Gunboat and Debt Diplomacy: Harsh Choices for Africa

Press Statement

The 17^th Inter-Region Economic Network (IREN) Forum, held in Nairobi, Kenya, 15^th–18^th April 2019, dedicated considerable intellectual and analytic attention to the Gunboat and Debt Diplomacy strategies facing East Africa and Africa in general. The presentations and in-depth deliberations unraveled this truth: Africa faces a serious, double-pronged predicament: Gunboat Diplomacy and Debt Diplomacy. The first is historical. It involved display of military-naval power, mainly by European imperial powers. The latter arose during the 1970s and 1980s when many developing countries were compelled, through various methods, to borrow from Western countries and institutions. This created a debt crisis that forced many African countries to become Highly-Indebted Poor Countries (HIPCs). Since the advent of China, many African countries have borrowed from an incipient global power seeking to acquire space in a hyper-competitive geopolitical landscape. The Euro-American actors have also been compelled to ease lending to Africa, hence using loans, grants and concessions as diplomatic weapons.

Today, Gunboat Diplomacy manifests in the form of militarisation of Africa. Many African countries host military bases for Western powers (the ‘accommodating’ Djibouti has the biggest of these bases: US, French, and Chinese). The existence of the United Sates Africa Command (AFRICOM), French and British military presence in Francophone and Anglophone Africa, China’s recent military ‘home-coming’ in the Horn of Africa, are indicative of a menacing gunboat diplomacy by global powers.  This is not to mention the presence of intelligence agencies’ espionage operations on daily basis across Africa.

Debt Diplomacy manifests in the form of indebtedness by many African countries. Africa’s debt has risen tremendously, and the risk of future debt distress is rising across Sub-Saharan Africa. By 2018, 18 countries were at high risk of debt distress. Eight African countries are already in distress, and almost 40% of countries in sub-Saharan Africa are “in danger of slipping into a major debt crisis” according to non-African sources. Since 2013, the Debt-to-GDP Ratio rose from 33% in 2013 to 53% in 2018. One-third of countries in Sub-Saharan Africa are under Debt Distress as defined by the International Monetary Fund (IMF) and World Bank. Others are issuing Eurobonds—Egypt’s Eurobond debt is US$ 25.5 billion; South Africa, US$ 18.9 billion; Nigeria, US$ 11.2 billion; Kenya, S$ 4.8 billion to mention but few. The Debt-to-GP ratio is projected to settle at 49.5% in two years.

China has come to Africa with such lending ‘generosity’, that almost all African countries are trapped and indebted to China. This is mainly because of attractions based on convergence of interests between an outward-looking China and African States seeking alternatives to Western debt-diplomatic pressures. The same competitive dynamic has forced Western lenders to modify their lending and loans relationships with Africa, turning the continent into a battleground for debt-diplomacy competition. Several harsh realities characterize this indebtedness:

• First, the debt burden is a reality. The question to ask, therefore, is the purpose for and how well a country incurs and handles debt. Loans and debts are necessary for growth in many African States. Each country must discuss and negotiate loans from positions of considered importance and after a thorough analysis using such tools as SWOT and PESTEL analyses.
• Second, big creditor countries and institutions do not want borrowing States to get out of indebtedness. Independence of the debtors implies lack of business for the creditors’ lending.
• Third, Euro-American and Chinese lenders have both economic and political reasons. There is no altruism. It is all about advancing and protecting their own national interests.
• Fourth, when borrowing, African countries need to consider both domestic and external forces that can derail well-thought-out development/investment projects. In a capitalist world, large companies can control policymakers in both creditor and debtor countries. Such companies do not necessarily have interests of either country, and can hold both States hostage to their wealth-accumulation interests.
• Fifth, much of the borrowed monies are scooped by corrupt political and bureaucratic leaders, repaid in form of purchase of overpriced equipment and supplies, paid to so-called experts hired from lender countries and institutions or brought through patronage networks and cronyism. This reduces the amount of debt money available to deliver intended benefits, making the taxpaying citizens liable for monies they did not receive.  
• Debt monies when used wrongly tend to distort domestic politics, erode government accountability, encourage non-responsive governance and confine local labourers to only ‘sweat jobs’ with no opportunities for advancement.
• Finally, powerful economies give loans as instruments of foreign policy: to enhance images, extract raw materials, and/or exercise political leverage over borrower States. Therefore, due diligence and non-corrupt management of debt monies are unimportant to them (the lenders).

Debt and indebtedness is as old as human social relations. This is not necessarily bad. East Africans need their own clear-cut interests in this game of gunboat and debt diplomacy, strategies to advance those interests, and regional strategies and relationships aimed at strengthening both their bargaining positions in this ‘diplomatic’ game. Progressively liberating the East African economy from foreign debt subjugation is a vital strategic move.                                                                                                                        

What is the way out for East Africa and Africa in this non-benevolent power-play? Few options are possible for East Africa:

1. Clearly define and articulate East Africa’ Interest—Regional and National—and use it as the benchmark for determining borrowing priorities.
2. Take stock of illicit and licit financial flows out of Africa, seal out-flow/exit holes, and seek to retain as much money within African economies as possible—while attracting financial inflows from African Diasporas, through sell of services, and negotiating for the return of ‘stolen’ monies.
3. Intensify non-tax sources of revenue, by working on low-hanging fruits like Tourism sector, agribusiness investment, and other sectors.
4. Undertake serious capacity building. This entails identifying, developing, deploying and facilitating the best negotiators, and domestic resource-mobilisation and management teams. This also entails attitudinal and mindset change among officials and intellectuals to enable them appreciate the multiple ways of raising revenues to reduce indebtedness.
5. Engage young people—leaders of today and tomorrow—to enrich their understanding and appreciation of the international power-play games involved in gunboat and debt diplomacy.
6. Strengthen regional-integration processes and institutions in order to enhance benefits and synergies across countries while collectively reducing indebtedness.
7. Make as many local Africans as possible rich. Rich citizens contribute to Government revenues necessary for State operations and further development, via taxation. Targeted investments—in industrialization, agriculture, tourism, animal industry and fisheries, infrastructure, regional integration, financial access and inclusion, innovations and market access—can increase the rate of wealth accumulation at individual, household, and national levels, leading to collective increases in National Wealth.
8. Engage the Media—Investigative Reporting and Data Journalism—to highlight, inform and enlighten the public and leaders about the harsh realities of gunboat and debt diplomacy. Media can take positions loan issues to encourage public discourse.
9. Undertake institutional reforms of both creditor and recipient institutions by developing domestic legal frameworks, openness and transparency about loans and grants.
10. Increase public participation in loan negotiations to widen and deepen understanding of the pros and cons of potential loans, grants and concessions.
11. Africans need to develop counter strategies to tackle the ongoing gunboat and debt diplomacy reality.

Nairobi, 17^th April 2019

The 17^th IREN Eastern Africa Media Forum.

About The IREN Eastern Africa Media Forum.

The Annual IREN Eastern Africa Media Forum exposes media practitioners to factors that influence events in the world; the principles of wealth creation, governance, and promotes coverage on development issues. For the last 17 years, IREN has hosted over 700 journalists and communicators from the region as part of Inter Region Economic Network’s (IREN) think tank initiative.

www.irenkenya.com