‘Natural resources endowed, but poor’

Enacy Mapakame

Despite being resource rich, the region, Zimbabwe included, is at the receiving end of global capital with an unsustainable debt overhang weighing on economic development.

But, to break free from the debt entanglement, the region must shift focus towards industrialisation, increased production, beneficiation and value addition as well as exports, according to experts.

Speaking at the just ended Third Africa Conference on Debt and Development (AfCoDD 111) held in Dakar Senegal, delegates acknowledged the region is debt strapped.

As such, dialogue was centred around Africa’s intricate debt challenges and to chart a transformative path for economic advancement and enable the region to benefit from its rich natural resources.

This should make Africa a rule maker and not a rule taker through among other ways, breaking away from the dependency on the dominant countries, promoting self-reliance, and pursuing more equitable and autonomous paths of economic and social development.

African Forum and Network on Debt and Development (AFRODAD) founder, Opa Kapijimpanga, emphasised the importance of industrialisation and increased exports of finished goods, which in turn fetches more capital.

This also comes from the realisation that limited industrialisation and diversification limited the capacity of African countries to generate more foreign exchange. This structural constraint made it difficult for countries to generate sufficient revenue to repay their debts.

“Crucial to Africa’s long term development is industrialisation on the basis of our resources base,” he said while presenting a paper on debt sustainability.

“We must produce capital goods required to process our raw materials and produce manufactured goods and export manufactured goods first to ourselves (Africa Trade Area) and then to others.

“External trade must be an extension of domestic trade. This is where the largely development leakage lies and cause of unemployment, low financial base to sustain any borrowing.

“If we do not do this, Africa will remain in perpetual unsustainable debt,” he said.

However, Kapijimpanga also noted the region still does not have enough control over its resources in terms of commodity prices and therefore “subject to long term decline in terms of trade.”

This is despite being home to vast mineral wealth. Zimbabwe for instance, boasts a producer of gold, platinum, nickel, chrome, diamonds coupled with a climate conducive for agriculture production.

According to Global Data, Zimbabwe is the world’s third-largest producer of platinum in 2022.

But the country has an unsustainable debt burden. According to the Treasury, total consolidated debt of Zimbabwe stands at US$17,5 billion. Debt owed to international creditors stands at US$14,04 billion, while domestic debt stands at US$3,4 billion. Debt owed to bilateral creditors is estimated at US$5,75 billion, while debt to multilateral creditors is estimated at US$2,5 billion.

The country is also in arrears for servicing its debt, with arrears to multilateral development banks, including the African Development Bank, the World Bank, and the European Investment Bank. While token payments are being made to service the debt, the country now wants to move towards comprehensive arrears’ clearance, debt resolution and debt restructuring.

While Zimbabwe is not alone in this debt conundrum, but a challenge across the region, it is also the one-sided relationship between the developing countries and international lenders that is worrisome.

Kapijimpanga has also highlighted how multi-lenders like the International Monetary Fund (IMF) demand that countries radically change their domestic economic policies as condition to approval of their support. Failure to do so also means their credit rating becomes severely compromised.

As such, there have been calls also for the region to come up with its own credit rating, following continued downgrading of African countries by international credit rating agencies who see Africa as highly risky.

Public Policy and Research Institute of Zimbabwe (PPRIZ) director, Dr Gorden Moyo, has called for the establishment of a Pan-African credit rating agency that can be more objective and sensitive to the cause of Africa.

The international credit rating agencies are currently biased against the region.

“Because of that I do not see any way of reforming those situations, you cannot talk of reforming the international credit rating agencies because those are private companies so we cannot talk about reforming them but we can deny them our markets,” Moyo told Zambia Monitor on the sidelines of the AfCoDD111 in Dakar Senegal.

“As we go out there all the time, the challenges we face is that the perception is that the market in Africa is a risk market, to do business in Africa is so terrible. That is the perception created,” he said.

Another recommendation proffered is a crackdown on illicit financial flows especially from the mining sector where resources are siphoned out of the region.

This is in addition to harnessing diaspora remittances for the development of the region.

“Africa has a huge diaspora, in that regard, we must incentivise financial institutions and capital market players to develop diaspora-tailored financial products and instruments to attract diaspora finance (diaspora bank accounts, and bonds),” said Kapijimpanga.

In 2020 alone remittances to sub-Sahara Africa were US$ 51 billion.