Dec. 28, 2020 (GIN) – As the year winds down, analysts are speculating about the biggest challenge facing Africa in the new year. It’s not what you might think.
If you guessed Covid-19, you’d be wrong, says Alex Vines, director of regional and security studies at the London-based Chatham House. It’s a four letter word – a polite one – and it’s Debt.
African debt will become a greater global concern in 2021 as many African states remain the world’s poorest and most fragile and have been hard hit by the economic and financial costs imposed by the pandemic, writes Vines in a recent editorial.
There’s $5.4 billion owed in 2020 but which could be postponed. That however is a fraction of the $13.6 billion in interest and principal owed by sub-Saharan African states to creditors.
Pile that on top of $20-billion in private obligations, much of it owed to Chinese commercial creditors or Eurobond repayments.
“2021 will be a slow recovery year for many African states, with increased unemployment and growing debts and reduced liquidity to provide public services,” Vines writes in the Mail & Guardian. “A few countries are likely to struggle – particularly Zambia, which in November became the first debt defaulter of the Covid-19 era. Angola and Namibia are also badly exposed. Zimbabwe is already in debt arrears and is not eligible for debt relief.
A number of African states, such as Angola, Congo-Brazzaville and Equatorial Guinea, have been hit by a sharp down-turn in demand for their main export – oil. Angola will in 2020 have reached a debt to GDP ratio of just short of 120% – a lot of debt but little income.
Prior to Covid-19, sub-Saharan Africa’s 48 countries included several of the world’s fastest-growing economies and a burgeoning middle class, but also remained mired in some regions by debt, conflict and protests, and plagued by elites clinging to power.
Civilian-led reform movements toppled regimes in Algeria and Sudan in 2019 followed by messy transitions. Youth-led protests have clashed with government security forces, pushing for accountable government, such as the #EndSARS Movement in Lagos or the 11 November (Independence Day) demonstrations in Luanda.
More protests should be expected in 2021.
The year 2020 will, of course, be remembered for the COVID-19 pandemic. Many African countries have handled the public health effects of coronavirus well compared with neighboring continents, with some 55,000 related deaths and 2 million recovered out of a population of just over a billion – thanks to quick action and leadership by the Africa Centres for Disease Control and Prevention, by public support and a youthful population.
Despite these challenges, 2021 could be an important moment for a fresh start, with debt forgiveness offering greater pan-African prosperity and resilience for future generations. The African Development Bank agrees. “Africa is still a prime investment destination despite COVID-19,” said Tetsushi Sonobe of the Asian Development Bank at a recent webinar. “Investment opportunities still abound in Africa.”