In the blunt words of Brookings Institution scholar, Raymond Baker “this is the ugliest chapter in international commerce since slavery”, while the All-Africa Council of Churches has referred to Africa’s debt burden as “a new form of slavery, as vicious as the slave trade.” Indeed, the historical record of Africa’s “debt burden” is critical to our study, since it largely explains why African states have been unable to diversify from their dependence on natural resources and chart independent economic paths. The debt crisis continues to have a devastating impact on the economies of developing countries, and is yet to be resolved. In particular, the legal aspects of Africa’s debt burden need to be highlighted, particularly its origins as perceived under international law, “which now considers the debt to be illegitimate.” The concept of “odious debt” is an established legal principle, and it is used to refer to debts owed even though the borrowed funds have been misappropriated by state officials and were either used for personal purposes or oppressing the population. Furthermore, the creditors may be considered to have committed a hostile act against the people, if the borrowed funds have been used for purposes that were not in the interests of the people, with the knowledge of the creditors. In such cases, creditors cannot legitimately expect such debts to be repaid. Debts can be considered odious and do not have to be paid if the following three conditions are met: (1) the government incurring them was despotic (i.e. lacked the consent of its citizens); (2) the debts did not benefit the populace; and (3) the creditors were aware of the likely misappropriation of the funds they were advancing.
The principle of odious debt was first applied by the U.S., after it seized control of Cuba from Spain. Although Spain insisted that Cuba repay the loans it owed, the U.S. refused to do so.
Instead, the U.S. argued that this debt ought not to be repaid, since it had been imposed on Cuba by force of arms and served Spain’s interests rather than those of its former colony. This precedent was subsequently upheld by international law in the case of Great Britain v. Costa Rica (1923), whereby funds were used for illegitimate purposes with the full knowledge of the creditor. The resulting debt was cancelled.

There are other examples of debt repudiations based on their odious character include:
(i) the three waves of debt repudiations by the United States in the 1830s, 1860s and 1870s;
(ii) the Mexican debt repudiations in 1861,1867,1883 and in the 1910s;
(iii) the repudiation by Peru of the debt reclaimed by the Parisian bankers;
(iv) the repudiation by the British of the debt reclaimed on the Boers after the conquest of the Boer Republics in 1899-1900;
(v) the repudiation by the Bolsheviks in 1918 of the debt left by the Tsars;
(vi) the repudiation of Germany’s debts on Poland and its African colonies in 1919;
(vii) the abolition of the debt of the part of Poland that was colonised by the Tsarist Empire;
(viii) the abolition, by the Bolsheviks in 1920, of the debt of the three Baltic States and of Persia;
(ix) the large debt repudiations made by Brazil and Mexico in 1942-43;
(x) the Chinese debt repudiations in 1949-52;
(xi) the repudiation by Indonesia of the debt reclaimed by the Netherlands in 1956;
(xii) the repudiation of the colonial debt by Algeria in 1962;
(xiii) the three Baltic Republics’ repudiation of the debts reclaimed, this time by the other former members of the USSR, in 1991;
(xiv) the abolition of Namibia’s debt, by Nelson Mandela’s South African government in 1994;
(xv) the abolition of Timor-Leste’s colonial debt in 1999-2000;
(xvi) the abolition of 80% of Iraq’s debt in 2004;
(xvii) Paraguay’s repudiation of debts reclaimed by Swiss banks in 2005;
(xviii) Norway relaxing its claims on five countries (Ecuador, Peru, Sierra Leone, Egypt and Jamaica) calling for repayment of debts concerning the production and delivery of fishing boats in 2006; and
(xix) the abolition, in 2009, of the part of the Ecuadorian debt that had been identified as non-legitimate by the 2007-2008 debt audit Commission.

In Africa’s Odious Debts, Ndikumana and Boyce reveal the shocking truth, that contrary to the popular belief that Africa is a drain on the financial resources of industrialized nations,
the continent is in fact a net creditor to the rest of the world. The extent of capital flight from sub-Saharan Africa alone is astonishing: over $700 billion in the last forty years prior to
2011. However, although Africa’s foreign debts are public, owed by its people through their respective governments, the continent’s foreign assets remain private and hidden.  Ndikumana and Boyce expose the intimate links between foreign loans and “capital flight”: in recent decades, more than half of the money borrowed by African governments has left within the same year, mostly ending up in private accounts at the same banks that provided the loans in the first place. Meanwhile, Africa’s debt-service payments continue to drain its resources, cutting into public spending on crucial services such as healthcare. The authors argue that African states, with the support of the international community, should reject these odious debts since the borrowed funds did not benefit their citizens, but mostly ended up in the pockets of corrupt local elites, who worked to ensure that their countries remained aligned with foreign interests.
The total external debt of all developing countries in 1980 was $609 billion, and in 2001, after twenty years of structural adjustment, this figure had increased to $2.4 trillion. Moreover, countries in sub-Saharan Africa paid $3.6 billion more in debt service than what they received in new long-term loans and credits in that same year. The amount that Africa spends on debt-service payments is almost four times more than what it spends on healthcare. In fact, since 1980, African countries have spent a total of $255 billion in debt-service payments, which is four times the amount that was originally borrowed. This also exceeds the amount that African exports have earned, many times over. According to Oxfam, “for every $1 given in aid…$4 are paid back to rich countries…” However, these resources overwhelmingly flow to the already wealthy in those countries:“$30 million dollars an hour is being paid by the Global South to the richest 1% in the richest countries”, while the average citizens in those same countries struggle to heat their homes and pay their bills in “this new, modern economic colonialism”, whereby “they too are the victims.” Meanwhile, a recent study found that “an annual wealth tax of up to 5 percent on the world’s multi-millionaires and billionaires could raise $1.7 trillion a year, enough to lift 2 billion people out of poverty.”

Africa’s also loses its wealth through the operations of multilateral companies. A 2014 report titled Honest Accounts? The True Story of Africa’s Billion-dollar Losses revealed that “while $134 billion flows into Africa each year, predominantly in the form of loans, foreign investment and aid, $192 billion is taken out, mainly in profits made by multinational companies, tax dodging, and loan repayments.” Africa therefore suffers a net loss of at least $58 billion a year, which is almost “double the amount of aid the continent receives annually.” The report further revealed that while African countries repay $21 billion in loans each year, multinational companies make profits worth $46 billion during the same period. Illicit financial flows facilitated by a global network of tax havens results in the loss of another $35.3 billion. Thus, wealth is increasingly being concentrated within a network of both local and foreign elites.
The report concluded that: “Africa is not poor, but a combination of inequitable policies, huge disparities in power, and criminal activities perpetrated ad sustained by wealthy elites both inside and outside the continent are keeping its people in poverty. The UK and other wealthy governments are at the heart of this theft.” The historical links between slavery, colonialism, and more recently neoliberalism, can be used to demonstrate that Africa’s debt is illegitimate and an instrument for both subordinating the continent and plundering its natural resources. One of the greatest barriers to economic recovery and renewal for most African countries is “the odious and illegitimate debt burden which acts as a constraint on their ability to pursue sustainable and equitable growth, human development and poverty reduction.” The impossibility of repaying this debt and the persistent crises stemming from meeting debt service payments has resulted in negotiation processes that are primarily political-economic interventions implemented through the IFIs. In this way, “the economic policies of the indebted countries can be…moulded into the purest possible forms of neoliberalism.”
African nations must therefore reject these odious debts as a necessary step towards achieving true independence and self-determination, or we say in Kiswahili, Madaraka.

Leonce Ndikumana – Author, Africa’s Odious Debts