The Position of South Africa regarding
On 9 September 1999, an Extraordinary OAU Summit
was held in Libya. The Sirte Declaration was adopted
by the Heads of State and Government at the conclusion
of the Summit. As part of the Declaration, President
T Mbeki and President A Bouteflika of Algeria were
mandated to engage Africa's creditors on the total
cancellation of Africa's external debt.
President Mbeki has successfully utilised various
opportunities since then, during bilateral visits
and at regional and multilateral meetings, to present
an economic and social development agenda for Africa.
He has been working with President Bouteflika and
President O Obasanjo of Nigeria, in terms of an
extended mandate from the OAU and from the South
Summit, to develop the Millennium African Renaissance
Programme (MAP). This global initiative endeavours
to change the place of Africa in the global economy.
It is based on the twin priorities of poverty alleviation
and people centred development (economic growth
and social justice). Debt is one of the major issues
emphasised in the process of discussing what needs
to be done. Debt is not seen in isolation, but as
a vital part in an overall, enhanced and coordinated
package of measures, aimed at developing a new world
agenda to integrate the developing world into the
global economy. The slow pace of debt relief remains
a critical obstacle in this process.
Pursuant to the Sirte and South Summit mandates,
President Mbeki, along with Presidents Bouteflika
and Obasanjo, went to the G8 Summit in Japan during
July 2000 to engage the G8 leaders on the issues
of concern for the South, particularly the debt
issue. The matter was also raised during the 2000
UN Millennium Summit.
Debt cancellation, coupled with the efficient utilisation
of scarce financial resources and macro-economic
stabilisation policies, is a fundamental condition
for growth, development and the eradication of poverty.
Unsustainable debt has a severe impact on resources
available to address economic and social development
needs. Resources are wasted on debt repayment and
foreign debt servicing, instead of where they are
most needed, eg education, health, and infrastructure
The situation becomes even more untenable when
coupled with declining levels of overseas development
aid and foreign direct investment, and deteriorating
terms of trade and international market access.
Existing measures, such as negotiations within the
London and Paris Clubs, bilateral negotiations and
the HIPC Initiative have not succeeded in resolving
the debt crisis. The total external debt stock of
the continent, despite the best efforts, continues
to increase, as does the debt to GDP ratio and the
debt to export ratio. Sums of money greater than
the original debt have been paid, but, due to the
capitalisation of arrears, the debt has increased.
The enhanced Highly Indebted Poor Countries (HIPC)
Initiative adopted in Cologne and endorsed at the
World Bank/IMF Annual meeting of September 1999,
attempted to address the deficiencies identified
in existing debt relief measures. It attempted to
provide deeper, faster and broader debt relief,
while forging the vital link between debt relief
and poverty reduction and development. In general,
the enhanced HIPC was widely welcomed at the time.
However, even the enhanced HIPC has serious shortcomings
and increasingly it can be seen that the initiative
is failing in its goal of providing accelerated
relief. The financial commitments made to the enhanced
HIPC largely still have to be met and implementation
is proceeding too slowly.
In Washington during April 2000, Minister Manuel
addressed the key IMF policy body, the International
Monetary and Financial Committee. He stated that
the enhanced HIPC initiative was not working and
needed to be revised. The commitments made to the
initiative were not being followed up, and the deeper,
faster, wider debt relief envisaged was not happening.
Financing of the US$ 28 billion initiative still
remains a major problem.
In this regard, South Africa, Nigeria and Botswana,
amongst others, have made contributions to the HIPC-PRGF
(Poverty Reduction and Growth Facility) Trust. The
qualification process under the initiative is too
cumbersome, prolonged, resource intensive and complex.
In order to qualify, detailed poverty reduction
strategy papers (PRSP) have to be developed by countries,
in consultation with civil society. Furthermore,
these strategies have to be implemented for at least
one year in order to qualify for relief. This presents
a major obstacle/conditionality for eligibility,
in that the funds deriving from relief are needed
for the very poverty implementation that states
are expected to pursue before receiving any relief.
This process of policy formulation, implementation
and management also presents a major human resource
capacity challenge to poor states.
The linkage between multilateral and bilateral
creditor support for relief presents another problem,
particularly where developing states are involved.
Debts owed to developing states should be excluded
from burden sharing requirements. There is a concern
that the problems of middle income states are not
being addressed. Lastly, Minister Manuel called
for the developing world to have a greater say in
the global financial organisations.
In statements following the same Committee meeting,
the Chair of the Committee and the Acting Managing
Director of the IMF were more positive, talking
of progress made under the enhanced HIPC initiative.
They welcomed the establishment of a joint World
Bank-IMF Committee to facilitate implementation
of the initiative and of poverty reduction strategies.
However, they did urge all parties to work for faster
and more effective implementation and to ensure
that as many countries as possible reach decision
point by the end of 2000. There are 41 HIPC states,
33 of which are in Africa.
Both sides have roles to play in the process of
debt relief. For creditors, relief must not replace
other forms of development and growth support, such
as increased flows of development aid, increased
foreign direct investment, access to capital, and
market access. The debtors must continue with economic
policy reforms, structural adjustment, liberalisation,
and poverty alleviation programmes.
An enabling environment for the mobilisation and
efficient utilisation of scarce resources, such
as the savings from debt relief, must be in place.
All attempts should be made to ensure that the basis
for linking debt relief to poverty reduction is
realised, ie poverty must in fact be reduced. The
linkage should not become just another conditionality.
Speedy, flexible and clearly defined eligibility
criteria and time frames for graduation need to
be reviewed, in order to immediately bring relief
to countries faced with an untenable debt overhang.
Generally, the matter is still being looked at
from the perspective of the needs of the creditor
rather than those of the debtor, eg criteria used
to measure debt sustainability still focus on levels
of debt service and debt stock, rather than the
capacity to pay and the growth, poverty reduction
and infrastructural needs of a country.
The report of the UN Secretary-General for the
Millennium Assembly states that debt relief must
be an integral part of the international community's
contribution to development in poor countries. The
linkages between debt cancellation, poverty eradication
and finance for development are accepted. It states
further that the expansion of debt relief programmes
under the HIPC initiatives must be implemented without
further delay. Progress under HIPC has been slow
and the enhanced HIPC endorsed in September 1999
has not yet been implemented.
The report calls upon donor countries and international
financial institutions to cancel all official debts
of the heavily indebted poor countries, in return
for them making demonstrable commitments to poverty
reduction. New approaches to the debt problem are
required. The report proposes cancellation for those
who have suffered major conflicts or natural disasters,
expanding the number of states in the HIPC scheme
(by allowing them to qualify on grounds of poverty
alone), pegging debt repayments at a maximum percentage
of foreign exchange earnings, and establishing a
debt arbitration process to balance the interests
of creditors and sovereign debtors. The Secretary-General
concludes by saying that, without a convincing programme
of debt relief, the objective of halving world poverty
by 2015 will be but "a pipe-dream".
In conclusion, the initiatives taken and achievements
forged over the past year or so should be consolidated.
The message needs to be conveyed that the debt issue
continues to present a critical obstacle in the
development of Africa and the fight against poverty.
Existing measures must be accelerated, improved
and implemented. Commitments made under the existing
relief mechanisms, particularly relating to financing,
must be met. Shortcomings inherent in present initiatives
must be resolved.
A radically new initiative must be developed to
cover the gap between existing measures and the
ultimate objective, represented by the total cancellation
of Africa's debt. Coordinated action by African
governments, to put in place a unified framework
to address the debt issue on a continent-wide basis,
while still allowing for a case-by-case, country-by-country
analysis and assessment, is required. The different
types of creditors and debt should also be factored