Debt in Africa Debate
Full Debate: Read Full DebateMartin Vickers
Main Page: Martin Vickers (Conservative - Brigg and Immingham)Department Debates - View all Martin Vickers's debates with the Foreign, Commonwealth & Development Office
(1 year ago)
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I beg to move,
That this House has considered the matter of debt in Africa.
I am extremely grateful to the House authorities for allowing me to secure this crucial debate on debt in Africa. I intend to cover the essential points that demand our urgent action. Today, I stand before this Chamber to confront a crisis of global magnitude—the escalating debt crisis in African countries. This is not merely an economic issue; it is a humanitarian challenge that demands our immediate and decisive response. The way in which we address this crisis does not just reflect on our policies but on the core values of Great Britain on the world stage. This moment is more than a test of financial acumen. It is a testament to our commitment to human dignity and global justice.
The decisions that we make in Parliament have far-reaching implications, shaping the futures of millions. In our interconnected world, the fortunes of African nations are intrinsically linked to our own. The Labour party has a proud history of leading international efforts on debt cancellation and relief for the world’s poorest. We remain committed to international development. I feel our response to this crisis will define our legacy in international solidarity and moral leadership.
The situation in Africa is increasingly alarming. Currently, more than half of the continent’s low-income developing countries are either in debt distress or on the brink of it. Debt distress refers to a situation in which a country is struggling to meet its debt obligations. That figure has worryingly doubled since 2015, and looking ahead to 2024 and 2025, those countries will face debt repayments six times higher than their total debt servicing in 2021. This drastic increase is a result of several factors, including the covid-19 pandemic and global tensions—such as Russia’s invasion of Ukraine.
Having liaised with the shadow Foreign Office Minister —my hon. Friend the Member for West Ham (Ms Brown) —I am cognisant of the fact that the Labour party has long advocated for debt relief as a cornerstone of its foreign policy. It steadfastly believes that the resources of low-income nations must be directed towards enhancing the lives of their citizens rather than being drained by unsustainable debt repayments. Our perspective must be rooted in the principle that investment in infrastructure and public services is crucial—not just for Britain’s societal stability, but equally for countries across Africa.
We need to see a model where an increase in GDP in those nations translates into significant investment in their own societies and infrastructure. That approach counters a current trend where a substantial portion of their national income is funnelled into servicing external debts, often with stringent conditions attached. We should envisage a world where economic growth in African countries is harnessed for their own development, fostering stronger, more resilient economies and societies. It is a vision where international co-operation and fair debt practices replace the cycle of debt and dependency, allowing those countries to realise their full potential on the global stage.
If I now come on to the middle east and north Africa region, the contrast between the accumulating wealth of the few and the deepening debt of the many is stark. The richest 0.05% in the region, with wealth above $5 million, saw their wealth surge by 75% from $1.6 trillion in 2019 to $3 trillion by the end of 2022. That boom in ultra wealth comes on the back of every country in the middle east and north Africa region sinking deeper into debt. For instance, in Tunisia, public debt increased from 43% of GDP in 2010 to 80% in 2021. In Egypt, it increased from 70% to 90%.
In the light of the escalating crisis, I ask the Minister: what steps are the Government taking to work with international partners to address the debt crisis that some African countries are facing, including debt held bilaterally, multilaterally and by private creditors? A World Bank report has highlighted a 35% increase in debt interest bills for the world’s poorest countries, further strained by the pandemic and increased food import prices. I ask the Minister to elucidate the UK Government’s response to that alarming development.
The G20 common framework for debt treatments was designed to deliver a sustainable solution to lower-income countries’ debt vulnerabilities, but it has failed. Only four countries have so far applied for debt treatment. Of those, only Chad has reached an agreement with both its private and bilateral creditors. That agreement appears inadequate, and has been criticised for its failure to reduce Chad’s debt burden and make it sustainable. Another example is Zambia. It defaulted in 2020, but has not yet reached a comprehensive restructuring agreement. The failure of the framework to deliver necessary relief is largely due to private creditors’ reluctance to participate in debt restructuring.
As a significant funder of debt relief initiatives and a supporter of international financial institutions, the UK has a role in ensuring that private creditors participate in restructurings. Some organisations, such as Debt Justice, argue that without firm action, English courts may end up enforcing repayment on behalf of private creditors who are exploiting official debt relief initiatives. Those organisations argue that the reluctance of private creditors to agree to restructuring creates a domino effect where other large creditors also refuse to accept a loss. It leads to a slow, uncertain process that consistently fails to deliver effective debt relief.
Given those challenges, I ask the Minister: what proactive steps are the UK Government taking to engage with, and ensure the participation of, private creditors in the debt relief process? How are the Government planning to address the issues raised by organisations such as Debt Justice to prevent debt relief initiatives from being used to pay off other debts rather than investing in the country? The United Kingdom, as a key player in global finance, has a crucial role in shaping frameworks that govern sovereign debt contracts. My challenge to the Government is: what initiatives are being pursued to reform the frameworks and facilitate effective debt restructuring?
I will turn to the impact on women and girls, who are being disproportionately affected by the debt crisis in Africa. I am aware that many hon. Members will elaborate further on this topic. The crisis leads to a reduced governmental investment in vital public services such as healthcare, education and social services. It also has an impact on supply-side factors, affecting those who work in health and social care. Globally, women account for 67% of the health and social care workforce. As we strive for a society where women are empowered globally, it is important that we look at the consequences of the debt crisis and its impact on egalitarianism and progressive values. Clearly, if Governments do not have the funds to support the basic needs of their populations, women and girls in particular will suffer. I call on our Government to outline how our international aid policies are addressing the unique impact of this crisis on women and girls in Africa.
Beyond that, there would be no good or relevant debate without mention of our effort to combat climate change. The debt burden significantly impedes African countries’ abilities to adapt to a changing climate and mitigate the impacts of the climate crisis. As we know, reaching net zero is of critical importance for us all, here and around the world, and I know that the Labour party is doing all it can to acknowledge the impact that the climate crisis is having on African nations.
Sustainable development and climate resilience are urgent needs, yet the debt crisis presents a formidable barrier. I implore the Government to detail collaborative efforts, aligning debt relief with climate change mitigation and adaptation strategies in the countries that I am discussing.
I will now address the long-term consequences of the African debt crisis and the serious threat that they pose to development, poverty alleviation and progress towards achieving the sustainable development goals. The SDGs are fundamental pillars of the international organisations that the UK works so diligently to support.
Low-income countries trapped in a debt doom loop cannot access the transformational finance that would allow them to escape from extreme poverty, fight climate change and meet their global goals. So, I urge the Government to share comprehensive strategies for confronting those profound challenges.
This critical moment demands international solidarity and decisive action. The UK, along with other leading economies, must spearhead the search for fair and sustainable solutions. Therefore, I ask the Minister the question: how are the Government working with international partners to develop strategies for long-term economic stability and social wellbeing in African countries?
I understand from my hon. Friend the shadow Minister that a Labour Government will restore Britain as a trusted and long-term partner to tackle the great challenges of our time, to promote the rules-based order and to deliver transformational change with communities around the globe. In seeking to address the challenge of debt burdens and to foster sustainable and resilient economies in Africa, I say to hon. Members here in Westminster Hall and indeed the whole House that now is the time not to cling to existing strategies but to leave no stone unturned.
In conclusion, the gravity of the African debt crisis necessitates collective action. We must look beyond temporary fixes and address the systemic issues that are at play. I am sure that a future Labour Government will embrace a new approach towards development that is based on respect and a genuine partnership with the global south, which involves supporting its plans to eliminate poverty, tackle climate change and reach the global goals. However, we cannot wait for that future Labour Government; we must act now. So, I implore the current UK Government to act now to address the debt crisis facing African nations.
I intend to call the Front-Bench spokesmen from 3.25 pm onwards. I have four other Members indicating that they wish to speak, so I would be grateful if they could bear that instruction in mind.
It is a pleasure to serve under your chairship, Mr Vickers. I congratulate the hon. Member for Slough (Mr Dhesi) on securing this important debate. It could not have come at a more timely moment.
The debt that Africa owes is equivalent to something like 24% of its gross domestic product. As of 2022, Africa’s debt burden was around $1.8 trillion. As an absolute number, that does not appear as high as some—Germany’s debt is larger—but compared with the living standards and available wealth of the people and their Governments, it is crippling. That debt has been placed on the backs of African nations as a legacy of centuries of colonialism and exploitation—exploitation that continues today, as western corporations make billions every year from the natural resources of the continent, particularly in the form of mineral extraction.
To demonstrate the extent to which western mineral exploitation damages Africa, out of all African nations, only Botswana’s Government retain ownership and control of their own country’s considerable mineral wealth. As a result, it has by far the lowest national debt as a percentage of its gross domestic product—barely a quarter of neighbouring South Africa’s, and even its closest rivals have double its debt. Botswana has stated that its aim in retaining control of its mineral resources is to maximise the economic benefit for its people—and it works.
For centuries, Africa was pillaged of its wealth: timber, oil, diamonds, and, above all, its people. Western nations grew rich on the backs of the slaves that they took and the exploitation of those who remained in Africa, and then from their colonisation of those same nations. Rich countries and their corporations continue to steal by deceit, by intimidation, and by fomenting unrest and division, particularly to obtain the rare earth minerals that drive our technological society and bloat the bank accounts of the companies that make and use that technology.
Africa is not poor; the west has stolen its wealth and is still doing so today. Aid and loans to Africa, along with personal remittances from Africans working abroad, are worth far less than what is taken out of Africa. That difference is at least $40 billion annually, making aid and loans little more than camouflage for neo-colonial exploitation. That piles debt on to the people of Africa, which drains away their ability to build themselves better economies and a better standard of living. And, as usual, the money going out of Africa is going into corporate profits, while the cost of loans and aid is borne by taxpayers.
The reparations that the UK and other nations owe to the people of Africa—and the other countries exploited for so long—is a huge debt, both moral and financial. Cancelling Africa’s debt would be one small step towards repaying what was stolen and making restitutions for centuries of damage done. Yet Governments will not acknowledge the debt that they owe to Africa, let alone put measures in place to do something about it or to claw back some of the obscene corporate and personal fortunes dug out of Africa and its people. It is high time that that situation changed.
Thank you, Mr Vickers. I was so excited at the prospect of speaking in front of you that—
Thank you. I congratulate my hon. Friend the Member for Slough (Mr Dhesi) on introducing this debate. It is timely. I think we all know that the crisis in Africa is real. We—as a world, not simply as a country—need now to address that. I would like to start quite a long time ago, rather like my hon. Friend the Member for Putney (Fleur Anderson). When we look back over the history of the debate around indebtedness—to “break the chains” and all those phrases that used to trip off our tongues about the need for change—I believed that the world would be very different.
I want to relate something from around 30 years ago. I went to the funeral of a very young child in Mozambique. The baby died because the mother simply could not feed that baby. It was shocking at the time to see a baby denied the nutrition that I would expect for my own grandchildren, for my constituents and for our world. At the time, I would have said, “It will change.” I would have said that we would move down the path of debt relief. Had we had this debate 30 years ago—we probably did have it—we would have been told, “Don’t worry: with a combination of looking carefully and kindly at debt management, at the transmission of technical aid and assistance and at the growth of trade, the world will be very different.”
Well, the world is very different: it is worse for those in Africa. In practical terms, the little baby from all those years back, whom I talked about, is now replicated by many others. Debt is an enslavement of the generation to come, and that is, of itself, something that we ought to rail against. How can a child be born into the enslavement that debt causes? My hon Friends have given different accounts of debt, and we can probably argue about the figures. The hon. Member for Leicester East (Claudia Webbe) used a particular figure, but the figure I have about the GDP-to-debt ratio is that debt will now be something of the order of 60% of GDP across sub-Saharan Africa. Whether that is exactly right or wrong almost does not matter. It matters in general terms—we can talk trillions or billions of dollars or pounds—but debt impinges on the quality, the reality and the possibility of life of millions of people across the African continent. It is at the human level that debt matters.
If we look at the battle against poverty, the battle against poor health, the battle for education, the battle to create the health services and the battle around climate change, we are losing those battles. We are losing them in this generation—at the moment—and we have to change. We have to change in a particular way, because, at some point, we have to make our minds up and say whether we are prepared to create a very different relationship: the indebted no longer as clients of those who hold the debt but, instead, as partners. My hon. Friend the Member for Slough made some very profound points about this.
If we are not a partner to African nations and the people of Africa, we lose battles such as climate change, which is our common battle together. It would be remarkable for Africans to know that we are losing it together, because they make so little contribution to the problems that we have all caused around climate change. African nations as a whole are insignificant at the moment, although an Africa of the future, if not helped through transition to those climate change-consistent policies, will potentially be a major producer of greenhouse gases. We should therefore be partners, but if we are going to be partners, we have to be meaningful about what debt really means.
Those who were in the Chamber earlier heard the international development Minister, the right hon. Member for Sutton Coldfield (Mr Mitchell) make a very good series of statements on the White Paper. I welcome that White Paper, but there is a challenge that the Minister of State, Foreign, Commonwealth and Development Office, the right hon. Member for Berwick-upon-Tweed (Anne-Marie Trevelyan) has to take back to the Prime Minister and others. It is not enough to print the words in the White Paper; we need the political will to translate that into national action in the UK and international action. On national action in the UK, when I looked into our history of debt relief, the only figures I could come up with showed that the UK’s spending on debt over the last 10 years or so has been £44 million. That is absolutely insignificant against the scale of the problem. We have to do more by way of debt forgiveness, but not simply on our own. We have to be a part of that global coalition that challenges debt and looks at debt restructuring in a real and rational way.
We have to look, for example, at Zambia and the number of people who have evidenced the situation there. Zambia could not come to an agreement, partly because it was the private debtholders who caused the crisis there. Zambia then offered to pay them some 73 cents on the dollar, compared with 55 cents on the dollar for intergovernmental loans. That was a massively bigger rate of return for the private investors, even though they charged massively higher interest rates on their debt. Bear in the mind that the reason for charging higher interest rates is relevant to risk. They put the risk premium in, but having put the risk premium in, they then wanted to be paid a superabundant return on their investment. The reason that failed is that it was inconsistent with the G20 common framework, which said that there had to be a rough equivalence between Government and private debtholders. That is right; there should be that kind of equivalence. We have to be in this together.
A challenge for the Minister is this: are this Government prepared? As a lot of that debt is operated through UK law, it is in our capacity to ensure that that debt, which is factored through the City of London and so on, is managed in a way that says to private debtholders that they have to pay their fair share of debt forgiveness and debt relief, if we are genuinely going to restructure on these issues.
We can make a change. I may not have been able to give hope to the mother of the child I talked about before, as I do not think I would have been so bold as even to say to her that something could be better at that stage of her life. Perhaps I would have said to other people that the world can change, and it can change for the better. Let us ensure that we can do it in this generation. Let us ensure that now is the time.
This has to be a political priority, and I believe my party will take this on board. I hope that in a year’s time or thereabouts we will be sat around having this debate again, and we will be sat on different sides of this little horseshoe. It will be about political will. As I have said to the Minister, the challenge is whether the political will is there from the Prime Minister. Is there the political will to say that the decision to cut the development assistance in the way this nation did took us in the wrong direction? Is the political will there to raise those very powerful points, as my hon. Friend the Member for Leicester East did, about the history of post-colonial Africa?
Even now, we subsidise, for example, Rwanda and Uganda in terms of their education and health service. That is the right thing to do. In turn, however, the armies of those two countries have been part of the exploitation of the mineral wealth of the Democratic Republic of the Congo, which of course is then shipped over to the west, where it is paid not at a value-added rate, but at the market rate. Who controls the market? It is not the producers of those rare earth minerals that we take from African soil.
We need to think not simply about debt relief, but about the bigger picture and how we alter the terms and conditions of trade and exploitation, which our system is part of. I do not say that in any sense of whipping myself; I say it rationally, because if we are going to make that change, we have to think about that.
I say to the hon. Member for Strangford (Jim Shannon) that I have always been puzzled by the parable of the stewards. I always felt it was little unkind on the perhaps slightly less competent steward with his one talent. I never quite understood why he should be treated so badly, because clearly there was a steward who thought he was doing the best—he buried the talent in the ground, and that talent did not lose any value in that process.