Africa: cost of resource-backed loans [Business Africa]

A wake up call for developing nations borrowing to fund infrastructure. A new report by the Natural Resource Governance Institute is warning of crippling debt levels in developing countries. The report highlights resource-backed loans shrouded in secrecy at the detriment of the very people they are intended to benefit.

After considering more than 50 of such loans made between 2004 and 2018, authors found the value of these loans to be worth over $164 billion. It said 77 percent came from China. Angola, Chad, the Republic of Congo, South Sudan and Venezuela were mentioned as countries with excessive debt levels, thus landing them in economic crisis.

We speak to Silas Olan’g, Africa co-director at the Natural Resource Governance Institute. Olan’g said ‘‘there’s potential corruption associated to these loans because the terms are not known and so it is very possible that at the end of the day not all that has been borrowed and committed in terms of natural resources of the country to repay the loan actually goes to pay the loan.’‘

In the medium term, yes there is infrastructure in place in these countries, but the tricky part is at what cost in terms of the long term?