As our editorial in Issue 173 argued, we are ‘witnessing the intensification of neoliberalism and an accompanying resurgence of its associated power and institutions, maybe above all the IMF in Africa and elsewhere’. A world recession induced by pandemic and war, a consequent boom in energy prices and a cost-of-living crisis with rising inflation, especially of food prices, is threatening to reverse the progress that many African economies made during the ‘commodity super-cycle’ of the 2000s and the first part of the 2010s. Indeed, there are strong echoes of the recession of the late 1970s and early 1980s, itself induced by a twelvefold increase in the price of oil and in Africa, by famine and war. In both cases, these appearances of crisis disguise the fundamental contradiction of capitalism – the relentless pressure to increase profits facing the limits of realisation as consumption is squeezed and the state is restricted in its powers of intervention, even in limiting the impact of the cost-of-living crisis on its already impoverished population.
While much attention has been focused on the oligarchs of Russia and Ukraine, these plutocrats, as they should be called, exist all over the world. Their increasing influence is evident everywhere. They acquire their wealth by hoarding the economic rent they receive from highly valued products and paying as low wages as they can get away with to largely non-unionised labour. They then secure that wealth and economic power from any government intervention, first by capturing political parties – and not only of the right, but also the self-styled left – and then playing a crucial role in funding their election campaigns. Then, after those parties win elections, the government is captured and liberal democracies or countries moving towards such democracy morph into shades of oligarchy or even autocracy, as we observe most obviously in countries such as India, Hungary and Turkey, and in Africa, Uganda.
Once again, the chief beneficiary of this war-induced recession is US imperialism and its dominant finance–security complex (if not oligarchy) based on oil, gas and arms. The US been able to benefit not only as an oil producer from the increase in the oil price but also from the increased demand for its liquid petroleum gas (LPG), as Europe reduces its demand for Russian gas following that country’s further invasion of Ukraine. The potential axis of Brussels–Moscow–Beijing, which would have been a serious threat to US global interests, has been averted. The US has been able to reassert its hegemony over Europe through its mobilisation of economic and military support for Ukraine and has also underlined its hegemony in the Far East with its clear assertion of its support for Taiwan’s independence, reaffirming its strategy of, and belief in, a unipolar world.
For the countries of Africa, the last decade has seen a large increase in sovereign debt in the wake of the extremely low interest rates that followed the financial crisis of the late 2000s. The encouragement of African economies’ entry into global capital markets, mainly through issuing Eurobonds, was regarded as something to be celebrated as part of the ‘Africa Rising’ narrative. Not that capital markets treated African economies in the same way as those of the global North. Instead, they placed a premium on interest rates reflecting what they saw as the greater risk in lending to African countries. Borrowing on global capital markets when interest rates were low seemed a good way to finance development or even restructure existing debt. However, the downturn in the world economy both before and especially during the Covid-19 pandemic, together with the effects of the Russia–Ukraine war, has now placed some 22 countries in the position of actual or potential ‘debt distress’ and needing, or likely to need, IMF and World Bank support. Such initiatives as the G20’s Debt Service Suspension and the Common Framework for Debt Treatment have relieved very little of the pressure on the debtor countries.
African countries’ debt now averages over 60% of GDP and in the case of Mozambique 100% – ratios not high in comparison with some countries of the global North, but servicing this debt diverts resources away from investment in productive activity as increasingly borrowing is directed to repayment of previous bond issues. In the case of Mozambique, Zambia and Ghana, ‘debt distress’ has led to default on some of their debts and to attempts to restructure them, including negotiating deals where effectively a large part of the debt is written off as the lenders take the proverbial ‘haircuts’. As a Briefing in this issue shows for Ghana, these problems of integration into global financial markets have led to bank failures putting even more pressure on weak financial systems. Ethiopia’s war with Tigray has had devastating effects on its economy and increased its level of debt distress, resulting in a rescheduling of its debt to China (a third of its total external debt) and so reducing the risk of default. In North Africa, Egypt and Tunisia have been racking up huge external debts and have now agreed new credit arrangements with the IMF.1
China has become a major lender to Africa, mainly for infrastructural investments: the country now holds 12% of Africa’s debt, and for several countries in Africa is their biggest creditor. Debate around the motivations for Chinese lending abound, with some observers seeing China luring key African states in debt-traps while others see China being drawn into a trap of its own as the risk of default heightens. Perhaps because of this risk, the last two years have seen China sharply scaling down its lending to Africa. Unlike its willingness to reschedule Ethiopia’s debt, and that of some other African countries, China is now delaying a rescheduling of Zambian debt, arguing that the multilateral organisations such as the World Bank and IMF should also take haircuts. This is of no help to Zambia, which needs support from all its creditors. The IMF’s agreement to grant an Extended Credit Facility of US$1.3 billion in August 2022 (100% of Zambia’s special drawing rights quota) is contingent on Zambia effecting its ‘home-grown’ adjustment strategy, which involves restructuring and rescheduling China’s external debt as well as the other usual ‘adjustments’ in the IMF’s playbook, to which we return later.
How far repayment of current external debt by African economies is feasible will depend on its foreign exchange earnings. These are still – for much of Africa and some 60 years after the end of colonial rule – highly dependent on the export of primary products. The latest data tell us that these products, predominantly fuels and minerals, comprise 77% of Africa’s export income. Some countries are more dependent on primary product exports than others and in some cases their export income is dominated by just one product, as in the case of copper in Zambia which produces 70% of its export income, Botswana, heavily dependent on its exports of diamonds, and Angola and Nigeria, almost completely dependent on oil. Recent discoveries of new sources of gold, oil and gas have led to export concentration in an increasing number of countries.
Such dependence and concentration leave countries vulnerable to swings in commodity prices which can affect both the capacity to import and the management of windfall gains in export income. However, research carried out to examine the effects of commodity prices on economic growth in African economies has suggested that there is no clear positive relationship, which may have to do with the volatility in commodity spot prices not being reflected as sharply in actual export earnings. Commodity prices are normally set by long-term trading contracts incorporating expectations about the future, so the prices at which commodities are actually traded do not fluctuate as wildly as spot prices, such that the effect on economic growth will be more muted. Where a country exports more than one commodity, all prices may not always move in the same direction. Nonetheless, diversifying out of dependence on primary commodity exports was always a policy objective of postcolonial governments in Africa and elsewhere.2 While there has been considerable growth in industrial and service activity, primary commodity production has also grown as global corporates with active support from African governments have sought to diversify their sources of high-value commodities. The ‘commodity super-cycle’ of the 2000s petered out in the course of the 2010s and especially during the pandemic-induced decline in global growth, but now there is talk of a new super-cycle as economies recover and as demand, especially for precious metals, increases. The Ukraine war’s effect on oil prices has strengthened primary commodity prices but this will not offset the large increases in debt interest payments following the tightening of money supply generally in the wake of the rapid rise in inflation resulting from the steep increase in energy and cereal prices triggered by the Russia–Ukraine war.
The combination of rising indebtedness and a slowdown in global growth, if not another world recession, has seen the return of structural adjustment programmes (SAPs). These sets of policies spawned from the 1980s neoliberal revolution succeeded in halting the transformation of African economies from producers and exporters of primary products to industrialised manufacturing economies, despite the less than perfect implementation of their industrialisation strategies. We published several articles in ROAPE critical of these policies, with some based on carefully researched case studies, especially in Issue 42. In an editorial in Issue 62 we argued that these ‘lending policies and conditions imposed by the IFIs [international financial institutions] are heavily to blame for the dismal performance of most African economies over the last decade or more’. Now, once again, indebted countries seeking assistance from the IFIs are to be subject to a set of economic policies intended to restore domestic and external balances to some degree of equilibrium.
Current SAPs, whether ‘home-grown’ or not, involve government budget restraint, increasing efficiency in tax collection, abolishing many price subsidies, improving the management of public enterprises and facilitating greater private-sector investment. The major plank of previous SAPs – evaluation – is no longer a requirement where, as it most cases, foreign exchange markets are liberalised and currency values find their own level dependent on market assessment based on the trade and payments balance and its anticipated movement. However, in the case of Egypt, there is a specific requirement to liberalise the exchange rate. Paradoxically, exchange rates tend to appreciate when an IMF support package is agreed and financial inflows increase. This is the opposite of what is theoretically required to increase exports, but that seems to matter less than the fact that a country’s economic policy is being supervised by the IMF. This gives greater confidence to potential foreign investors, even if the trade balance goes even further into the red.
The most noticeable difference with the SAPs of the 1980 is the requirement that governments protect the vulnerable. Here is the IMF Mission Chief for Ghana announcing the agreement with the Ghanaian government for an extended credit facility of US$3 billion over three years:
Key reforms aim to ensure the sustainability of public finances while protecting the vulnerable. The fiscal strategy relies on frontloaded measures to increase domestic resource mobilization and streamline expenditure. In addition, the authorities have committed to strengthening social safety nets, including reinforcing the existing targeted cash-transfer program for vulnerable households and improving the coverage and efficiency of social spending. (IMF 2022a)
Help for ‘vulnerable households’ is also a key requirement for the Egyptian loan package. With the benefit of hindsight, the IMF and the World Bank recognise the political difficulties for governments in pursuing an austerity agenda which leaves more and more people living below what passes for the poverty line. The solution to avoiding bread riots and other manifestations of public discontent is to target ‘vulnerable households’ with cash transfers so that they can eat. It is not to support government investment in economic activities that will generate employment and structurally transform African economies, support which is badly needed to build the economic and social infrastructure that will generate growth in other sectors and develop the linkages.
However, as has been pointed out many times before in these pages, the activities of the IFIs are not about growth and development, let alone protecting the vulnerable. They are about control of global South economies by the global North and the hegemon-in-chief, the USA which – lest we forget – appoints the head of the World Bank, while a European is the managing director of the IMF. Indeed, ROAPE contributors on the subject have alluded to this issue of control. So then it is easy to understand why the IFIs are prepared to see Egypt fail to ‘reform’ and instead be perpetually rescued with loans, while others not so strategically important have conditionality forced on them more stringently.
While the IFIs return to making policy in some African countries, there is also pressure on them to finance a green agenda for the global South in the face of the climate emergency. Where such financial transfers from the IFIs to support green policies or compensate countries for the losses from following these policies take place, this will offer the IFIs another opportunity to exert their leverage on policymaking in general. Dressed up as getting countries to ‘take ownership’ of policies which have been imposed on them, yet again we will see that African countries, and indeed all countries of the global South, will come under the tighter control of global capitalism.
There have always been alternatives open to African governments, as we have often argued in these pages. The ‘introverted’ strategy advocated by Samir Amin has been much maligned and misrepresented as autarky but, like Clive Thomas’s strategy of seeking the convergence of domestic resources with domestic needs, offers countries a way out of what appears to be their enduring entrapment in a global financial system that works for the global financial corporates that dominate it. This system ensures uneven development, with some countries or regions of countries developing faster than others. But it does offer opportunities for rapid development through a relatively coherent industrial and agricultural policy, as been demonstrated by the ‘Asian tigers’. The alternatives calling for a domestic-oriented industrial strategy argue for taking more distance from this system, but still exporting wherever possible to earn the foreign exchange needed to import capital goods while prioritising domestic production for the needs of the majority. This is surely a better way forward than being trapped in permanent debt and cajoled to ‘own’ policies made in Washington DC.
In this issue: imperialism old and new
Structural adjustment policies have enabled the dominant sections of global, principally financial, capital and its state and international institutional enablers, to keep control over African economies and so further their own interests in order to accumulate and gain even greater control over the global economy. These policies have also maintained African economies in their role as suppliers of raw materials to the global North – as three of the articles in this issue illustrate in different ways – and have resulted in consequences that may have been unforeseen, but follow from the system’s inexorable search for resources and profit.
In the early days of development economics and development strategies for structural transformation through industrialisation, a key feature was investment in social and economic infrastructure. Under colonial rule, whatever infrastructure – mainly economic – that existed fostered the interests of mineral and agricultural resource production for export to the seaports and onward processing and consumption in the imperial centres. Upgrading this infrastructure for development of the whole country became a priority in the development plans and was the stuff of textbooks and World Bank surveys in the 1950s and 1960s. Building schools, universities, housing and hospitals would provide the necessary conditions for the development of a healthy and educated workforce, while building and expanding roads, railways, power stations, ports and airports would encourage inward investment in various industries to feed domestic and foreign demand.
As Tom Gillespie and Seth Schindler argue in our first contribution, this strategy did generate significant growth rates in manufacturing and other industrial output under the strategy of import substitution industrialisation. However, the debt crisis of the 1980s resulting from the world recession discussed earlier, which drove many countries into the arms of the IMF’s SAPs, resulted in a period of de-industrialisation, which was succeeded in the wake of the commodity super-cycle by a renewed emphasis on the importance of an infrastructure-led industrialisation strategy. Gillespie and Schindler show that far from incentivising industrial investment, infrastructure projects have intensified the demand for urban land and created advancing ‘real estate frontiers’ of urbanisation and benefited various global and domestic rentier forces that own or control land as land prices and speculation on their future values have become the main economic consequence of the infrastructure projects.
Their argument is evidenced in detail by an analysis of the Abidjan–Lagos Corridor (ALC) project and the Lamu Port (Kenya), South Sudan, Ethiopia Transport Corridor (LAPSSET) project and their impact on the real estate frontier in Ghana and Kenya respectively. The first project involves building a 1000-kilometre six-lane road linking Abidjan to Lagos, via Accra, Lomé and Cotonou, more than half of its length traversing Ghana. The LAPSETT project involves the construction of roads and railways to connect Nairobi and Ethiopia to the north, and from Lamu port on the coast to South Sudan, as well as oil pipelines to connect the oilfields of South Sudan with Lamu port, and sending oil products to Ethiopia via an oil refinery at Isiolo. Infrastructural projects like these expand the real estate frontier of the cities and towns along the routes, spawning speculation in land values to the benefit of rentier enterprises, construction firms and high-level state actors who both own land and make policy affecting its value. What the projects do not so far do is generate industrial activity except in the logistics business of warehousing, suggesting that projects like these linked to the coast and ports will simply perpetuate the import intensity of the economies involved rather than structurally transform them.
The power of highly placed state actors in respect of infrastructure development, observed in the Kenyan case in our first article, is examined in the second contribution to this issue. In this case, Aloysius-Michaels Okoli, Kelechi Nnamani, Chikodiri Nwangwu and their co-authors examine Nigeria’s attempts to develop a procurement law that makes state contracts with infrastructure construction companies in the water, sanitation and hygiene (WASH) sector both competitive and subject to enforcement at the tender-winning prices. The authors note both the failure to allocate sufficient resources to achieve the UN Sustainable Development Goals for WASH and the failure to spend effectively the resources allocated both nationally and by international organisations. They root the failures in the system of lowest responsive bidding, a tendering system that gives state contracts to the lowest bidder, seemingly regardless of reputation. The winning bidder is often connected to highly placed individuals in the decision-making apparatus, often subcontracts the work at a lower price to other entities, or forces renegotiation of the contract at a higher price at a critical juncture of its execution, all this in spite of legislation that forbids renegotiation and places procurement in the hands of a committee supposedly, but often not actually, independent of state or private interests.
The authors show that the result of this bidding system is poorly executed or unfinished projects, accumulation of capital by contractors, and a large proportion of the population without access to clean water and hygienic sanitation as well as a proliferation of water-based diseases. The authors note that this system shuts out ‘tried and trusted’ contractors who would tender realistic prices and finish the job competently. The question for further investigation, touched on in the article, is why these companies do not have sufficient power and leverage to define the rules and win contracts. This article is yet another example of how the state at national and regional level is captured by a section of the domestic capitalist class and aids its accumulation of state capital to capture even more of the state apparatus that contracts to the private sector.
Another aspect of the exercise of power is examined in the third article in this issue, which presents a case study of the evolution of community power dynamics in the Niger Delta that has been a region of continuing conflict for the last 20 years, principally over the region’s oil resources and the distribution of rents. A key question following the end of conflict is how the militants of the rebel forces reintegrate into the communities that they effectively ruled during the conflict and how that affects power relations subsequently. Tarila Marclint Ebiede shows how struggles within communities over the use of rents from palm oil plantations and of oil company compensation payments developed into demands for a greater share of the rents from oil production leading to armed confrontation with the state and the oil companies. The armed militants used their power to dominate the institutions of governance, but once conflict subsided and a presidential amnesty was declared, these militants found themselves challenged by other sections of society and had to negotiate their way through the contradictory demands of the communities and the militants’ power base. This is a fascinating account of the origins and changes in power relations over periods before, during and after armed conflict in a mineral-producing area central to the Nigerian economy.
Staying in West Africa with struggles over fish, another of its rich resources, is our next contribution, which analyses the relationship between the eradication of the fisheries stocks off the Senegal coast by industrial trawlers and the migration of the dispossessed small-boat fishers to Europe. This is a migration which is not the result of poor fishers heading to Europe for a better life, but fishers who previously earned a good living being impoverished by trawler competition and power destroying their livelihoods, thus forcing them to fish as subcontractors to the trawler enterprises or if that is not possible or sufficiently remunerative, forcing them to go to Europe to earn enough to send money back to their families in Senegal. Noam Chen-Zion’s analysis, based on interviews with migrants in Spain, transcends the usual push/pull explanations of migration as well as the arguments about the benefits that migrants bring to the European economies, by rooting migration in the search by global capital for ever-cheaper labour, such labour made available by the spread of global capital into many, if not all, areas of African economic activity. Destroying their sources of income creates the pool of unemployed, which keeps labour cheap and the rate of profit high.
Hannah Cross’s contribution to this issue’s Debates section takes up the issue of the role of migration in supplying cheap labour to capitalist centres in the service of higher profits, specifically referencing Chen-Zion’s article in this issue. She draws attention to the connections between increasingly authoritarian states in the global North and their manipulation of migrant labour for their own purposes, militarising border controls in collaboration with states from where migrants come, or through which they pass, turning on the immigration tap when specific kinds of labour are required and turning it off when not. It is precisely the primitive accumulation of extractive capitalism that forces people to move thousands of miles to the other ends of the value chains to seek the means of subsistence for the families they have left behind. Cross draws our attention to leading African thinkers and activists building on the work of Samir Amin and in particular their calls for a second independence, a movement asserting demands for a national sovereignty which brings control by labour over national resources and their use to benefit all urban and rural workers, and not just the rentier capitalism of the global corporation its their domestic subordinates.
In the second contribution to Debates, Buhari Shehu Miapyen and Umut Bozkurt revisit the work of Cedric Robinson, exploring the analytical heft of Robinson’s perspective of racial capitalism and his concept of racialism. They reflect on what they see as limits to the ways in which Robinson framed his approach in the prevalence of feudal racial dynamics of modern capitalism, and they argue that the neoliberal mode of capital accumulation has ‘rendered the dichotomy of Europe and the rest less persuasive’.
The first of this issue’s Briefings is by Isaac Akolgo. He examines a hitherto underplayed dynamic of Ghana’s current debt crisis, namely the recent banking sector failures resulting from the country’s uneven integration into the global capitalist financial system. Osama Diab, in the second Briefing, develops the critique of financialisation in Africa by examining its impact on employment in Egypt. And, finally, Francis Nyonzo examines Tanzania’s 2021 introduction of levies on mobile phone transactions and airtime and the deleterious consequences for phone users. This he sees as symptomatic of the ways in which financial service provision more generally undermines the poor.
A note on further reading
Readers wanting to follow up the first part of this editorial might like to look at the many editorials and articles that have appeared in ROAPE on the IFI’s structural adjustment policies and their impact on African economies. A good start is John Loxley’s review of the Berg Report in Issue 27–28 (Loxley 1983), followed by the special issue, Issue 47 (ROAPE 1990) titled ‘What price economic reform?’, which has several pieces including the Editorial related to the subject and, very relevant to our times, Loxley's analysis of the SAPs of Ghana and Zambia, Judith Marshall's of the SAP in Mozambique and Trevor Parfitt's of the debate between the World Bank and the UN Economic Commission for Africa on the effectiveness of SAPs.3 Later contributions by Gavin Williams (1994) in Issue 60 and by Sarah Bracking (1999) in Issue 80 are well worth reading. A very useful analysis of the current indebtedness of countries of the global South is The Coming Debt Crisis: Monitoring Liquidity and Solvency Risks by Charles Albinet and Martin Kessler of the Finance for Development Lab (Albinet and Kessler 2022). For statistical information, there is the regular Regional Economic Outlook from the IMF (2022b), and its later update of the World Economic Outlook (IMF 2023).