Africa’s debt at $625bn, 38% of region’s GDP; options are limited

Africa Rising may fast become Africa Uprising. After a decade of a debt-fuelled growth, the poorest continent always risked a difficult moment of reckoning. Depressed commodity prices and more circumspect foreign lenders will mean tighter budgets and unhappier citizens from Angola to Zimbabwe in the coming year. That’s a recipe for political instability, conflict and migration.

Even before Covid-19, warning lights were flashing. In 2019, Sudanese telecoms tycoon Mo Ibrahim’s eponymous Index of African Governance turned negative for the first time in its 10-year history. South Africa, the most developed economy south of the Sahara, kicked off 2020 by slipping into recession. When the pandemic struck, social, economic and political cracks papered over by years of cheap credit and bountiful mining receipts were torn open: soldiers seized power in Mali, Zambia defaulted on its obligations, and ethnic civil war broke out in Ethiopia.

With global banks like Morgan Stanley predicting only marginal increases in world oil prices, to around $55 by next December, there’s little external respite in store for crude producers like Nigeria and Angola, which rely on hydrocarbons for three-quarters or more of government revenue. Nor can struggling citizens expect much sympathy from the state – Dozens of Nigerians were killed in October in a crackdown on protests against police brutality.

Finance, too, will be harder to come by. Even though rock-bottom rich-country interest rates should bolster debt sales by high-yielding frontier sovereigns, Zambia’s default will have made many investors reassess the continent’s credit metrics. They’re not reassuring.

From 2011 to 2019, sub-Saharan Africa’s outstanding debt nearly doubled to $625 billion, according to the World Bank, going from 23 per cent of the region’s GDP to 38 per cent. Meanwhile China, which has lent an estimated $150 billion since 2000, will temper its largesse as it shifts from Belt and Road-based lending. Countries like Ethiopia, Angola and Kenya running into repayment difficulties will only accelerate Beijing’s pivot.

Even the sticking plaster of charity will be in short supply. Britain is cutting its generous overseas aid budget to save money on the home front. And developed nations bulk-buying Covid-19 vaccine for their own citizens means 1.2 billion Africans will be relegated to the back of the inoculation queue. Suddenly, Africa Rising looks a very long way off.