Dramatic scenes this week in Italy where 7,000 people, mostly from Africa, came ashore after making the dangerous trek across the Mediterranean. It was a similar situation along the U.S.-Mexico border where 9,000 people crossed in a single day.
Poverty, in many cases, is fueling this latest migration surge due in part to the worsening economic conditions in many of these countries, particularly in Africa which is now the epicenter of twin climate and debt crises.
David McCnair, executive director of Global Policy at the UK-based One Campaign, joins Eric & Cobus to discuss his latest research on African debt repayments and how stark inequities make it impossible for many of the world’s poorest governments to do anything to mitigate the effects of climate change.
Show Notes:
- Sign up to receive the One.org Aftershocks weekly newsletter: https://data.one.org/aftershocks/
- One Campaign: The collateral damage of rising interest rates by David McNair, Amy Dodd and Jorge Rivera
- Bloomberg: Africa Seeks Finance, Debt Relief to Battle Climate Change by Antony Sguazzin
- Brookings Institution: Managing the compounding debt and climate crises by Gracelin Baskaran
About David McNair:
David McNair is the executive director for global policy at ONE.org. Co-founded by Bono, it is a movement of millions of people fighting to end extreme poverty and preventable disease. He sits on the European Council on Foreign Relations Council and is a founding executive board member of the Africa Europe Foundation. Previously, he worked on successful campaigns to reduce child mortality and crack down on grand corruption and tax evasion. In 2012 he was named one of the ninety-nine top foreign policy leaders under 33. He holds a PhD in social geography from the Queen’s University of Belfast.
Transcript:
Eric Olander: Hello, and welcome to another edition of the China in Africa Podcast, a proud member of the Sinica Podcast Network. I’m Eric Olander and, as always, I’m joined by China Global South’s Managing Editor, Cobus van Staden, coming to us, as always for the next few months from beautiful Berlin, Germany. A very good afternoon to you, Cobus.
Cobus van Staden: Good afternoon.
Eric: Cobus, it has been a rather dramatic week in the Mediterranean and also along the U.S. border in terms of immigration, and that’s prompted us to kind of have this thought today that we want to talk about the intersection of climate, immigration, and debt. And as one of the megatrends that shapes all of this, China’s role touches all of it. And it’s interesting because this week we’ve gotten a number of different emails from some of our listeners, and I think these listeners are probably coming to us from the U.S. and Europe, who are saying that they’re bored of the climate discussion.
They say, what was it? “Annoying.” That’s what they said. A couple of them said it was annoying, it’s boring. And I don’t even think we’re actually talking about it that much. We’ve talked about it a little bit more, but I think it speaks to some of the discrepancies in how climate is perceived in parts of the global north, in parts of the global south, where, in many parts of the global north, it’s still really, it’s an academic issue. And I mean, when you’re sitting in Wisconsin or you’re sitting in parts of California, even though there are natural disasters — fires, floods, drought — people don’t necessarily associate, make the link to climate change. For us, though, we just don’t feel we can abandon and walk away from this story because when you look at the major megatrends of the 21st century, China and climate change are two of them, and they overlap in a number of occasions. And that’s what we’re going to be talking about today.
When we’re talking about climate and immigration specifically, consider the fact that there’s been 124,000 migrants that have landed just in Italy this year. And just this week alone, on one single day, 7,000 people, mostly Africans, arrived on the small Italian island of Lampedusa. Let’s take a listen now to the BBC’s accounting of what happened.
Speaker 3: Not since the crisis in 2015 has Europe seen images quite like this. The Deputy Prime Minister describes it as an invasion.
The Deputy Prime Minister: It is obviously organized, financed, and prepared. It is an act of war because if we go on at 6,000 migrants a day, it means collapse for Italian society. I said it at the beginning, what is happening in Lampedusa is the death of Europe.
Speaker 3: 7,000 migrants crossing the Mediterranean in just three days to an island with space for just…
Eric: And a similar crisis is now unfolding along the U.S. border with Mexico, where tens of thousands of people have been crossing the Rio Grande. And just like in Lampedusa, on a single day, 9,000 people crossed the border and completely overwhelmed the immigration system. So, when we look at this migration that’s happening across the Mediterranean, across the Rio Grande, and elsewhere as well, you can’t kind of boil it down to any single factor that’s driving them. And I would just urge you to be very, very suspicious and cautious of people who say it’s because of this, it’s because of that, any single reason. But there is one factor that does unite a lot of those reasons together and it’s poverty.
And when we talk about poverty, poverty is being fed by debt and climate change and so many other issues. So, when we look at that intersection of climate change, poverty, and immigration, they’re all linked. Take a listen to some of these statistics on the climate in Africa specifically. In 2029, out of the 10 countries most affected in the world by climate change were in Africa. And in the horn of Africa alone, we’re looking right now at 32 million people who are going hungry due to a worsening drought. And so when we think of climate, then now we have to flip the page and look at the debt question. And let’s talk about Kenya as an example of what’s been going on in other African countries.
Just this week we got some new data from the treasury and the Central Bank of Kenya that said the debt stock has now reached a new record of 10.2 trillion shillings, which is about $69 billion. And if you compare that to last year, that’s up $10.8 billion in just one year. A staggering 16% increase in 12 months. A couple of weeks ago at the Africa Climate Summit, William Ruto, the president, he made it very clear that these surging debt levels, not only in his country but also in other African countries, are simply unsustainable and they have to change.
William Ruto: Nine countries are already in debt distress in our continent, over the cliff — 13 countries are classified as high-risk, and another 17 countries are classified as moderate risk. And the biggest contributor to debt distress in our continent is high-interest rates. We pay five times more than others. Meaning that in fact the architecture is set up in a manner that if you borrow, it’ll be difficult for you to pay. And that is why we need a conversation and a very candid conversation. And we are saying this in all honesty around how do we get concessional funding? How do we pay as much as others are paying? How do we get Africa away from paying five times more? And I asked in this gathering, we’re not asking to be favored, we’re not asking for to be treated differently — we want a fair financial system that treats everybody equally.
Eric: Let’s deep dive a little bit on the Kenyan numbers. And again, I think in many ways Kenya is representative of a number of countries. As the president said Kenya is, by no means, alone. We’re looking at dozens of countries in Africa today that are facing debt distress. In just the last fiscal year that ended back in June, Kenya spent $2.7 billion on debt servicing costs. And interesting now, again, the China link here, repayments to the China Exim Bank accounted for the single largest share of that debt bill with payments totaling $734 million. The total Chinese debt now is estimated to be somewhere around $6 billion. However, it’s very, very important to put that Chinese debt into context. When you look at China’s share of Kenya’s total public debt, again we have $68 billion with about $6 billion owed to the Chinese, and that number’s probably lower now because of these repayments, it comes out to be about seven to 8%.
So, oftentimes the Chinese share is overstated and exaggerated. But we’ll find out more about that today in our discussion. But here’s the big problem. A lot of the loans that Kenyans and other African borrowers took out from the Chinese, the World Bank, private creditors are all priced in either Euros or US dollars. And when we look at the performance of the shilling this year, just the shilling, and this has happened across the continent, and Cobus, in South Africa as well it’s the same problem, the shilling is down 19% against both the Euro and the dollar, which means that the cost of servicing those loans is now about 20% more expensive just because of the devaluation of their currency.
So, the Central Bank issued a warning this week; again, this is why it’s so important we’re having this conversation today that interest payments in the current fiscal year that’s now underway are going to increase by a third to $6.2 billion. Cobus, there you hear it from William Ruto, we’ve heard it from other African leaders — they don’t want charity, but they also feel that the current financial system just isn’t fair, and they’re having to pay risk premiums that other countries don’t have to. And when we go back to this climate issue, every dollar that goes out the door to service debt is another dollar that can’t be used to build infrastructure, climate mitigation, human resilience programs, social services.
And then again, we’re dealing with the ravages of climate change now in Africa, in many African countries, including Northern Kenya, which is prompting, in part, a lot of those people to flee across the Mediterranean.
Cobus: Well, exactly. The issue is, of course, that the higher the debt repayments are, the less money there is for school feeding schemes or for school as a whole or for healthcare, for example, right? So, all of these factors are not only kind of affecting that country alone, but it is significantly affecting the migration issue as well. The fewer social services people can count on, the more precarious their lives are and then the more kind of radical the choices are that they have to make. Because also it’s so fascinating to hear these Italian politicians talking about this being an attack on Europe when you’re considering that the migration move from the global south through the global north is happening in the context of a massive wealth transfer from the global south through the global north because of these kind of elevated debt repayments due to high-interest rates. So, the fact that the migration crisis is somehow seen as Europe being victimized and that’s why the context not being made clear is, I think, just one sign of how distorted that debate is.
Eric: And that’s a very similar debate that’s going on in the United States as well, where he said it’s war. And you hear that in a lot of Donald Trump’s rhetoric as well. Well, let’s get a perspective now on this intersection between climate, debt, and immigration. We’re pleased to have on the show for the first time, really very excited, David McNair, who’s the Executive Director of Global Policy at the ONE Campaign, and the author of a new report entitled Collateral Damage of Rising Interest Rates. It’s an absolutely fascinating read with some very revealing data visualizations that show just how shocking it is about how much money is literally leaving the global south to the global north in the form of interest payments as Cobus pointed out. David, a very good afternoon to you in County Kerry Island.
David McNair: Thanks, Eric and Cobus. It’s lovely to be on the show.
Eric: Yeah, it’s great to have you. And we’ve been wanting to do this for a few weeks and we weren’t successful when you were at the Africa Climate Summit. We want to get your take on what happened at the summit. But before we get into the details of your report and some of the specifics that you found in your research, I’d like to get your take on this question of what’s happening in Lampedusa and the link between debt, climate, and immigration as you see it.
David: Look, I mean, you talked about these megatrends — China, debt, climate. Another megatrend is demographics. And there are two sides to this. If you look at the African continent, by 2050, there will be 2.5 billion people, 25% of the world’s population, most of them young at a time when Europe’s population is aging. And that’s creating a fiscal time bomb. The credit rating agencies recently factored this aging issue into their credit ratings. By 2050, on the other hand, Africa will add 796 million people to the labor force. So, if you think about it, Europe’s getting older, more pensioners, more costs. You’ve got this young dynamic workforce. If you invest in the right ways, that could be a driver of economic dynamism and growth and also kind of a driver of green technology and the green transition.
And this is the real kind of message that came out of this Africa Climate Summit, which was hosted by William Ruto a few weeks ago in Nairobi, where he was saying, “There’s injustices here.” Africa didn’t cause the problem of 4% of historical emissions. But actually, we don’t want to kind of go over historic grievances. What we want to do is to say we’ve got potential solutions to the climate problem. Africa has 70% of the world’s solar potential, 70% of the world’s cobalt and other critical minerals essential for battery technology. It’s forests take more carbon out of the atmosphere than the Amazon. And it’s got the best locations in the world for carbon capture and storage. So, there are all these potentials that are worthy of investment, but the capital isn’t flowing because the cost of capital is too high.
And the International Energy Agency did this analysis in 2020 where they looked at, if you wanted to create or borrow to build a solar farm in Texas, you’d pay an interest rate of 1%. If you wanted to build the same solar power solar farm in Nigeria, you’d pay 14%. So, comparison of 1% to 14%. And that’s one of the reasons-
Eric: There’s a risk difference, though, between Texas and Nigeria. That’s what the industry will tell you is the reason why there’s such a stark discrepancy between the cost of money.
David: Exactly, but it’s something that we need to address because what UN development program and others are saying is that actually there’s an element of these credit rating methodologies that is subjective and that that subjective element is basically punishing African countries when you look at the detail. So, I think there’s a technical methodological conversation that needs to be had about that, but it’s a real issue that is inhibiting investment in technologies that need to be invested in. And I was in a meeting at the summit with the head of the International Energy Agency, and he shared an absolutely shocking stat. He said that the Netherlands generates more energy from solar than the whole of Africa. And if you think about the amount of sun on that continent, the amount of resources there, that’s just something that just is not logical and we need to change.
So then we get to this question of debt. One in five people on the planet live in countries that are in or at risk of debt distress. 60% of African countries are facing that problem. And in a sense, there are four acts to this story. The first is we’ve obviously just had a decade of rising debt. There was a massive need for infrastructure on the continent because of this rising population. And as the population’s boomed, a lot of African countries looked at historically low interest rates and went to commercial markets to borrow. And that, in a sense, made a lot of sense at the time. Then COVID hit and put major pressure on vulnerable countries where tourism industries were hit, migrant remittances fell, and they were not in a situation where they could kind of service that debt effectively.
And the G20 put together this initiative, which paused debt repayments for a period, about 18 months or so, but it didn’t deal with the underlying problems. Then the third act — Putin invades Ukraine and sends shockwaves through the food and energy markets, which increases import costs and so on. And then the fourth layer, because of the inflation that was driven by COVID and by Putin’s invasion of Ukraine, the U.S. Federal Reserve is increasing interest rates at the fastest rate in decades. And because most of African sovereign debt is denominated in U.S. dollars, that means that the currencies devalue, as you mentioned, and the rates themselves go up. So, we look at this, the organization I work for, the ONE Campaign, looked at this on a macroscale.
And we basically found that on African Euro bonds, so commercial bonds that African governments are paying over the past five years, they’re paying a premium of 500% over what they could pay if they borrowed from the World Bank. And that amounted to an additional 56 billion in interest payments over the last five years. So, in a sense, 56 billion transferred from Africa to Wall Street bankers. And the question is the World Bank and other development banks were set up to fund this kind of infrastructure development and they haven’t been operating at the scale or the flexibility or the speed needed. So, we need G20 governments to, who are in a sense the shareholders of these banks, to step up and push them to take more risk, put more capital into them so we can address this problem. Otherwise, we’re just in a situation where, as Cobus said, more and more money is going on debt service and countries can’t even afford to pay their civil servants, never mind invest for the future.
Cobus: So, this issue of the 500% premium being paid by them, I wonder if you could break that down a little bit. And how do we come to that number and what are some of the factors involved?
David: Sure. So, we basically looked at the average rates that African governments are paying on Euro bonds that they have taken out of the last five years. And then we looked at the average rate that African governments were paying on loans from the World Bank, particularly the middle-income part of the World Bank, which is called the IBRD, the International Bank for Reconstruction and Development. And basically, we find that there was a kind of huge difference between what could be borrowed at a concessional level from the bank and what was being paid on commercial loans, and that those rates were increasing because of inflation, and the Federal Reserve, and so on. And it’s important to kind of talk through just what the World Bank and other development banks do. They were set up after World War II, in a sense, to fund, initially, the reconstruction of Europe, but they are given guarantees by the major economies of the world, which means that they can borrow money very, very safely and very, very cheaply.
So, anytime the World Bank issues a bond, it’s oversubscribed immediately, and the rates that it can borrow and connect commercial markets, it can then on lend to countries that are considered more risky. And that’s the kind of delta between if countries go to the market themselves, the risk that’s considered, that the rating agencies consider them to be, means that they pay a lot more. Whereas if the World Bank and the other regional banks were bigger and more flexible and were willing to support this kind of financing, then it could unlock huge amounts of capital for countries to invest in green energy, in creating jobs, in all the things that are needed to both avert the climate crisis and address poverty that’s driving so much instability and migration as well.
Eric: Well, let’s talk a little bit about the multilateral financing part of this because you put the burden on the G20, and I’m going to challenge you a little bit on that because I just don’t know where you get the confidence that the G20 has any will or motivation, or even capability of doing this when they have done nothing on debt or climate really effective in the past three or four years. But yet this week, the China-backed Asian Infrastructure Investment Bank held their annual meeting in Sharm El-Sheikh, Egypt, and they announced that they’re going to increase their climate spending from $2.6 billion last year to seven to $8 billion a year by 2030. So, a major increase in climate spending from the Asian Infrastructure Investment Bank.
And I guess let’s bring China into this question that the G20, China XI Jinping didn’t even go. It hasn’t played a very strong role in it. But the G20 has been more of a forum now for the U.S., Russia, and, to some extent, China and India now, to really throw punches at one another and very little actually gets done. So, if the ONE Campaign and you are hoping that the G20 is going to be the solution, and yet we’re starting to see some of these alternative multilateral development banks like the AIIB step in, New Development Bank as well as increasing their spending on climate issues, why not pull those into the solutions rather than just put the burden on the G20?
David: Well, I think there’s two reasons. The first is the decisions that need to be made by these banks are made at the board level, and the board’s comprise finance ministers of primarily G20 governments. And I mean, while you’re right that there has been no effective solution on debt, and I can go into the reasons for that and the-
Eric: And climate too, by the way. They didn’t reach, remember their climate goals in Chennai? So, it’s climate and debt.
David: But on this issue, I think it’s one of the few areas where actually the G20 could, as a norm-setting buddy, establish some norms and then the members could go and implement. And this whole multilateral development bank reform agenda was kicked off by the Italian G20 who commissioned an expert kind of group that looked into the ways in which these banks could better sweat their balance sheets. And that created a whole kind of agenda around World Bank reform that was then kicked off by Janet Yellen and a group called the G7++ that is now looking at the World Bank’s balance sheet. There’s a whole piece of work that… so they announced that they would initially unlock an additional 50 billion over 10 years in capital, which isn’t enough. It’s 5 billion a year. They’ve now increased that to 20 billion a year, and they’re now looking at potentially a hundred billion a year.
So, there are norms that have been established going back to the Italian G20. And then in the recent Indian G20, the Indian presidency commissioned Larry Summers and N. K. Singh to do another report, and that then produced recommendations that the multilateral development banks should triple in size. And the announcement from the Asian Infrastructure Development Bank this week was a tripling of its lending portfolio. So, I think there’s a consistency between the norms that are set in these institutions like the G20, but then, of course, they need to be implemented by the actual decision-makers, the boards of these banks.
Cobus: Can you kind of give us a little bit of background context on what has been going wrong at the World Bank? One of the issues, of course, with all of these African countries turning to private credit markets to raise funds are some of these institutional blocks and difficulties in accessing finance from the World Bank. So, I wonder if you could talk a little bit about what is wrong at the World Bank at the moment.
David: The first thing to say is that the World Bank has a new president who is very, very effective and is a reformer, so he’s changing things, but that’s against the backdrop of a bank that has been outdated and not fit for purpose for a long time. So I think the first thing to say is this institution, and others like it, were set up at the Bretton Woods Conference after World War II when most African countries had not yet gained independence. So, they’re rightly saying that the governance around these institutions do not reflect the current reality. And there’s geopolitics to that as well because the U.S. holds a veto share and the Europeans are very kind of overrepresented in terms of the capital that they put into the bank and the populations that they have.
And then China is very actively pushing to put more capital into the bank to get a larger share of the governance. So, there’s the geopolitics of it and the fact that it’s outdated. Second is speed. So, an African leader told my boss, Gil Smith, that he can ask the Chinese to build a road, and he will be driving down it in the time that it takes the World Bank to sign the contract. And if you’re a political leader with a fixed term and you want to get things done and you’ve got a rising population, then speed matters. The average time from proposal to board sign-off for a project over the last five years at the World Bank is 465 days. And this is not a fast institution, and it needs to become faster. But then the third piece is scale. The kinds of resources that are needed are estimated by experts like Nick Stern to be in the kind of range of like a trillion a year.
And the World Bank is nowhere near that. And in part it’s because the bank has been so cautious. So, I mentioned the credit rating and the fact that the bank itself is seen as incredibly safe. There is a massive caution around taking risk with the balance sheet. And this G20 expert group that I mentioned estimated that the World Bank and other banks, if they took a bit more risk on capital markets and reduced the ratio of equity to loans, they could unlock hundreds of billions if they did that, plus incorporating a slightly esoteric thing called callable capital, which is basically a guarantee that if the banks get into trouble that the major shareholders will step in. And there has been stress tests done that suggests that in all the crises since World War II, including the global financial crisis and the oil crisis in the seventies, these banks have never come anywhere near close to needing to call on that capital.
However, if that capital was integrated into credit rating assessments, the ratio of capital to loan that they could borrow will increase dramatically, and they could unlock potentially up to a trillion more in lending. So, these are the kinds of things that I think Ajay Banga, the new president, is looking into. But the issue is that he’s a reformer, but ultimately the decisions lie with the shareholders, which are the G20 governments and majority of the G7 governments that need to actually implement these things.
Eric: Yeah, so it’s the Western governments here. And China has made it very clear both in some of its official rhetoric, but also through the unofficial rhetoric that it sees the World Bank and the Bretton Woods institutions as really extensions of U.S. power. And they look at them in quite hostile terms. In fact, we talk about Ajay Banga, the new head of the World Bank, China did not support his candidacy. They said they wanted to see other candidates. Now China’s share in the World Bank is quite low, so they couldn’t do anything to frustrate it. But one really has to wonder — does anything get done if the U.S. and China and the World Bank is caught in the middle of this new great power competition? And I come back to NGOs like yours that are putting solutions out into the world, and they’re predominantly Western-led solutions, G7, G20, World Bank, these institutions have not met the challenges at all, as you’re talking about 400-some-odd days just to get a project brief done.
I feel like we need new solutions that are much more radical. And then when we talk about these big numbers of hundreds of billions and trillions that are needed, there was commitments and pledges to dedicate $100 billion a year from the north to the south that the north just ignored. I mean, they just didn’t pay any attention to it. So again, where does the confidence come from that these institutions and these politicians are going to do anything that’s reasonable?
David: Well, I think there are a number of aspects to this. The first is needing to kind of build the political constituency so that Western governments take this seriously. And I think, as you mentioned at the outset, until recently, the issues around climate and so on have been seen as kind of, well, they’re both culture war issues, but they also are seen as quite academic. I think more and more we’re seeing, in Europe, forest fires, heat waves across the U.S. this is being seen more and more as something that is affecting domestic populations in those countries, and therefore the politicians need to respond.
Eric: Not the Republican Party. Not the Republican Party. I mean, and that is half the country right now.
David: Yeah.
Eric: So, I think when we talk about the United States, we can’t talk about it as a singular entity.
David: Yeah, that’s true. And that is a big problem. But it gets to the second point about scale, because if the estimates, these are very, very credible estimates are true, then the needs for investing in the energy transition at the speed and scale needed are on the order of a trillion a year. And if you look at be it budgets, they’re a 10th of that. So, the question is like, where is this money going to come from and how do you unlock it? And the multilateral development banks are one of the few mechanisms that we have that can use this fact that they’re so safe and secure and guaranteed that they can borrow on capital markets and unlock that money. Of course, there are a lot of problems within. There’s a lot of reform that needs to happen. But it’s almost like that Winston Churchill quote, “These are the worst option except for everything else at the moment.”
Cobus: Returning to the issue that Eric raised earlier about risk assessments, the issue of outsized risk assessments for African projects does add significantly to the cost of their borrowing. But I was wondering if you could talk a little bit more fine-grained detail about exactly how these assessments, how they’re calculated, but also what kind of ways there are to correct unrealistic risk assessments. It’s one of these things that kind of get, I think, used frequently as a kind of a neutral arbiter that can explain some of these cost imbalances, but they’re not necessarily that neutral.
David: I mean, I think the first thing is there’s a major data challenge. I mean, I’m on the Bloomberg terminal very regularly, and if you want detailed real-time information on the U.S. economy, you can get it. There’s a wealth of information. If you go to Ghana or Kenya, or Uganda, you’ve got old data, it’s patchy. And I think there’s an issue, which is that in the absence of high-frequency data, a lot of analysts will basically kind of make assumptions or fill in the gaps, and that creates space for perceptions or prejudices to come in. Now, I don’t know the ins and outs of the details of every credit rating that’s done. But UNDP, the UN Development Program did do an assessment last year where they basically find that about 20% of these assessments that are done are subjective.
So, they aren’t based on hard data. And if you were to basically take that subjective element out of it, that African countries would face a lot less of risk premium. And I think they said, if my memory serve me right, that that could unlock about 76 billion a year. So, I think there are lots of questions, there are lots of kind of technical issues. The problem is that we aren’t having a kind of honest debate. We don’t have the technical experts getting together to hash this out and find solutions because these are not things that are intractable. They can be solved. What is not negotiable is the way that our climate is changing and the impacts that it’s having. And if we don’t find solutions to this, then we’re going to be in a lot more trouble than we are now.
Eric: We passed $114 billion worth of spending in the U.S. Congress for the Ukraine War in I think about three months. So, where there’s a will, there’s a way. So it’s, as you pointed out, it’s not because we’re incapable as people of making quick decisions, it just, in this case, there’s very little consensus about how much should be spent and how it should be spent. So let’s flip the coin a little bit. Let’s say all of the wealthy people in Tokyo, Brussels, London, New York, Washington, say, “You know what, David, and the ONE Campaign, you’re absolutely right. Here’s a trillion bucks, we’re going to go take care of this right now.” Now we have this other question of how that money is spent. William Ruto, he wants it to be spent by African governments.
The problem is, if we look at some of the best journalism in Africa by groups like Africa Uncensored and others who have done some fascinating reporting on massive corruption and lack of governance and incompetence and greed on the part of so many African leaders, particularly Ruto himself, who is part of the massive debt binge that happened under the Kenyatta administration — is somebody like Ruto and his track record, is he the guy that we’re going to give $10 billion to, to mitigate climate change in Kenya given the fact that we know, from what Africa Uncensored reported, that there was massive corruption and incompetence in managing the loans from China and other creditors over the past 10 years?
I mean, so we have a governance question on the other side as well. How does this money get handled if it is actually approved? Or do the multilateral institutions, IMF World Bank, do they manage it? But then there’s going to be a lot of resentment towards that because people in the global south already hate the IMF and the World Bank in many respects because they see them as these extensions of colonial imperialism. So, what do we do if all your dreams come true?
David: This is a massive question that needs to be addressed. I think the first thing that I would say is corruption isn’t a uniquely African problem. I mean, we had-
Eric: Not at all. I mean, listen, Senator Menendez in Florida has just been busted having gold bars in his refrigerator. So, certainly not, and I don’t want to suggest that it’s purely an African problem. However, in the context of this program, in this discussion, we’re talking about Africa. That’s all.
David: Yeah. And I think the public financial management systems, the transparency and accountability that needs to be put in place, the brilliant journalism that you mentioned that is happening is a critical part of this ecosystem. I also think that there is, I mean, what I’ve observed in my travels in Africa is there is a kind of, because of this demographic shift, there is a change in the conversation and the expectations that African citizens have of their leaders, not everywhere. And of course, it’s a massive continent with more than 50 countries, but I think there is a kind of generational shift that is happening there. But of course, whenever these investments need to be made, it needs to be channeled through public financial management systems.
It shouldn’t all be government. There needs to be the infrastructure built that then can allow private sector companies to thrive and to grow. And I think a big part of that is addressing the fragmentation of the trade landscape in Africa, which the African Union has a plan for. But these aren’t issues that we can ignore. They’re also issues that given the realities that we just talked about, I mean, it’s not a perfect situation, but we need to work with it and improve it.
Eric: Cobus, let’s get your take on that. You’ve oftentimes commented on how Africa’s the youngest population in the world with the oldest leaders, and the stark gap that exists between the rulers and the ruled is wider in many parts of Africa than anywhere else in the world in terms of credibility, age, so many different factors. What’s your take on this question?
Cobus: It really is a very, very difficult question to answer because it has so many moving parts, and to a certain extent it would entail the setting up of institutions and other governance mechanisms that don’t exist on the continent at the moment or certainly don’t exist at any kind of level of power. So, one of the issues in African governance is that it tends to be very strongly driven by states and the African Union, for example, and other overarching governing bodies frequently find themselves somewhat undercut by individual states. But then within the state, obviously there’s a lot of different actors who sometimes are willing to play spoiler in order to make sure that they are served. The combination of those two factors tends to… And I mean that those are not unique to Africa.
They occur in many other countries as well, or many other regions, and they are very different in different African countries. I think South Africa is an interesting but also a cautionary example because South African democracy is very young. The African National Congress came to power during time when there was already very high awareness of the need for oversight and for checks and balances. And South Africa did implement very robust checks and checks and balances systems and oversight systems, which worked very well frequently, but then they ended up kind of being captured and hollowed out and, in the end, used against their original purpose.
And so we need both a combination of both kind of robust institution building, but also some kind of groundswell of democratic will to make sure that they work well. And then that also has to happen across borders on a kind of a meta-level that isn’t just… so that you don’t just have one state competing against a different state. I mean, that’s a very tall order. I mean, it’s a very tall order in a developing region like Africa. I mean, it’s an extremely tall order, even a place like Europe, where they still haven’t 100% made that work. So, which is a kind of a waffling way of saying that. I don’t 100%, but as David said, what Africa does have is a, a large new generation of people who, for all of the different contrasts, are at least, to a certain extent, united by a need to do things differently.
What I think is then going to be very needed is some form of way for their voices to be heard, for their kind of decision-making to move forward rather than just for them to make calls and then those calls being ignored by leaders who have a domestic or national power base.
David, in relation to that, are you seeing, in your different discussions, either at the G20 levels or at other multilateral levels and so on, are you seeing some form of new kind of blue sky thinking around governance reform that will make this kind of comprehensive dealing with this kind of multi-crisis at all possible, whether that be in Africa or the global south or elsewhere? Climate change is such a massively complicated process and problem that it seems like one of our problems is that our current governance systems just simply can’t cope with its scope. So, I was wondering whether you’re seeing any kind of green shoots about what that kind of organizing might look like.
David: Well, so I’m part of a study group. One of my roles is I’m visiting our non-resident scholar at the Carnegie Endowment. And there we have a study group looking at kind of international governance. And the guy there who’s leading this, a guy called Stewart Patrick, talks about a kind of a quilt or like a kind of patchwork of things that interface and do different things. And I think it’s really important to disaggregate on the different questions that we’re trying to address and the institutions that can address them. So, there’s enforcement of trade norms, there’s defense and security and, obviously, the UN Security Council is completely dysfunctional at present. There’s management of investment and multilateral banks. There’s questions about pandemic governance.
And the issues that we have been kind of talking through are, how can you get specific about objectives and purpose and then design representative institutions that can address those purposes rather than have these kind of massive behemoth institutions that are ineffective but also are not targeted? But how to get there is almost the question for the 21st century because more and more we’re interconnected, our interconnectedness is weaponized, and our dependence on one another when it comes to climate change or pandemic management, or whatever it might be, is dependent on us finding solutions to these problems that are currently there in the current institutions.
Eric: How do you do this if the United States and China hate each other as much as they do? I mean, again, in reality, the United States and China are two of the world’s largest polluters, the most accountable for what’s happening. And if they can’t even be in the same room together, how does this get done?
David: I don’t think it can. There was an interesting piece written in The Economist by Kevin Rudd, the former Australian Prime Minister during the pandemic, where he talked about this idea that the U.S. and China tensions are not going away anytime soon, but can we create a carve out of these kind of essential existential issues like climate change, like pandemic management, like other forms of global health, and almost kind of separate those from these tensions and find ways of working together because both parties and everyone else involved recognizes the jeopardy of not cooperating? I think that works in some kind of governance situations. With the current administration, there are some moves to, the current U.S. administration, to do that. I think if you’ve got a different administration that is not willing to do that, then I don’t see how that works. And this is one of the big issues for our time, because if we don’t address it, then we’re in serious trouble.
Eric: The problem is in both countries, any concession made in the name of the other is going to be seen as appeasement. The mood is the same in both countries. And so something as milk toast as climate change is where everybody agrees that it’s terrible and bad. If there’s any type of concession in the United States that’s done in order to help reach a compromise with China, the politics just don’t support it. I mean, there’s just no indication that it does.
David: Yeah, and this is exactly what happened with the debt issue. I mean, it’s still ongoing, but the U.S. in particular didn’t want to offer any more concessions to African countries in debt distress because the concern was that countries would just use that money to then pay off China. China then didn’t want to offer any concessions because their concern was that the countries would then just use that to pay private creditors, which they see as Western institutions. So, unless everyone moves at once on these issues, then you’re not going to get a resolution. And that’s where the kind of insider diplomacy to kind of try and get to specifics on individual country-based solutions is really essential. And I think we’ve seen some movement on that in Ghana and Zambia, way too late, not enough. But actually, the fact that there have been some movements on those debt restructurings is a signal of, of hope for me because previously there was just no movement at all.
Eric: Well, let’s leave our discussion on a positive note, a slightly positive note, a note of hope at the end of our discussion there. David McNair is the executive director of global policy at the ONE Campaign and the author of a fascinating new report — Collateral Damage of Rising Interest Rates. So, if you’re interested in the debt issue in Africa specifically, you’re going to want to take a look at the data that they have put forward. It’s absolutely fascinating. We’ll put a link to it in the show notes. David, if people want to follow the work that you and your colleagues are doing at the one campaign, what’s the best way for them to get in touch?
David: You can sign up. We have a weekly newsletter that goes to about 20,000 influencers, journalists, policymakers, kind of like a tongue-in-cheek kind of take on the events of the day with our angles on them. You can sign up at one.org — one.org/aftershocks.
Eric: Okay. We’ll put a link to that in the show notes as well. David, thank you so much for joining us. We really appreciate it.
David: Wonderful. Thank you both.
Eric: Cobus, again, I’m not sure whether we should be hopeful or we should be more depressed after a conversation like that. David brings some fascinating insights, and this report is revealing. We didn’t spend as much time talking about the report as I would’ve liked, but I really hope that everybody, again, will click on the link in the show notes to go check it out because it really shows the unfairness of the system. We talked about the risk premiums between Texas and Nigeria, and sure there is a little bit more risk in that sense, but is there 14 times more risk, as he pointed out, 14% versus 1% to build a solar farm? No, there’s not. And this is really a big problem. I guess I’m wondering, let me just ask the obvious question here — do you think these risk premiums are because of some evaluation that they’ve made, or is Africa suffering because of racism?
Cobus: This is a big and complicated question, and I think different forms of institutionalized racism I think do play a part in these issues, but they have to be unpacked in a way that I don’t a hundred percent feel kind of competent to do. And I think it would be really valuable for us to have someone who specifically focuses on that because there are academics who particularly focuses on structural racism in lending on a domestic level and on a transnational level. So, I can imagine it would be at play, but I think what is probably… Another factor that is also at play is just simply, as David pointed out, there’s a kind of an information deficit about Africa. And then the dots that are missing are kind of supplied by the assumptions of intelligent people who read the newspaper every day and who have a strong feeling that they know how the world works. And the construction of how the world works is a media construction which particularly kind of like has a lot of assumptions about how different African countries work.
And I think there is where kind of racism starts kind of creeping in, but it’s not necessarily even racism — only racism itself. I mean, that is always a really important factor, but what it also is, is it kind of a general idea of knowing what the global south is like. Even so kind of an assumption, very similar assumptions would be made about parts of Southeast Asia, for example, or about parts of Central America. It’s like, “Oh, okay, this is what corruption is like there,” for example, maybe. And then it gets played off a certain set of assumptions about developed countries that there is less corruption or more effective oversight or that that oversight is not so easily avoided, which, in some, cases are realistic assumptions, but they’re also kind of woven together from a set of perceptions.
They tend to kind of favor the familiar and then clad what is familiar as what is rational. And I think David’s point that if African countries are a lot more aggressive and a lot more proactive in putting out very, very concrete and fine-grained data about these different kind of issues in their countries, that would go a long way to challenge that process, I think.
Eric: Yeah, more knowledge-based policymaking data. This is something that we’ve been talking about quite a bit. Let’s shift attention to the question of China. And again, China is this fascinating mix of a country here. On the one hand, it is, in many ways, the leader in green technology. It is the main exporter of solar panels. It’s driving the green mobility revolution with electric mobility and things like that. So many positive stories. We’re putting together a map of green energy initiatives or renewable energy initiatives in Africa. And the list of projects in 2023 is enormous. I mean, it’s just really enormous, and it’s very inspiring. On the other hand, though, you look at the statistics of what’s going on in China, and in the first half of 2023, 37 gigawatts of new coal power capacity were brought online. 10 additional gigawatts of capacity is already moved into the construction phase, and 52 gigawatts of coal capacity is permitted.
And they’re talking about even expanding it. There was a coal conference in Indonesia this past week, and Chinese buyers were snapping up a lot of the coal. The appetite for coal in China is enormous. And they’re building more coal capacity every year. So, how do you reconcile what’s going on domestically with what’s going on internationally? And even domestically, there’s a lot of great green stories, but at the same time you have this coal story as well. Chinese fossil fuel consumption is also on the rise as well, oil buying is up as well. And then you look at the United States, the Visual Capitalist published one of these wonderful infographics of the largest oil producers in the world. And it is amazing to see that the United States is even larger than Saudi Arabia, but yet we don’t talk about it that way.
So, we have these two countries that are the keys to the solution and yet they are the main instigators of the problem right now.
Cobus: Yeah, absolutely. I mean it really is chilling to see among others because, like definitely everyone looks at Western discourse, of course, China is heavily criticized there for this issue. The fact that the U.S. is such a big player and that Western banks are by far the most dominant channelers of money into fossil fuel projects even now, especially now. I was looking at the finances of oil and gas projects, and China isn’t even in the top five. All of the top five, all Western countries — like U.S., number one; Canada, number two; UK is in there. You raise the issue of the kind of Western-centric-ness of some of the solutions that we discussed, right? The fact that it still is, again, circling back to the G20, for example, or like to the G7 even and to the World Bank and so on.
And that’s certainly true. But one also has to take into account that still in Africa at the moment, the vast amount of African debt is to Western private institutions and to Western-led multilateral institutions. Those are still the two largest creditors in Africa. The West still is at the center of this problem. And they see themselves as solvers of the problem or the people most concerned about the problem or most trying to set norms to help the problem, but they’re so complicit in the actual making of the problem. Even though India, China complete pollution nightmares, the structural and institutional bias towards channeling this capital and not reining it in is still so strongly in the West.
The fact that that is not much more of a topic of discussion in Western media is itself a kind of indictment, I think, of the West’s own ideas of itself as such a free society or a society of free discussion, or such kind of unfettered flows of media. I don’t know. It’s easy, I think, when one sees the actual stark numbers, to get really disillusioned I think with Western promises. And what goes with that, I think, again, young population in Africa, what goes with that is the long-term credibility of the West itself, I think. And they’ll claw their way, kind of they have a death grip on that power, but I think that kind of long-term credibility really is at risk.
Eric: Well, just to leave with one final depressing thought on all of this, and we’ll start where we began our discussion today with immigration in Lampedusa, so two trends that emerged from this week and the surge of immigration to the Italian island was one far-right conservatives across Europe descended on Lampedusa, particularly from France and other countries, to show that the immigration problem is going to be weaponized and politicized. And the answer for France, not, is to send more development money or to address climate change or to get to the root of the problem, is they’re fortifying their border now with Italy to prevent more migrants from coming into France.
And Germany now too is apparently starting to fortify some of its borders as well to control the flow of people in the Schengen area through Germany to make sure that immigrants don’t come through as well. So that is going to be the key takeaway, and I don’t suspect that it’s going to be much different in the United States either that the link between debt, climate, and immigration is not going to be made. Instead, they’re going to focus on immigration as the war that they said it is rather than address the root problems of it all. But once again, these are these conversations about the megatrends. I know some of you are thinking that we are doing too much on climate, but we can’t stay away from it because it touches so much of what’s happening today.
And the geopolitics of it between the United States and China as well impact Africa and many countries in the global south. That too, we can’t stay away from as well. So, hope that you found this conversation informative, a little bit sobering. Once again, I encourage you to go check out David McNair’s excellent report. And then we’re going to bring you our new interactive data map coming up in about a month. We’re hoping to have that ready so you can see Chinese green development projects in Africa. Also, we’re going to be updating our cobalt map that Geraud did, which is absolutely fascinating showing China’s role in the global cobalt supply chain and specifically in the DRC. And we also have a new project coming out of Indonesia, mapping the nickel-cobalt supply chain.
And another new feature coming out in about two months is going to be a interactive special on China and the quartz supply chain in Indonesia. So, lots of these resource supply chains, interactives, and data visualizations that we’re going to be producing. Keep your eye out for those. If you’d like to access all of the wonderful analysis that Cobus and the team are doing in Asia, Africa, and the Middle East, we would really appreciate your support. You can get it all at chinaglobalsouth.com/subscribe. You’ll get 30 days free just to try it out, see if you like it, and you can join a global audience of readers who are joining these great conversations that we’re having each day about what China’s doing in the global south with a particular focus on Africa. So, let’s leave our conversation there. Cobus and I will be back again next week with another episode of the China in Africa Podcast. Until then, thank you so much for listening.
Outro: The discussion continues online. Tag us on Twitter @ChinaGSProject and visit us at chinaglobalsouth.com. If you speak French, check out our full coverage at projetafriquechine.com and AfrikChine on Twitter. That’s Afrik with a K. And you’ll also find links to our sites and social media channels in Arabic.
