Addressing the recent 5th Mid-Year Coordination Meeting of the African Union (AU) in Nairobi, Kenya, African Development Bank Group President Dr. Akinwumi Adesina mentioned the importance of “decisively tackling Africa’s rising debt challenge.” He urged and expressed concern with Africa’s total debt stock, which stands at $1.3 trillion. “The cost of debt servicing reached $22 billion in 2022 and is expected to rise this year,” reported Business Ghana.
Kenyan host, President William Ruto, echoing Adesina said, “It is my prayer that we finally make the right decision and build an organization that is fit-for-purpose, has the requisite finances, the needed voice, and the leadership that can project Africa’s position much more clearly, with a strong voice, so that we can take our place in the community of nations.”
The recently elected president of Kenya bemoaned the current global financial architecture, stating part of Africa’s debt and liquidity challenges were caused by an unfair financial architecture. “We want a financial system that doesn’t profile Africa as risky.”
He added, “Today, Africa has $640 billion in debt stock, paying close to $70 billion every year. It is only fair that we have a financing mechanism that treats us equally.”
›The bank president said what Africa needs is to change its approach toward debt and called for an end to all-natural resource-backed loans. “They are not in the interest of Africa, as they are non-transparent. They undervalue resource assets and pawn national assets,” he stated. Adesina added that natural resource-backed loans had led to “predatory creditor lending practices that are leaving borrowing countries worse off.”
Economist Redge Nkosi, the Pretoria-based founder and executive director of First Source Money and Public Banking of South Africa, said to Africa Watch, that what Africa and the Global South needs is to decouple from the western Bretton Wood imperialist model.
Nkosi, a former member of the Nelson Mandela administration said, “They ought to be reformed but reformation is unlikely because the powerful Global North nations benefit from the poverty of the Global South. Abusing its dominant position, the U.S. has done us a great favor,” Nkosi said.
The favor is it has “abused its dominant position by geopolitically weaponizing this position,” and assuring the Global South, including Asia, Latin America, the Caribbean, and Africa that its survival depends on decoupling from Europe and the United States.
Today’s dominant reserve currency is the U.S. dollar and to a lesser extent the Euro. This means all invoicing of international trade is done mostly in U.S. dollars. According to Nkosi, foreign exchange is done in U.S. dollars. The consequence gives the U.S. inordinate financial and geopolitical power. Since all reserves are in U.S. dollars, it gives America the ability to punish at will. Any country that does not do U.S. bidding—like Iran or Afghanistan or Cuba—is sanctioned, “by either confiscating the reserves that are in U.S. dollars or blocking those countries from accessing infrastructure for the transmission of monies across the world.” This is called the Society for Worldwide Interbank Financial Telecommunications or SWIFT. SWIFT is a vast messaging network used by financial institutions to send and receive information, such as money transfer instructions quickly, accurately, and securely.
Nkosi presented at the June BRICS preliminary meeting in Cape Town, South Africa, for the upcoming BRICS Summit in August hosted by its five foreign ministers. They included Chinese Vice Foreign Minister Ma Zhaoxu, Brazilian Foreign Minister Mauro Vieira, South African Minister of International Relations and Cooperation Naledi Pandor, Russian Foreign Minister Sergey Lavrov, and Indian Foreign Minister Subrahmanyam Jaishankar.
Giving Africa Watch a summary of his presentation, Nkosi said, “De-dollarization and the construction of a new global financial monetary architecture” was the substance of his talk. “The Global South countries are sick and tired of the hegemony and the abuse of the hegemony led by the U.S. and Europe,” he said. “And we’re determined to ensure that institutions like the IMF (International Monetary Fund) and World Bank become as obsolete as they are destined to become.”
He said the system they proposed will be consistent with the global system they are wanting to put in place. This new global monetary system will reflect the dynamics of “countries across the world … not Europe and the U.S,” adding that, the Global South sees the handwriting on the wall. “Whether it’s Europe or the United States they are going to fight to reverse these new initiatives. These are the last breaths of a dying horse.”
Nkosi looks forward to a world run fairly by countries in a democratic way. Western economies are dying economies, said Nkosi, and if you read the financial pages they are coming to grips with this very fact. He said, historically they’ve exploited the mineral and natural resources of the Global South. The Global South has almost simultaneously awakened to their greed, corruption and exploitation and are now in the process of “decoupling from Europe and the United States,” he added. Follow @JehronMuhammad on Twitter
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