B in the current budget to service its debt. That translates to just over R1 billion a day. This is a result of the rated risk to lend SA money as rated by the ‘leading raters’ which are Moody’s, Standard & Poor’s, and the Fitch Group. SA is also considered a grey listed country because of corruption. To the capitalist consciousness, SA is the place to make money.
Unfair or biased rating of African economies has costed the continent more than $75 billion annually. Just to illustrate how the biased rating goes, when there was a coup in Niger in 2023 Kenya had to pay more interest in it loans. What sense does this make? It is in this spirit where the African Union should pace up pipeline plans of building an African independent continental rating agency. One which will be conscious of the past economic history of Africa.
Therefore, a debt trap is a possible scenario, but neocolonialism is the elephant in the room. The state of our African economies is being assessed by our former colonizer who inherently believes we are a racial inferior group. Not only that, but foreign borderless corporations are also milking Africa dry under the belt of capitalism. SA tried to benefit itself with Starlink of Elon Musk but tasted the wrath of modern racist media narrative imperialism.
-MediaHouse150
Interesting and informative