Saturday 23 April 2016 is best remembered as the day Beyoncé released her sixth album, Lemonade. Lemonade was inspired by the philosophy ‘when life gives you lemons, make lemonade’ and shares the experiences of the ordinary African-American woman, whom Malcolm X once described as “the most disrespected person in America.”
Yet a bigger story was brewing behind closed doors at the International Monetary Fund (IMF) head office in downtown Washington, DC. The Prime Minister of Mozambique, Carlos Agostinho do Rosario, had flown in for urgent talks with former IMF Managing Director, Christine Lagarde, following the bombshell reports that Africa’s future LNG powerhouse had more debt than previously disclosed. The IMF issued a press release that day to confirm rumours that Mozambique had undeclared sovereign debt in excess of $1 billion and promptly suspended its programme which triggered a severe financial crisis.
What emerged in the months that followed was that the previous Mozambican government had guaranteed loans from Credit Suisse and VTB in 2013 to three state-owned enterprises to establish tuna fishing and maritime security businesses. About 10% of the proceeds went to bribes and some of the funds were diverted to purchase arms. London School of Economics (LSE) researcher, Joseph Hanlon, identified three fundamental issues with the loans:
• The loans were unconstitutional and illegal because they were not approved by the Mozambican Parliament as required by the constitution
• The borrowing entities were not commercially viable and the proposals for the use of funds were unrealistic
• The debt was always going to be unsustainable and the foreign exchange crisis that soon hit increased the cost of the US-denominated debt
How civil society in Mozambique took up the fight
As the country tried to come to terms with the economic fallout from tuna-bond scandal which included the suspension of budgetary support by most donors, it was the civil society who stepped up and started fighting for justice. Groups such as Budget Monitoring Forum, Mozambique Debt Group and Transparency and Fiscal Justice Coalition called for the following:
• Criminal charges for all actors involved
• The declaration of the debt as illegal
• The non-payment of the debt
In the five years since the scandal broke, the civil society have achieved the first two objectives. Most of the known actors have been arrested including the former Finance Minister, Manuel Chang and the three credit Suisse bankers who arranged the transactions. Credit Suisse, which earned over $24m from the deals, may also be held criminally responsible for the actions of its employees. In May 2020, the Mozambican Constitutional Court declared the debt illegal and it remains to be seen if the judgement will be upheld in a London court.
The launch of The African Sovereign Debt Justice Network (AfSDJN)
The Mozambique case has inspired other civil society groups to join Africa’s sovereign debt fight. The African Sovereign Debt Justice Network (AfSDJN) is a coalition of citizens, scholars, civil society actors and church groups committed to exposing the adverse impact of unsustainable levels of African sovereign debt on the lives of ordinary citizens. Ongolo is a proud founding member.
Mission: To amplify the African voice and decolonize narratives on African sovereign debt
Convened by Afronomicslaw.org with the support of Open Society for Southern Africa, (OSISA), the AfSDJN’s mission is to address the threats that sovereign debt poses for economic development, social cohesion and human rights in Africa. The coalition advocates for debt cancellation, rescheduling and restructuring as well as increasing the accountability and responsibility of lenders and African governments about how sovereign debt is procured, spent and repaid.
The initial focus countries will be Kenya, Zambia, Zimbabwe, Mozambique, Nigeria and Senegal. Key deliverables include producing research outputs to enhance the network’s advocacy interventions. It also seeks to create awareness on and elevate the priority given to sovereign debt and other economic justice issues on the African continent and beyond throughout 2021.
The initiative will cover all actors in the sovereign debt game including: governments, judiciary, legislature, auditor general’s office, lenders, multilateral organisations, the civil society and most importantly, the general public, who are often overlooked and yet ultimately bear the burden of debt.
Transparency and Accountability in Debt Management
Mozambique is not the only African country to be carrying odious debt, which refers to sovereign debt incurred without the consent of the people and not benefiting the people.
The lack of transparency and accountability by many African governments and public institutions has negatively affected state-society relations and has even led many African citizens to question the legitimacy of the renewed debt cancellation agenda meant to support African countries recover from the COVID-19 pandemic.
One way to respond to the citizens’ diminished confidence in their governments is to establish more binding rules, processes and strong institutions that would promote discipline, transparency, and accountability necessary for ensuring sustainable borrowing.
The publication of borrowing plans, both short and long term, is not provided for in the law across most countries and therefore no borrowing plan is made public. When Ghana, Kenya and Zambia courted commercial lenders, no debt strategy was published for public scrutiny.
The first time a debt strategy was prepared and published in Zambia was in 2017 years after the country had already borrowed heavily from international money markets in 2012. Zambia has now defaulted on Eurobond payments just as Mozambique did and the true size of the country’s debt remains unknown. More African countries are expected to default in 2021.
The AfSDJN initiative could not have come at a better time. We will create a movement of ordinary citizens who are willing to stand up and fight for Africa in order to drive meaningful and lasting change. Time to make lemonade.
© 2021 Muloongo Muchelemba. All Rights Reserved
Sports July 25, 2021