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In October 2019, long before the global coronavirus epidemic, the World Bank already said without shame that: “If the circumstances remain the same, the [global] poverty rate should decrease to just 23% in 2030”. At the same time, it presents a bleak future for African countries. Also according to the World Bank: “global poverty will become increasingly African, rising from 55% in 2015 to 90% in 2030”. In other words, in 2015, 55% of the world’s poor were in Africa and in 2030, 90% of the world’s poor will be in Africa.

By Yves Mwana Mayas and Cesar Neto

 

Once again, we say: this was before the coronavirus crisis.

This statement resembles an ad for a horror movie. It is up to the working class and the poor to understand the mechanisms of debt, to organize and combat.

So, let’s start with two concrete examples, try to understand, explain the mechanisms of formation of the African external debt and discuss how to get out of this “catastrophe that threatens us”, as Lenin would say. In fact, it is worth resuming this important text.[1]

 

The formation of the current African external debt

After the Second World War, the European imperialist countries were destroyed and in debt. In the war, and especially in the countries that were occupied, roads, bridges, port facilities, electrical systems, fields and their agricultural and agrarian production, etc. were destroyed. Everything needed to be rebuilt.  Everything that was built with the exploitation of workers and the overexploitation of the colonies should be rebuilt. The needs were immediate, the times were short, and therefore the exploitation of the workers intensified to “build the homeland of all“. In the colonies that had lived for decades, the imposition of slave labor, occupation of the lands of entire populations, theft of material, everything should be intensified.

Even so, the main imperialist countries lacked money. The World Bank, always attentive to the interests of the capitalists, reached out and lent money to Belgium, France and England. These three countries were very grateful for the help and reminded the WB that they needed more than money, they also needed to pass the crisis on to the colonies, intensifying their exploitation.So, the loans would not go out in the name of the imperialist countries. They would leave in the name of the colonies that should honor the debts of their metropolises. Thus, loans from Belgium would be paid by the Democratic Republic of Congo, Rwanda and Burundi. French loans by: Algeria, Gabon, Mauritania, Senegal, Mali, Guinea-Conakry, Ivory Coast, Niger, Burkina Faso and Benin. And English loans by: Kenya, Uganda, Tanzania, Zimbabwe, Zambia, Nigeria, English Guyana (South America).

The intensification of the overexploitation of the colonies led to a wave of dissatisfaction that was expressed in strikes, general strikes, insurrection and armed confrontation. On the defensive due to the crisis that affected them and anti-colonial struggles, part of imperialism gave in and sought negotiated independence.

 

Belgian Congo: insurrections, independence and foreign debt

The Belgian Congo, later Zaire and now the Democratic Republic of Congo, was one of the countries that went ahead in the fight against the intensification of overexploitation and, as a consequence, advanced to the anti-colonial struggle.

The formation of the external debt of Rep. Democ. Congo gained a jump with World Bank loans to Belgium in the post-war period. There were obviously other loans, for example for the reactivation of the Shinkolobwe uranium mine.

For the construction of the first atomic bomb, the USA bought uranium from the Belgian company, Union Minière from Haut Katanga, produced at the Shinkolobwe mine in Congo. There were 1,200 tons. After the end of World War II, the USA continued to strengthen its atomic industry. The best uranium was in the Congo. To remove the remaining uranium, “a huge amount of money was poured into the construction of a processing plant near Shinkolobwe. The World Bank provided $ 70 million in loans to Belgium to improve Congolese transport and infrastructure and facilitate the uranium export[2]“.

And who got the debt? The US that needed uranium so badly for its imperial-military control? The Union Minière of Haut Katanga who sold the uranium? Belgium, a metropolis nation that so badly needed political support from the United States for its reconstruction? Or did the World Bank grant debt relief?Or maybe the chemical and engineering corporations: Bechtel[3], DuPont, Raytheon, Eastman Kodak, Union Carbide[4] who had big contracts for building the atomic bomb[5]? Ah … perhaps Pan American Airways, which transported the uranium illegally, Caltex (California Texas Oil Company)[6], which provided its infrastructure to cover up the American secret agents of the OSS (Office of Strategic Service)?

None of them took responsibility for this debt. It was passed on unfairly to the Congolese people. This is an “unfair debt” in the broad sense of the term. It is unfair because it was a debt that served the interests of US and Belgian imperialism, a gigantic uranium mining company, and by corporations that directly or indirectly made astronomical profits from the production of the atomic bomb. It is also illegal, unfair and immoral because the exploration and transport of radioactive uranium was carried out without any security measures. Congolese workers “were not informed about the terrible health and safety risks to which they were exposed; they were simply used as workers, as if they had no rights as equal human beings. This was a process for which the USA, the United Kingdom and Belgium have a great responsibility[7]“.The transport of uranium through the interior of the country, without protection, has led to “What we are witnessing now is genetic mutation. The pollution has been so deep that it has reached the level where we are giving birth to children without limbs, without heads, without legs. , without a mouth. This is happening not only in one case, but in many cases in Lumbumbashi[8].

Now let’s see another example of the formation of foreign debt in Africa.

 

South Africa: the odious debt inherited from apartheid

For its support and maintenance the apartheid regime used extreme violence and internal and also external repression. Internal repression was based on: political imprisonment, detention without trial, torture and forced removal. On the external issue, in the face of the anti-colonial struggle in Southern Africa, in particular, Angola, Namibia and Mozambique, South Africa financed, trained, gave territorial protection and provided arms to pro-imperialist military groups.

Internal struggles against apartheid were growing day by day and putting the existence of capitalist South Africa at risk beyond the regime. At the same time, international repudiation of the racist segregation regime was growing. In 1976, the United Nations General Assembly voted Resolution 31/33 in which it urged banks not to provide financial assistance to the white minority government and called on all states to stop new investments and financial loans to South Africa.

Apartheid only ended in 1994 and in that lapse between the UN Resolution (1976) and the end of the regime, South Africa continued to repress internally and interfere in the anti-colonial struggle of its neighbors. Both tasks required weapons, ammunition, technology, etc. which continued to have access through acquisitions of international manufacturers and with the financial backing of large banks.

During the United Nation blockade, arms purchases were made by the state company ARMSCOR, which offered a premium on all transactions between 25% and 30% more than the normal cost.[9]

The large oil and steel companies in England and the USA, the communications and automobile companies in Germany, nuclear energy companies with Franco-German capital continued to invest and remit profits through the banks of their respective countries. And it was these banks that helped finance the purchase of arms.

Among these banks we can mention from the United Kingdom: Barclays and Hill Samuel; USA: Citibank and Chase Manhattan; Germany: Deustsch Bank, Dresdner Bank, and Commerzbank; France: SocietéGenérale, and Paribas; and Switzerland: UBS, and Credit Suisse. At that time, arms dealers and banks were euphoric. They said at the time: “Never [South Africans] have been as welcome in European markets as they are today[10]

 

An intricate system of camouflaged operations

Armscor received orders from SADF[11] and the Central Bank of South Africa authorized purchases based on a budget item voted by the National Congress, known as “Secret Defense Accounts” (SDA – Special Defense Account). Next step, Armscor sought allies abroad for illegal purchases. There were banks for financing and banks for remittances. 70% of remittances were made by a bank in Belgium, Kredietbank and its branch in Luxembourg: Kredietbank Luxembourg (KBL).

KBL executives advised Armscor on the opening of façade companies and secret accounts. “76 shell companies were created in Liberia, which in turn operated 198 Kredietbank accounts. Another 39 shell companies were created in Panama.”[12] The scheme was set up, but great care was needed. So “over 800 numbered bank accounts meant that billions of rand moved out of South Africa did not go directly to arms companies. Instead, the money was transferred between numerous anonymous bank accounts to camouflage where it came from and to. where were you going”.[13]

In the diagram below we see the Armscor modus operandi:

It is estimated that at the height of internal and external repressive policy, in the 1980s, 25% of the national budget was used in the so-called Secret Accounts for Defense.

 

An odious debt

In the case of Congo we speak of “unjustdebt” and in this case it is an “odious debt”. Odious debts are those that: a) were assumed against the interests of the population and not for their benefit; b) were not consented by the population; and, c) The creditors knew the two facts above and proceeded with these loans regardless.

“In the case of apartheid, it is clear that the vast majority of South Africans did not consent to or benefit from these loans. In fact, this debt served to finance oppression and to prolong a system considered a crime against humanity. It is also true that creditors were aware of the conditions in South Africa under apartheid and the regime’s actions and their consequences for black South Africans. It has also been repeatedly raised by the international community that state funding is likely to contribute to the perpetuation of the regime and its policies.”[14].

We could continue to develop the theme of public debt in South Africa, but this example is enough for us to understand the role played by CNA-Cosatu-PC of South Africa in its 26 years of government. A blessing for bankers and transnationals.A disaster for the workers and the poor people.

 

After independence, the empire counterattack

The independence of African countries was a major political victory. We cannot say the same thing from an economic point of view, because, by not advancing in the expropriation of foreign capital and large capitalist groups, it left the possibility for the empire to attack. This counterattack occurred in several ways, but we want to summarize it in three major policies developed by the World Bank and the International Monetary Fund.

 

  1. The exploitation of mineral resources is the only solution for indebted countries

In the early 1980s, there was a serious crisis in world capitalism that became known as the “Foreign Debt Crisis”. In the process, many countries declared that it was impossible to continue paying their debts. Some countries declared themselves in default and others temporarily suspended payment. In Africa, where many countries had just left the colonial period and with huge debts inherited from the old empire, as we explained in the Congo example, the debt crisis was violent. The World Bank presented an alternative through the Strategy for Minners in Africa.

The World Bank imposed a strategy where countries should close their industries, not worry about unemployment and seek to maximize mineral exploitation. According to the World Bank, “The report’s main conclusion is that the recovery of the mining sector in Africa will require a shift in government objectives towards a primary objective of maximizing long-term mining tax revenues, rather than pursuing other economic or political objectives, such as control of resources or improvement of employment”[15]

In addition to leaving aside the industrialization of countries and the generation of jobs, the World Bank imposed that mining exploitation would be at the service of paying the debt, being exploited by private companies and closing state-owned mining companies. In summary, these measures attacked the little sovereignty achieved in the struggle for independence.

 

2.      Highly Indebted Countries

The International Monetary Fund announced in 1996 a “aid” program aimed at countries that they considered to be highly indebted, which received the pompous name of the Initiative for the Heavily Indebted Poor Countries , also known as “HIPC Initiative” for its acronyms in English. Among the 52 countries on the African continent, 33 are considered poor by the IMF[16]. The HIPC Initiative is based on the correct idea that there are countries that are unable to pay their debts. The problem is that they do not explain how this debt started or how it developed. The HIPC Initiative’s proposal is to lend more money to countries to pay interest on these debts that are illegal, illegitimate or hateful. However, they lend but demand as a counterpart “control of public spending”, that is, reduction of spending on health, education, housing, financing for small farmers, etc. Then the countries that are already considered poor, will become poorer because the Union budget will be at the service of paying interest, only interest, of the external debt.

 

3. Bad Governments and Corruption

Since 2011, international organizations have invented a new panacea to explain the problem of debt growth. Now the problem is bad governments, the lack of bourgeois state control bodies and corruption[17]. Of these three elements, the one that gained the most followers was corruption. In any debate at the University, in the media or in the bars where you have a beer, the conversation is always the same: the problem of corruption. For this, the bourgeoisie has an army of reformist intellectuals, NGOs, bureaucratic unionists and even churches that promote prayers “in defense of the country and against bad governments” Corruption obviously exists, but the problem with the problems is the debt itself with interest in the clouds and with mineral production totally controlled by financial capital as we can read in the article “Imperialist Financial Capital in Africa: Overexploitation of the working class and the theft of natural wealth[18]

 

External debt continues to bleed on the African continent

The debt formation process in the African continent had its origin in the colonization process, following the example of the Congo reported here, which we can identify in other countries. There is another emblematic example that took place in South Africa during apartheid that was not questioned by the governments of Mandela and his successors.

In fact, throughout the post-independence years, we had other forms of bleeding from the African economy. We will describe three major ways:

 

  1. Capital Flight:

A study started in 2007[19] and constantly revised presents amazing data on capital flight. According to the 2018 edition[20]: “This report provides updated estimates of capital flight from a representative sample of 30 African countries from 1970 to 2015 using an updated algorithim. The results indicate that this group of countries los a combined $ 1.4 trillion through capital flight over the 46 year period. Including interest eranings on capital flight brings the cumulative amount to $ 1.8 trillion. The amount vastly exceeds the stock of debt owed by these countries as of 2015 ($ 496,9), making the group a “net creditor” to the rest of the world.IThis report studies 30 countries and together they represent 92% of the continent’s GDP.

And who are the ones who bleed our economies with capital flight? Let’s see this information:  “Indeed oil-rich countries feature prominently on the top of the list in terms of volume of capital flight. Nigeria leads the pack with $ 340 billion, followed by Algeria ($ 141 billion), Angola ($ 61 billion), Cameroon ($ 43 billion) and the other five oil exporters with smaller amounts. The oil-rich countries together account for 55 percent of the continent’s cumulative capital flight over the period[21]“. This means that behind the capital flight are large companies, including oil companies. Everyone knows this, but States and their governments are direct agents of companies and therefore do not act.

This bleeding represents an attack on public accounts. Let’s look at other information: “The evidence also shows that capital flight represents a heavy burden relative to the size of the economy for most countries. For the 30 countries as a group, cumulative capital flight represents 65,6 percent of thei combined 2015 GDP. The ratios of cumulative capital flight to 2015 range from 9.9% for Egypt to 705.9% for the Republic of Congo[22].

One way of capital flight is through under-invoicing exports or over-invoicing imports. In under-invoicing, a commodity that costs US $ 100 is invoiced for US $ 10. In this way, the payment of taxes and fees on the US $ 90 is avoided and the repatriated profit is much lower. In overbilling, the mechanism is the same as a product that costs 10 is imported for 100 and in this way large amounts of dollars are sent “legally” abroad..

 

2.      Illicit Financial Flows – IFFs:

Illicit Financial Flows increase as the capitalist crisis worldwide grows. The table below shows how, from 2004 to 2013, it jumped from 465 billion dollars to more than 1 trillion dollars. But the crisis continued to grow, the data available are from seven years ago. The question is what will be the value today?.Illicit financial flows are the result of smuggling and illicit drug trafficking, among other activities outside the law. Smuggling can range from cross-border vehicle “small business” between Sudan and its neighbors, or smuggling of wild animals or illegal forest products through Kenyan ports. Smuggling can also be of large quantities of minerals that illegally leave landlocked countries for Atlantic or Indian ports.

 

  1. The revolving door

The best way to explain the inflow and outflow of dollars is by calling the mechanism known as the “revolving door”. Between 1970 and 2002, sub-Saharan Africa received 294 billion in loans. Of these, 268 were used to pay debts and still owed 210 billion. In other words, the new loans were intended to pay off old debts. Currently, African debt is estimated at 500 billion.

 

Stop paying the debt to be able to live

 An important organization for the struggle and defense of workers and poor people, the International Workers’ League, warns of the fact that: “The social consequences of the pandemic, associated with unemployment and decline in wages because of the economic crisis, will be brutal. In the U.S., 30 million workers applied for unemployment insurance in six weeks, a figure only seen in the 1929 depression. 20 to 25 million jobs could be lost in Brazil. The consequences can be like those of a war. Not in terms of physical bombardment of factories but the destruction of productive forces can occur on a gigantic scale, starting with the main one: the human workforce. Millions of workers can die, and hundreds of millions will be condemned to an even greater poverty than today“.

Immediately suspend the payment of the external debt. Both principal and interest. Life is more important than profit. This debt was not made by the workers and the poor people. This debt, even if it was fair (and it is not), could have already been paid with the amounts that escaped the continent with the “Capital flight” and the “Illicit financial flows – IFFs”. And as if it were little, we still have the Revolving Door mechanism, which again shows that this debt does not exist..

 

International campaign for non-payment of debts

Trade unions, homeless organizations, youth, women, and the poor in general should make non-payment of foreign debt the center of their claims. However, given the nature of capitalism this is not a simple task and in that sense it is necessary to build a great unity among the peoples through their organizations to impose the non-payment of the debt. Only then will our countries be able to effectively combat Coronavirus and the effects of the recession.

 

[1] LENIN. A catástrofe que nos ameaça e como combatê-la. -https://www.marxists.org/espanol/lenin/obras/oe12/lenin-obrasescogidas07-12.pdf

[2]Borstelmann, Thomas. Apartheid’s reluctant uncle: The United States and Southern Africa in the Early Cold War (Oxford: Oxford University Press, 1993), pag. 182

[3] Bechtel became famous in the 2000s, when it bought the state-owned water company in Cochabamba in Bolivia, doubled the price of water, to reduce consumption and export the surplus to Chile. The Water War in Cochabamba, defeated Bechtel and reversed privatization

[4] General Golbery do Couto e Silva, the main articulator of the Coup d’état in 1964, in Brazil, was president of Union Carbide in that country for many years.

[5]Zoellner, Tom, Uraniun: War, energy and Rock that Shaped the World. (London: Penguin, 2010 page 47)

[6] CALTEX later became TEXACO and finally Chevron Texaco. Texaco in the 1990s was famous for spreading oil on the lands of Ecuadorian indigenous reserves causing several deaths from cancer.

[7] Williams, Susan. Spies in the Congo.The Race for the Ore that Built the Atomic Bomb.( London: Hurst & Company, 2018), pag. 265

[8]idem, pag. 266

[9]Hennie van Vuuren, Apartheid Guns and Money.A Tale of Profit. Jacana: Cape Town, 2017

[10] A warn welcome from the lenders (Uma recepçãocalorosa dos credores). – EuromoneyMagazin – June 1984

[11] SADF – South African Defense Force – was the official name of the armed forces until 1994, when it was replaced by the South African National Defense Force.

[12]OPEN SECRETS. The Bankers: corporations and economic crime report”  Johanesburgo, 2018 pag 12

[13]Hennie van Vuuren, pag. 204-205

[14]OPEN SECRETS. The Bankers: corporations and economic crime report”  Johanesburgo, 2018 pag 18

[15]The International Bank for Reconstruction and Development/ The World Bank . Strategy for African Mining – Washington/DC – 1993

[16]Angola, Benin, Burkina Faso, Burundi, Camerún, Chad, Democratic Republic of Congo, Congo, Ivory Coast, Ethiopia, Ghana, Guinea, Guinea-Bissau, Guinea Ecuatorial, Kenya, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique , Niger, Central African Republic, Rwanda, Santo Tomé and Príncipe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda and Zambia.

[17] https://litci.org/es/menu/movimiento-obrero/africa-nacionalizar-y-estatizar-la-produccion-mineral-para-poder-vivir/

[18] https://litci.org/en/imperialist-financial-capital-in-africa/

[19]was presented at the Senior Policy Seminar on “Capital Flight from Sub-Saharan Africa: Implications for Macroeconomic Management and Growth”, jointly organized by the Association of African Central Bank Governors, the Reserve Bank of South Africa, and the World Bank, in collaboration with the African Development Bank, the International Monetary Fund, and the Bank of England, October 30 – November 2, 2007 Pretoria, South Africa.

[20]Ndikumana, L.  and Boyce, James K. CAPITAL FLIGHT FROM AFRICA: Updated Methodology and New Estimates. 2018

[21]Idem

[22]Idem