On May 19, Ghana received the first tranche of a $3 billion, three-year bailout agreement with the International Monetary Fund (IMF). Accra had approached the lending agency in 2022 amid a severe cost of living crisis as food prices surged by 122% and the inflation rate breached 50%—the highest in two decades. With its currency cedi having lost over half of its value against the US dollar, and a debt burden that was draining between 70-100% of government revenues, Ghana reached a loan agreement with the IMF in December.
This is Ghana’s seventeenth arrangement with the IMF since independence, with each engagement marked by similar policies of austerity which worked to erode the revolutionary vision of the country’s first president, Kwame Nkrumah.
Ghana is not alone. By the end of 2022, around half the countries on the African continent were either under, or were negotiating, a programme with the IMF. How is it that countries in Africa, and broadly the Global South, are repeatedly trapped in cycles of debt and austerity?
The roots of this crisis were examined in a panel discussion hosted by the Tricontinental Institute for Social Research on May 18.
The panel featured members of the Collective on African Political Economy (CAPE) including Dr. Grieve Chelwa, an economist and the Director of Research at the Institute of Race, Power, Political Economy at the New School (US), Crystal Simeoni, a PanAfricanist feminist and the director of Nawi-the Afrifem Collective, and Brian Kamanzi, an Energy Policy Research Associate with the Trade Unions for Energy Democracy.
Debt is neocolonialism
“Debt has largely acted as a mechanism through which neocolonialism has continued to be administered on the African continent…Neocolonialism, as classically theorized by Osagyefo Kwame Nkrumah, is a subtle mechanism through which erstwhile colonizers continue to set the political and economic policy and agenda in previously colonized countries,” said Chelwa.
“The current debt architecture is rooted in a global economic extractive order that is colonial…but is also racist and sexist in nature…It is not designed to build but instead is designed to extract to continue to feed its system that has always needed a subsidy, and that subsidy has always come from the Global South, has always come from Africa, from our resources and our labor…and African women’s bodies continue to carry a lot of this burden,” added Simeoni.
The manner in which the African continent was integrated into the “exploitative, extractive world capitalist system,” initially through the slave trade, was “designed in a way that Africa’s role was to supply the world capitalist system with export commodities and it has always remained that way,” according to Chelwa.
“The classic feature of the export of raw commodities is that their value fluctuates…a big driver of economic performance on the continent is not [government] incompetence, but this fluctuation.”
At the advice of the IMF and the World Bank, countries across Africa, including Ghana, have borrowed on the promise of high commodity prices, only to be left in the lurch when these prices eventually crash, and the cycle of debt and distress continues.
In the aftermath of Ghana’s previous IMF program in 2019, for instance, the Ghana Trades Union Congress had denounced: “What we got in return was an economy still overly dependent on production and export of raw materials…Most of our productive sectors such as mining, petroleum, and telecommunications are still being controlled by foreign companies.”
A study by the Bank of Ghana showed that less than 1.7% of the returns on gold had reached the government, with the bulk mainly being controlled by multinational corporations.
“This is essentially the point Sankara was making about why debt is located in colonialism…to make sure that we maintain the position of being a supplier of export commodities without adding any value to them,” Chelwa said.
Attempts by countries to break this link by way of infrastructure development and industrialization were severely undermined by these very international institutions.
“The colonialists only built infrastructure that facilitated the extraction and exploitation of the [African] continent, and this is essentially what the first post-colonial, independence leaders inherited,” Chelwa noted. “Because of the cycle of debt boom-bust, it has been very difficult to close these infrastructural gaps which are really laid in history.”
Talking about newly independent Ghana, Brian Kamanzi expounded on Kwame Nkrumah’s “delicate gambit,” one where “Africa could have a relationship with the West and Western capital that could be used in a subversive manner to kickstart an industrialization process.”
“Electricity was very central to Nkrumah’s gambit, the idea was to leverage a mega project, which actually came from the colonial era—the Akosombo Dam—to massively electrify Ghana, but also to provide beneficiation for bauxite and make aluminum,” he said.
Following years of colonial exploitation and extraction, Ghana did not have the capacity to produce aluminum, and under these circumstances, it became the first country in Africa to take a loan from the World Bank to fund a hydroelectric project.
While Ghana would incur huge amounts of debt, Kamanzi added, large hydroelectric projects became very popular across the Global South as “marker of how to modernize the economy, with the World Bank at the forefront of promoting this vision.” The result was “new parcels of debt that compounded onto the historical debt” imposed on many of these countries.
As these dams were being built between the 1980s and the 2000s, the World Bank was also exerting influence over domestic policies and financing, including at the district and county levels, all in the service of the idea of cost recovery or collection of rates to finance basic services. In this way, a “failed model was pushed on to Africa, installed to ensure that multinationals and northern and European creditors, who were financing big infrastructure projects, could get their payments.”
Meanwhile, Kamanzi added, “Very little capital was left to expand infrastructure for basic service provision… Rural electrification, which was a big demand of newly independent states, in Africa has left 600 million people without electricity since the start of such schemes in the 20th century.”
Narratives of state incapacity to provide basic services and the image of a “person on the dark continent” was used to create “a market for new small private initiatives… which have potentially progressive technological elements but are essentially transformed into financial services to extract small amounts of rent from the tremendously large rural populations across Africa,” he further explained.
‘Who is the economy for?’
This was also underscored in Busi Sibeko’s ‘feminist approach to debt’, which “requires that we take into account how debt has led to policy externalization, characterized by neoliberal policies that have undermined the role of the state in provisioning the basic goods and services needed to reproduce our societies… in the absence of state provisioning, the debt burdens have been transferred to households, with women disproportionately bearing the costs.”
“With austerity measures from debt…usually the first things on the chopping block are things women need in terms of service provisioning, maternal health care, and access to child care…it is women who will have to carry [the burden] of the gaps in the economy and society,” according to Simeoni.
Not only that, “The financialization of life is the new frontier of debt, with the rise of the World Bank’s cascade approach that introduced foreign private finance to roll out what should be public services, and accrue as an added debt. But who sets the priorities for what gets invested in, again, is based on neoliberal priorities rather than a people-centered approach,” she added.
“So the debt question is inextricably linked to a question that Radhika Balakrishnan asks: what is this economy for?”
“What is all of this for if the economy is not at the service of life, if not at the service of people?” she asked.
This is also connected to another theme that the panel discussion covered—what is the role of the state in the economy? While the idea of a “people-centered approach to development” had varied iterations among newly independent states, Chelwa said, “many of these saw that the path to development largely lay in a non-trivial role for the state…what we did see in the first 20 years following 1960 were some improvements in the socio-economic development of people.”
“This is why we are not surprised that China has been able to do it in a record time and primarily on the basis of really an activist state, a state-led development model…that is what we experimented with in the first 15 years after 1960, and we made strides but neocolonialism became incredibly violent.”
In a United Front Against Debt, Sankara had warned that “If Burkina Faso stands alone in refusing to pay, I will not be here for the next conference!” Months later ,he was assassinated in a coup backed by France and the US.
A few years before Sankara had delivered this speech in front of the Organization of African Unity, the group had presented the Lagos Plan of Action for the Economic Development of Africa 1980-2000, which outlined the goals of “rapid self-reliance and self-sustaining development and economic growth,” also highlighting that Africa had been “directly exploited during the colonial period” and later through “neo-colonialist external forces.”
“As soon as that document was promulgated we had the IMF, World Bank structural adjustment become much more violent, much more reactionary,” said Chelwa.
The existential threat that sovereignty for Africa would pose to the existing extractive order was noted by Kamanzi: “Liberating Africa will change the world precisely because of how we are embedded in it, you transform Africa, you transform the global capitalist structure.”
Trade unions and social movements, and importantly, a collective and “coordinated political consciousness,” as Simeoni said, remain critical in resisting neocolonial extraction and debt, the panel stressed.
Recent global shifts including a growing regionalism and what has been referred to as “multipolarity” within the global economy offers opportunities or “windows” for different partnerships, “imperfect as they are, with the contradictions that they entail,” said Kamanzi.
“Domestic reform is of critical importance, strengthening local movements is of critical importance and that must be tied to an internationalist strategy,” Simeoni said, and also to a “coordinated political consciousness.”
(Courtesy: People’s Dispatch, an international media organization with the mission of highlighting voices from people’s movements and organizations across the globe.)
