Africa must take heed of debt lessons of past

Debt helped to finance the economic expansion of the West but has been a curse to Africa, where much of it lined the pockets of Cold War dictators.

After the pivotal G8 decision to write off the debts of 18 of the poorest countries, analysts said Africa must learn the lessons of history and the opportunity must not be squandered.

"Many of the loans to Africa served foreign policy during the Cold War," said John Stremlau, head of the International Relations Department at the University of the Witwatersrand.

"So a guy like [former Zairean dictator] Mobutu Sese Seko would just pocket the money and the US would tolerate this because it served a strategic purpose."

The case of Mobutu is often held up to illustrate just how a leader could amass a fortune and plunder a nation even under the eyes of Washington.

"Between the start of the Zairean economic crisis in 1975 and Mobutu's departure in 1997, Zaire received a total of US$9.3 billion in foreign aid," wrote Michela Wrong in her book In the Footsteps of Mr Kurtz.

She said while the cash flowed, Mobutu's biggest lenders - the World Bank and the International Monetary Fund - "knew all too well what was going on".

Countries across Africa plunged deeper and deeper into the red, goaded on by backers on both sides of the Cold War who turned blind eyes to rampant graft or poor spending.

As well as corruption, analysts said there were other obstacles to African development which prevented debt from nurturing stagnant economies.

Bisected by the equator, Africa has an exceptionally high disease burden which would strain even the wealthiest health-care system and damage the workforce.

Commerce has been stunted by a dearth of navigable rivers and deep-water ports, and heavy reliance on commodities for foreign exchange earnings made debt loads intolerable when the commodity cycle took a sharp downturn.

Aid was also often doled out with no strings attached, creating a sense of dependency.

The contrasts between Africa and the developed world - where debt has provided the building blocks for growth and capital markets - could not be starker.

"Britain's debt rose with only a few peace-time pauses to 215 per cent of national income in 1784," wrote historian Niall Ferguson in his book The Cash Nexus.

Yet this huge debt failed to weigh down an economy which was giving birth to the Industrial Revolution, which would mould Britain into the global economic giant of the 19th century.

Much of the prosperity that citizens of the developed world enjoy - from decent schools to public health care - was built on public debt.

But poor Africans - almost half of whom live on less than US$1 a day - have not enjoyed the fruits of past borrowing.

"Africa really needs to show a commitment to democracy and accountability. Otherwise, we'll be crying for debt relief again in a few years' time," said Sipho Seepe, a political analyst at Henley Management College.

- REUTERS