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Diogène Senny : Fatal Debts or the Illusion of African Independence

Diogène Senny

Secrétaire général de la Ligue panafricaine-UMOJA, Toulouse.

Here we are, assembled once again, as in October 2014 in Frankfurt, Germany, thanks to the comrades of the Schiller Institute, whom we wish to thank and congratulate for their constant engagement. We want to thank all of you for your tireless efforts in maintaining the link between us.

And finally, I greet our friends from the CADTM (Committee for the Abolition of Third World Debt), including Eric Toussaint and Damien Millet, who have been fighting for many years to denounce the huge scandal of odious and illegitimate debts.

I. Introduction

To understand the fatal debt that besets Africa, we have to look back at how it began and why it developed. Once we have shown that the African debt is a cleverly orchestrated policy of new conquest by neo-colonial forces, we will easily characterize it as being odious and illegitimate.

Consequently, to cancel it is not a request for generosity from the creditors, but a reparation and an act of justice for the people betrayed.

II. Background and causes of African debt

When African nations gained their independence in the 1960s, the former colonial powers were first with two challenges: to prevent by all means the coming to power in the former colonies of any nationalist-pan-africanist regime, and to prevent the Soviet Union, in the context of the Cold War and with the help of the United States, from finding allies in Africa, and thus gaining access to the mineral resources, which were the exclusive privilege of the Western powers until then.

Globally, the West did manage to remove the nationalists, either through assassination (the case of Lumumba in the Congo in 1961), or through wars and massacres on a grand scale (the case of the leaders of the Union of the Peoples of Cameroun), or through various tricks such as condemning opponents to prison or to exile (the case of Abel Goumba in the Central African Republic in 1964, after the mysterious accident in March 1959 of Barthélémy Boganda).

In the few countries where the regimes were allied with the Soviet Union, the West nonetheless maintained a presence, and used every chance to topple the powers in place and replace them with regimes which were more favorable to their interests and more servile. The overthrow and assassination of Thomas Sankara, for example, is a perfect illustration of this.

The West did everything it could to keep a stranglehold on the former colonies. One of the weapons was the debt, under the official pretext of reproducing the success of the Marshall Plan in Africa, while in fact, the main reason was to maintain strategic geopolitical control and to gain access to the mineral resources, as in the former colonial times. Hence, the following adage is perfectly applied: Whoever controls the finances of a nation, does not need to have total control over internal policies to be the real boss; he pulls the strings from behind the scenes.

At least three historical phenomena have provided the West with huge financial means to keep a stranglehold on Africa. First, at the time of accession to independence, in the 1960s, the western private banks had huge amounts of euro-dollars at their disposal, as a result of the U.S. loans granted to the Europeans in the 1950s under the Marshall Plan for post-war reconstruction.

To avoid the massive return of these euro-dollars to the United States, not only because of the inflation that would produce in the US economy, but also because of the risk of draining the gold held by the US, since the agreements provided for the exchange of the reimbursements in dollars against gold, the western governments encouraged their banks to lend massively, at very advantageous rates, to the new and nominally independent African countries.

Naturally, the African regimes, whose allegiance the western powers were sure of, were very interested in such loans, in such a strong inflow of money, particularly for their own use.

The second historical phenomenon which can explain the explosion of the debt, is the oil shock of 1973 due to the sudden quadrupling of the oil price. The emirs of the Gulf countries deposited those vast quantities of dollars from the oil sales in western banks. This is the phenomenon known as the petro-dollars.

These petrodollars, on top of the eurodollars linked to financing the reconstruction of a war-torn European continent, again flocked to Africa. Hence, within a period of 20 years, from 1960 to 1980, the private part of the Third World debt exploded. From almost 0 at the beginning of the 1960s, it reached $2.5 billion in 1970, and $38 billion in 1980.

Finally, the third phenomenon related to the explosion of the debt, is what we call the “bound aid”, which is bilateral aid, meaning from state to state. This “bound aid” is a kind of indirect subsidy for western companies, whose interests are paid by the African peoples. This practice goes back to the crisis that hit Europe in 1973-1975, and which is known as the end of the “thirty glorious years”, that is, the 30 years of strong growth mainly due to the capital invested under the Marshall Plan.

In fact, to find market openings for products which could not be sold in the western world due to a drop in purchasing power, the idea was to grant loans to be used exclusively for the purchase of goods produced within the creditor country, even if they were more expensive or ill-adapted to the development plan of the purchasing country. From $6 billion in 1970, bilateral aid exploded to reach $36 billion in 1980.

So, dear friends, anyone who has closely followed this narrative and the reasons for the explosion of the African debt, which has proved to be fatal and deadly for the African people, will come to the conclusion that all these initiatives have nothing to do with generosity or the wish to ensure for development, especially since the African regimes aligned with the West and other beneficiaries of these huge transfers of wealth were ostensibly despotic, corrupt and venal.

The Cold War, the looting of raw materials and the “bound aid” were used to justify financial and even military support for heinous dictators, who where a danger for their peoples. From Idi Amin Dada in Uganda, Mobutu in Zaire, Mengistu in Ethiopia, Samuel Doe in Liberia, to Bokassa in the Central African Republic, they rivaled with each other in terms of their brutality, their lavish spending, and their total indifference towards the most elementary and fundamental needs of the population.

We still remember the coronation, with the approval of the Vatican, of Bokassa in 1977, a great admirer of Napoleon the First and a great friend of Giscard d’Estaing, which cost one-fifth of the annual budget of the Central African Republic, that is, 22 million euros. The gigantic embezzlements operated by Mobutu and deposited in western banking accounts amounted to nearly $8 billion, while the debt of Zaire at the time of his fall in 1996 amounted to $12 billion.

In addition to the two debt methods mentioned above, the western banks for the private part and the western states for bilateral bound aid, we should mention the IMF – World Bank duo, for the multilateral part of the debt. At zero in the early 1960s, the multilateral part of African debt amounted to $1.2 billion in 1970, and $15.5 billion in 1980.

Private debt, bilateral debt, multilateral debt: all together in 1980, Africa was staggering under the weight of $89 billion of debt. The continent had no viable health system, no decent infrastructure, no educational system, and the misery was still increasing. What had happened with the $89 billion borrowed by our governments? Where was the human development?

Let us recall that in 1980, the African debt was denominated in dollars, in French francs, in deutsche marks, in pounds sterling and in Japanese yen, which forced the Africans countries to secure strong currencies to reimburse the loans contracted.

Year in and year out, Africa was still paying its debt. However, under the combined effect of the drop in raw material prices and the steep increase in interest rates on the dollar or the pound at the beginning of the 80s, the African countries, as well as the rest of the indebted Third World, were unable to reimburse their debt. Thus was born the debt crisis, with the emergence of the shock therapy and harsh medicine ordered by the IMF-World Bank duo, the Paris Club, the London Club and consorts.

III. The shock therapy of the IMF-WB

Like Mexico, which had announced publicly in August 1982 that it unable to pay the debt, due to the drop in raw materials prices and the explosion of interest rates, most African countries also announced they could not pay.

This crisis led to the strangulation of those countries, all the more so as the western banks refused to grant new loans while the old debts were outstanding. The world was headed towards a series of debt defaults of historic dimensions.

To prevent the bank failures that were in the making, the IMF and the industrialized countries granted new loans to keep the private banks afloat. This “snowball effect” amounted to contracting new loans to be allow a “roll-over” of the old ones.

But the new loans were made conditional on imposing structural adjustment plans (SAP), leading to the outright loss of sovereignty on economic matters.

Since the 1980s, including after the return of the multiparty system in the early 1990s, the structural adjustment plans, revamped into today’s Highly Indebted Poor Countries Initiative (HIPC), were brutally applied to the populations, leading to massive losses in income, the drastic freeze of new jobs, the cut-off of subsidies to basic services (health, electricity, running water, education…), the privatization of state enterprises and massive lay-offs.

It is as if the African people are forced to suffer a double punishment. Besides enduring the horrors of dictatorial regimes, they are regularly sacrificed to repay odious and illegitimate debts, contracted by those same unjust regimes, with the complicity of dishonest creditors. And the cynicism reaches new heights when the population is forced to reimburse debts contracted for the purchase of military equipment, which have caused thousands of deaths among them.

According to UNCTAD, between 1970 and 2002, Africa received $540 billion in loans. $550 billion were repaid, but the outstanding debt today is $295 billion. According to the work of the CADTM, for Sub-Saharan Africa, the outflow of money through debt service and the repatriation of profits from transnational companies, is almost equivalent to the inflow of money related to development assistance and to the money sent home by workers abroad. The outflow is even $1 billion greater than the inflow. In 2012, the profits repatriated from Africa, the poorest region in the world, amounted to 5% of its GDP, while development assistance amounted to only 1% of its GDP.

We have to ask: who is helping whom?

That is why an audit of the African debt must be done.

IV. Demand for a civic audit of the African debt

A civic audit, as an instrument of sovereignty, involves a critical analysis of the loan practices of those in power, as well as finding answers to many questions.

For example: why has the government contracted a debt which continues to increase? For what political choices and what social interests has the debt been contracted? Who has benefited from it? Would it have been possible to make a different choice? How much interest was paid, at what rate, which portion of the capital has already been repaid? How did private debts become “public” ones?

The threat of ostracizing states from the international community is only one way to discourage such practices. Contrary to popular belief, the recent work by two economists, Carmen Reinhart and Kenneth Rogoff, found there had been 169 defaults between 1946 and 2008, which lasted an average of three years.

But as a political organization, our movement, the Pan-African League – UMOJA, is aware that the issue of the African debt is eminently political. It is not enough to wish for or to call for an audit of the debt, we need to create the right balance of power to put the African States on this path.

That is why, faced with the creditors assembled under the IMF-World Bank banner, a united front against the debt is also a Pan-African goal.