Austerity is more than just a European response to the 2008 financial crash. It is the common response of indebted countries wherever they may be. And no more so than in Africa.
Trapped in binding agreements for loans they can ill afford with international investors, most African countries have kept their heads down and trimmed their spending.
This response stands in sharp contrast to the foot-stamping of Turkish president Recep Tayyip Erdoğan, who last week raged against global lenders after a spike in debt interest payments undermined his country’s finances.
Erdoğan is widely considered to be making his country’s situation worse and for one good reason: the days when a saviour would appear with a lifeboat full of cash are gone.
During the cold war, countries like Turkey could play the US and Russia off against each other and extract funds for development. Even after the fall of the Berlin Wall and the first Iraq war, there were still geopolitical games in the region that could be leveraged into hard currency.
Later – in the seemingly golden era of the late 1990s and early 2000s, before countries like the UK understood they were living on borrowed money and borrowed time – the west was susceptible to the argument that writing off developing-world debt was both morally necessary and affordable.
Tony Blair and Gordon Brown corralled the G7 to agree a huge debt write-off at the Gleneagles summit of 2005. Eighteen of the world’s poorest countries, most of them in sub-Saharan Africa, had their debts to the World Bank and International Monetary Fund wiped out as part of a £30bn deal.
These days, every rich country feels poor, even the US. The financial crisis knocked the stuffing, and the generosity, out of every country caught up in it.
Donald Trump’s battles over trade reflect his campaign to convince voters that poverty at home is caused by “unfair” currency manipulators and intellectual property bandits stealing US business ideas.
In Moscow, now that Putin has squandered his roubles on local invasions, foreign policy is devoted to cyber-attacks on other countries’ democratic institutions. Europe has turned in on itself, thinking mostly of its elderly and how to protect their generous retirement plans. Even the UK has turned much of its aid funding into a “buy British” campaign, undermining its hard-won reputation as one of the most generous donors.
Beijing has plenty of money, but the emphasis is on loans and not gifts. And when countries get into trouble financing a loan, there is a straightforward, if harsh, remedy: the creditor gains charge of any assets purchased with the loaned money.
It is in this atmosphere that the west has turned away from even the most emotional pleading, such as the calls for Mozambique to be supported with a debt write-off following the devastation left by cyclone Idai. According to the IMF, Mozambique is among six out of 35 low-income countries in the region that are in “debt distress” – in default and unable to service outstanding loans. A further nine are classified as at “high risk of debt distress” after their debt-to-GDP ratios exceeded 50%.
Namibia’s overarching aim is to stay off the IMF’s list. If last week’s budget – when the finance ministry forecast that its debt-to-GDP level of around 40% in 2017 would rise to almost 50% by 2021 – is anything to go by, it will struggle to achieve this.
The IMF is worried because while 50% might not seem so high, given that countries like the UK have already exceeded 80%, Namibia pays 10% interest on its debt and the UK pays 1.8%. The multiplier effect pushes the African country into dangerous territory.
There was hope for countries like Namibia. As with so many of its mining- and commodity-dependent neighbours, it benefited from the enormous spending splurge in 2009-10 by Beijing that effectively saved the global economy from recession.
Since the Chinese economy began to slow in 2016 and commodity prices consequently slumped, life has been more difficult.
These days there are plenty of examples of sub-Saharan African countries – with the IMF’s endorsement – passing austerity budgets that discreetly tighten the screw on households and businesses with a mix of higher taxation and lower state spending to keep debt interest payments in check.
This is a hard road to follow for any country that wants all its citizens to enjoy the fruits of 21st century living. But in sub-Saharan Africa – where the population is expected to rise by one billion before 2050, the amount of arable land available for farming is shrinking and burgeoning cities are havens of poverty – it is a catastrophe.
