Africa’s Debt Crisis: Breaking the Cycle

Africa, rich in minerals (30% global reserves) and arable land, with a young population, faces a debt and underdevelopment cycle exacerbated by global shocks but rooted in structural flaws and a flawed financial system.

Debt relief initiatives like HIPC proved temporary, with 20 African countries in distress by 2023. Political leaders prioritise quick-win projects, fueling corruption (Nigeria’s ABP, Kenya’s SGR). Low tax-to-GDP ratios (16%) and tax evasion hinder revenue generation. Disasters and predatory lending, including opaque loans and high private creditor rates, worsen the situation.

Underlying issues include reliance on raw material exports, low manufacturing (10% of GDP), and constraints like power deficits and skills gaps. The AfCFTA offers trade potential. Solutions involve smarter borrowing, local currency bonds, institutional reforms, leveraging geopolitical importance for better deals (technology transfer, local content), and prioritising long-term industrial development. Political will and shared commitment are crucial for breaking this cycle.