Debt in Africa

Tony Lloyd Excerpts

Tuesday 21st November 2023 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to serve under your chairmanship, Mr Vickers, and to speak in today’s debate. I thank the hon. Member for Slough (Mr Dhesi) for leading the debate. We are all here because we have a passion for foreign affairs, and it is great to support him today and I congratulate him on how he has set the scene. It is also a real pleasure to follow the hon. Member for Putney (Fleur Anderson) for the second time in recent days, as she spoke before me in the COP28 debate last Thursday. I recognise that she has a deep interest and passion, shown through her work with Christian Aid, CAFOD and WaterAid and some of her other projects. I am pleased to follow her in particular because with all that depth of knowledge comes a contribution that makes the debate even more salient and interesting for us. I thank her for that as well.

There is no doubt that the covid pandemic had a profoundly negative impact on Africa’s sovereign debt situation. It has been stated that some 22 countries are either in debt distress or at high risk. That has meant that African Governments are struggling more to pay the debt incurred. Countries such as Mozambique and Zimbabwe were already in debt—and indeed, Malawi. The hon. Member for Glasgow North (Patrick Grady), who will shortly speak for the SNP, has over the years that I have known him always spoken about Malawi and the strong relationships that he and his constituency have with that country. Those things are important when we discuss the matters under consideration today.

Research has shown that as of August 2022, countries in Africa owed the UK a total of £2,758 million, which accounts for 56% of all debts owed to the UK, with Sudan’s the highest. It is important to note that debt is not necessarily a bad thing in itself and can help with economic development. I say that because the increase in debt in the early 2000s was accompanied by a higher level of economic development in Africa. There is a history and I say that because I want to have it on record that it is not all doom and gloom. If we look back through history, we will see that countries were able to address the debt issue and grow accordingly. Sometimes, we have a duty to try and encourage those countries and work with them to get them out of a bad patch.

I was talking to the hon. Member for Glasgow North, and as I sat listening to the hon. Member for Slough’s contribution, I was reminded of the story in Matthew 25 where the master travels into a far-off country. Mr Vickers, you will know the story and probably everybody in the Chamber will know it. The master gives his three servants five talents, two talents and one talent. He comes back and the guy who had the five talents has made them into 10, the guy who had two has made them into four and we know the story of the one who did not invest his money and work hard.

The reason why I tell the story is because that is the Africa of the 2000s. Today, I believe that we in the western world have a duty to try to get them out of these bad times, to give them the advice and assistance they need, and to give them experience. We cannot just —I say this genuinely—pursue somebody and say, “We must get your debt” because that will lead to more debt for them and even higher levels of poverty, so I use the biblical story of Matthew 25 to illustrate in a small way, and hopefully in a strong way, what it means to help others.

According to the World Bank’s debt sustainability analysis, nine African countries were in debt distress and unable to fulfil their repayment requirements as of the end of September 2023. A further 15 African countries were at high risk of debt distress, with another 14 at moderate risk. If it were up to me—I am not the person to do it, so I look to the Minister and the Government to take on this task—I would speak to each of those countries individually. There has to be a two-way dialogue, whereby we can discuss how we manage debt repayments and help countries to grow at the same time.

None of us is a stranger to the impact that Russia’s invasion of Ukraine has had on our ability to afford things and get our debt under control. I have constituents —indeed, I expect all Members do—who are still coping with the effects and struggling to regain control of their finances, especially when it comes to paying for gas, oil and electricity. The conflict between Russia and Ukraine is causing a rise in the price of commodities, particularly food and gas, and the war is also disrupting food supply chains, which especially affects people in Africa.

Between 2010 and 2021, external debt servicing payments in Africa more than quadrupled, growing at over 60 times the pace of average fiscal revenues. In discussing how much debt, and by what rate, it should be paid back, we must show compassion for a country’s social and financial situation. There has to be realism about how much money can be paid back and the rate of repayment. Regardless of whether that means restructuring loans or helping them to balance or grow their economy, we should be trying to do it. For example, there must be repayment options for countries with negative human rights and social considerations.

Strengthening debt management policies to deal with repayment issues through Governments is one of the best ways to enable the stable payback of debts. If paying back will ultimately plunge a state into further demise and poverty, I do not believe that is the right way to do it. We have to find a better solution. I am not just saying that for the sake of it; if we want to recoup debts, we have to work with countries to make that happen.

The economic consequences of the covid-19 pandemic and Russia’s invasion of Ukraine have undermined the ability of many African nations to service their sovereign debt. Consideration must be given to that, to human rights abuses and to a nation’s ability to pay back its debt. I look forward to the Minister’s comments, and we as a nation should continue to be supportive to all those struggling, especially through aid. I know the Minister is compassionate and understands what we are asking for, but when it comes to dealing with the debt of African nations and others, there has to be a sense of realism and real compassion in order to try to get them out the other side. By doing so, we will help them contribute to their future. At the end of the day, it is surely about their future. Let us get it right.

[Tony Lloyd]

rose—

[Martin Vickers (in the Chair)]

Sorry, I call Claudia Webbe.

--- Later in debate ---

[Tony Lloyd (Rochdale) (Lab)]

Thank you, Mr Vickers. I was so excited at the prospect of speaking in front of you that—

[Martin Vickers (in the Chair)]

We were excited to listen to you, Tony.

[Tony Lloyd]

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.

[Jim Shannon]

rose—

[Tony Lloyd]

I ask the hon. Gentleman to just let me finish. He thought he was being a good steward. What he lacked was the technical awareness that would have allowed him to invest in whatever—perhaps rare earths or, in those days, fine wine for weddings. In that sense, if we are going to face the challenges together, we have to take that stewardship process. Technical assistance matters enormously.

[Jim Shannon]

I am not smarter than anyone else, biblically, physically or emotionally. I think the story of the parable is about those who use their talents wisely, and the steward who received five talents used them wisely. The comparison I made was with the economic decisions made by African countries back in 2000. When they did it wisely, their economies grew. Use talents wisely—the five and the two—and the economy will grow. Those who do not use their talents and hide them are not being fair to themselves, their families, or indeed their countries. The point I am trying to make, very gently, is that they could do better.

[Tony Lloyd]

I agree. Perhaps I should not have picked up on the parable. It is just that I do rail a little bit against the prosperity gospel. It is not my style of Christianity. Compassion is part of what we should be about, and it has to be a part of what we are talking about here today.

I will finish with this. Part of that compassion is that we need to restructure debt and increase trade, but we also need to recognise the capacity to ensure that the steward with the single talent really did need assistance to do the things that the hon. Member for Strangford is talking about, to invest wisely. We need to invest in education and in the technologies that can allow us to challenge climate change in Africa as well as here in the UK, in Europe, in China, and even possibly in the post-Trumpian United States of America—who knows? We have to work together, because in the end this is not about simply asking us all to be kind to each other. It is about a common interest of what kind of world we want to live in. Yes, this is a tremendously important debate we are having today. I hope the Minister will begin to respond in a positive way to the issues that my hon. Friend the Member for Slough and others have raised.