African debt is increasing—this is an indisputable fact. Indeed, sub-Saharan Africa is rapidly approaching debt levels reminiscent of the era just before the Multilateral Debt Relief Initiative (MDRI) for outright forgiveness of debt owed by a group of 36 low-income countries, and the Heavily Indebted Poor Countries (HIPC) initiative instituted in 1996 to address debt overhang in the poorest countries of the world. So does the current debt exposure enable us to expect a debt crisis in Africa?
Fine question. Africa is betting on infrastructure. The returns are poor. Policy makers are not addressing the challenge. Yet, we cannot blame them entirely. Scholarship has not exposed the complexity of infrastructure adequately. One reason, our best run to the West and pick a few models of the rational choice frame. A few return to work as clerks of rational choice. Some stay with the multilateral organisations and don’t do better. So, what will it take for us to develop a crop of scholars who appreciate non-ergodicity and ready to bring the realities to policy makers? It is sad our systems drop physics too early.
Important question. A lot of the debt can actually be considered investments in infrastructure, as pointed out by Fred Amonya. Policy makers must be careful invest only on high yield projects, avoid falling into the corruption trap, and make provisions to navigate the increasing trends of stagflation across several African economies, as I have pointed out in this paper/article, and Financial Nigeria, back in 2015: Article How Africa can manage threats of stagflation
Best,
MG
Yes, Marcus Goncalves. So, which are the ‘high yield projects’? The space of infrastructure investment in Africa is complex. The governments are doing little to understand the space. The West is continually sending consultants who peddle platitude. It is a difficult situation.
Hi @Fred Amonya, there are several high yield projects to be considered. I believe fintech, telecommunications, and in particular the internet infrastructure can be catalysts tk major economic boost, and entrepreneurship. The challenge is to attract FDI, and governments develop policies to foster such projects. This article of mine explores some ideas tapping internet plus: https://www.researchgate.net/publication/292762551_Seizing_the_'Internet_Plus'_moment_in_Africa
Best,
MG
Debts are not bad, when used appropriately and repaid promptly through PPIs where a project is transfered after full repayment of the loan.
The Covid-19 pandemic has scarred the world. It is life now completely unrecognisable in comparison to the freedoms we had a few short months ago. Whether Covid-19 triggers an economic crisis depends on the ability of industries to adapt to the new normal.
Lockdowns have restricted travel so those industries which have successfully digitalised are thriving. Whilst those businesses that are unable to do so are in danger of collapsing and bringing a significant chunk of the economy down with them.
In this global technocracy, almost everyone has access to a personal digital device. The limiting factor to successful digitalisation is therefore the industry rather than the public. So, the industries that will survive the Covid-19 crisis are those who either do not need to digitalise or can digitalise completely. For example, even the education system has fully digitalised. From kindergartens to universities; every educational institution is holding online classes. Some are even pre-recorded. Homework is submitted at the click of a button. This new system has resulted in cost savings and one wonders why this was not more common before.
The hospitality business has suffered as it can only partially digitalise. Sit-in restaurants are empty but online take-away services are booming. The role of tele-medicine in the healthcare sector is increasing for outpatient services. Some patients even prefer to have a consultation via telephone or video calls whilst sitting in their own homes. However, many people are unwell and need to be admitted to hospital. So, this sector can’t fully digitise.
Any sector in the economy that can digitalise will thrive under these conditions of the Covid-19 pandemic. Indeed, once the lock downs end these industries may remain fully online having realised the significant benefits of digitalisation.
However, it is difficult to digitalise international travel. Furthermore, now that the world is more digitalised than ever before, we do not need to travel as much as we did before. So, it will be interesting to see what remains of the airline industry when the lock downs end…
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