How the Exploitation of Africa Helps Fuel Global Capitalism

8 January by Chris Dite , Maha Ben Gadha


The political and economic crises roiling countries like Sudan and Tunisia right now cannot be separated from the global institutions of capital and the cycles of indebtedness that they impose.



The political and economic crises in Sudan, Tunisia, and Ethiopia have refocused attention on the increasingly volatile North and Horn of Africa. Faltering revolutions, military coups and the looming threat of balkanization have come to define the region in recent years. Tunisian president Kais Saied has imposed one-man rule, the Sudanese military has dissolved the civilian government, and Ethiopian prime minister Abiy Ahmed’s war on the Tigray Region threatens to tear the country apart.

The international financial press has trotted out the usual boilerplate in its attempt to explain this instability, asserting that African countries cannot manage their own affairs and that Western institutions must swoop in to rescue them. Once again, as the refrain goes, it’s a question of the West’s benevolence in contrast to Africa’s violence and corruption.

The forthcoming Economic and Monetary Sovereignty in 21st Century Africa seeks to challenge these explanations. The collection was born from a 2019 conference in Tunis organized by the Rosa Luxemburg Foundation’s North Africa office. It is edited by a group of young, bold African economists, authors of a fiery open letter challenging the economic orthodoxy that they argue has created the current crises. They hope to not only map the logic of the existing system, but to challenge it.

Jacobin sat down with Maha Ben Gadha, economic program manager at the North Africa office, to get a clearer picture of the connections between Western financial interests and the relentless political and social crises across Africa.

CD : The Financial Times recently admitted that International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
(IMF) policies are creating poverty and crisis in Sudan. Could you explain to readers how international institutions like the IMF contribute to the political instability in North Africa?

MBG : IMF policies are clearly creating poverty and instability in African countries. This isn’t just because they’re lending to dictators or corrupt governments — though this is part of the picture. It’s really due to the nature of the policies themselves, which impose austerity measures on countries that are already in economic and climate distress.

In Sudan, for example, it was the IMF insistence on removing fuel and bread subsidies in 2018 that caused the price of food, medicine, and transport to skyrocket. Its demand that the Sudanese Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx
devalue its currency was also a major contributor to higher costs on the imports needed for agriculture and other industries. These policies raised the cost of living for ordinary Sudanese people and unquestionably lead to more impoverishment.

Sudan is a country that lost its oil export revenues after South Sudan declared its independence. At the same time, it’s heavily dependent on imports like wheat, basic food, medicine, and chemicals for industry. These were factors that triggered the fall of the regime in 2019.

But no matter who is ruling, the IMF maintains the same austerity policies. The transitional council in Sudan, for example, had to further remove subsidies in order to be eligible for the debt relief program. This led to deadly riots in the poorer regions and bolstered enough anger to bring down the transitional council. In turn, this precipitated the military coup that took place last month. Political crises in Africa are always an opportunity for Western capitalist economies to set the conditions for more free-market measures, more free movement of capital, and more privatization.

CD : But this pattern isn’t limited to Sudanese crises, right?

MBG : The same story played out in Tunisia, both during the dictatorship and after the revolution. Whether it was while the transitional government was writing the constitution, during later elected governments, or even today, every new government finds itself with a list of policies that must be implemented in order to receive the benefit of the IMF, the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

, and bilateral aid. This aid brings fresh funds needed for servicing external debt and importing the food and industrial products from capitalist centres needed to fuel the economy.

African countries are in a trap of indebtedness — the more you seek loans the more you’re required to implement austerity measures that target wages, the privatization of state enterprises and the removal of subsidies. This makes the cost of living higher for the population. The scene is the same no matter which government is in power. Even if a regime falls, the neocolonial extractive model doesn’t. This is exactly what the Sudanese people chanted during their uprising: “Not yet fallen.”

CD : It’s been suggested that international donors should respond to crises by bypassing uncooperative African governments and using services like M-Pesa to lend directly to African citizens. This idea has been posed in the name of sovereignty and democracy in Sudan, but M-Pesa is owned by Vodafone, a UK-based multinational.

MBG : Of course giving money directly to people to fuel profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. extraction won’t change the extractive model. Political unrest and instability are always opportunities for the capitalist centres to set their preferred conditions and continue to impose them on our societies. What we need is to allow people in Sudan, Tunisia, or elsewhere in Africa to decide for themselves which economic model they need, not just who administers the existing model.

CD : A common retort to criticisms of the IMF is that international financial institutions are “scientific and neutral,” and that “ideological” African political organizations such as the Tunisian General Labour Union (UGTT) are responsible for Africa’s economic woes. How would you respond to this?

MBG : This is part of the ongoing neoliberal attack on unions and the working class. The role played by the UGTT specifically depends on the context. Observers sometimes deride it as a bureaucratic structure tainted with corruption. Sometimes they present it as a major sociopolitical actor and praise it. It was even nominated for the Nobel Peace Prize for its active role in establishing a national dialogue — a dialogue which, by the way, led to a technocratic government that continued negotiations with the IMF.

But today the most powerful union in Tunisia attracts the ire of the international financial institutions because of its resistance to implementing the IMF’s remaining conditions: reducing public sector employees’ wages, privatizing state-owned enterprises, and completely removing subsidies on fuel and food.

There’s huge pressure on the Tunisian government from the IMF and credit rating agencies Rating agency
Rating agencies
Rating agencies, or credit-rating agencies, evaluate creditworthiness. This includes the creditworthiness of corporations, nonprofit organizations and governments, as well as ‘securitized assets’ – which are assets that are bundled together and sold, to investors, as security. Rating agencies assign a letter grade to each bond, which represents an opinion as to the likelihood that the organization will be able to repay both the principal and interest as they become due. Ratings are made on a descending scale: AAA is the highest, then AA, A, BBB, BB, B, etc. A rating of BB or below is considered a ‘junk bond’ because it is likely to default. Many factors go into the assignment of ratings, including the profitability of the organization and its total indebtedness. The three largest credit rating agencies are Moody’s, Standard & Poor’s and Fitch Ratings (FT).

Moody’s : https://www.fitchratings.com/
to sign an agreement with the UGTT to pass these “reforms.” The attacks on the UGTT are fueling a debate that focuses on the public sector wages bill. But this debate in fact obscures reality. The real problem results from another IMF condition: the adoption of the central bank independence law in 2016. The resulting currency devaluation Devaluation A lowering of the exchange rate of one currency as regards others. directly resulted in the shrinking purchasing power of workers.

We hear a lot of accusations against the UGTT and comments about the skyrocketing wages bill. But to understand this assault on wages we should look at Tunisia’s position in the international division of labour. What is Tunisia selling to the world, and at what cost?

We specialized during the liberalization period in selling sheep, bulk olive oil, low value-added assembled industrial components, and tourism. This economic development was based on a low-cost female labour force and a race to the bottom in terms of working conditions. For decades in Tunisia, being a public employee was a safety net, a “nail in the wall” as the popular expression goes. It guaranteed access to consumer bank loans to buy a car or perhaps build a house. Today this is no longer possible. Hundreds of thousands of educated people like doctors and professors are unemployed. Whole regions are completely abandoned. There are very few job opportunities open to young people. We’re left with no basic social safety net.

These allegedly scientific and neutral proposals from the IMF will have consequences: the further deterioration of the public sector in terms of health and education. During the COVID crisis, Tunisia has suffered a lot from the deterioration of the public health sector — further privatization will be lucrative for foreign investors but dire for Tunisians. They’re currently targeting water, electricity, and transport — which are still publicly owned enterprises — in order to drain surpluses to the capitalist centre. This is the context of their attacks on the UGTT, which is rightly defending its constituencies in the public and private sector against this assault on wages.

CD : Africa will be disproportionately affected by climate change — for example, in terms of food security. African Union chairperson Félix Tshisekedi wrote recently that agricultural trade liberalization was one of the continent’s top priorities for addressing this issue, and should be seriously discussed at COP26. This is quite incredible — agricultural liberalization is well understood to worsen food security. How are Africa’s elites facilitating precarity, poverty, and crisis?

MBG : Our elites are sort of paralyzed in this neocolonial, extractive, export-led growth model. We can look at Tshisekedi’s own Democratic Republic of the Congo (DRC) as an example. It was an exporter of copper, rubber, and diamonds — these resources are subject to the fluctuation of competitive prices and put exporter countries in balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of payment distress when prices fall.

Agricultural liberalization means that African countries that specialize in agricultural products find themselves in the same position as the DRC. When prices of cacao, coffee, or olive oil are volatile — or when they’re hampered by drought and climate change — revenues from these exports are unpredictable. This puts huge uncertainty on budget planning. Instead of addressing the root causes of and changing this dangerous model, our elites are trapped.

The international financial institutions basically say, “If you want to be recognized as a president or transitional council you need an agreement with the IMF and to follow these structural reforms.” So they do. But we know that these reforms and liberalizing policies are a vicious circle that plunge our economies deeper into this dependency model. Because they’re detached from the real needs of their populations, elites in Africa are facilitating this precarity and poverty and increasing the possibility of crisis.

CD: Events of the past twelve months across Africa clearly demonstrate that a younger generation will not accept lifelong kleptocratic military governments, nor central bank board rooms dominated by Europe. But what kind of economic and monetary sovereignty is this generation interested in?

MBG: Today there are a lot of burgeoning social movements against austerity and against persistent colonial structures — such as the anti-CFA franc campaigns in Senegal, the Block ALECA campaigns in North Africa, and “fees must fall” in South Africa. Just yesterday in Tunisia an activist was killed when police tried to reopen a landfill site that environmental movements had forced closed.

Continuous pressure on our political elites is essential to de-link from the dependency model. Otherwise, there will be constant revolts — the youth will not stop trying to topple these regimes. The real time-bomb of this model is the unemployed, the dispossessed, and the marginalized. This is the gift the capitalist center will hand the peripheral elites to deal with. Then they’ll come and accuse those same elites of mismanagement and bad governance and close their eyes to the persistent repression which inevitably emerges from these policies.

Let’s be clear: Africa today cannot continue to fuel the imperial core with mineral and natural resources at the cost of starvation, blood, brain drain, and immigrant bodies in the Mediterranean. More than ever, we need African solidarity to strengthen our self-reliance, our productive capacity, our complementarity, and intraregional trade. We don’t need the neoliberal model praised by the African Union.

We can bolster intraregional trade not by relying on creditors, but by relying on our local productive capacities. We need to think about new paths, different from the current dependency model. I don’t see any other solution than to continue the resistance to the current model and try to build a resilient and prosperous system that allows people and their children to live a dignified life in a healthy environment.

CD : Most readers’ first thoughts when discussing Africa right now will be Ethiopia and Sudan. An open letter last year foreshadowed aspects of these crises when it talked about the “vicious geopolitical struggle,” the “new context of the economic war of all against all,” and the disintegration of the global order. How has this new context changed the capacity of these social movements to achieve the kind of radical reforms you’re calling for?

MBG : Most struggles are still conducted locally — upheavals are still largely driven by people who are the most vulnerable and impacted by neocolonial models. But one thing that has changed since the Covid-19 crisis began is the ease with which activists can connect with each other. Lockdowns and quarantine measures in fact made it easier for us to talk to each other, to think collectively, and strategize together across the wider region.

But the global shift the letter mentioned, and the involvement of many more political players in Africa, have created some difficulties for us. We have to understand how to navigate this new global order. How could we benefit? What alliances can be made? For example, today in Tunisia the debate is about where we should turn if we don’t pay our debts or if the IMF won’t give us new loans.

One proposed option is turning to China and reinvigorating our diplomatic relations with the East. Another is going to the Gulf countries, to Saudi Arabia and the Emirates. But we know that every country has its specific strategic and military interests in the region. We also know that some countries were involved in recent counterrevolutionary attempts to maintain the status quo.

There’s a huge difficulty in finding ourselves inside this global game. That’s why we need to build more connections between the working and middle classes in our African countries, in solidarity with those in the Global North. These global policies are not only impacting people in the Global South but everywhere. We need to connect our struggles, understand what’s happening and challenge them.

CD : Is that the main idea behind your book?

MBG : Yes – our main idea wasn’t originally to write a book but to collaborate and discuss with different activists and scholars about how to de-link from the dependency model. After our initial conference, we had three days of intense discussion and thought we should put it all in writing so a wider audience could benefit.

The book will be published by Pluto Press as open access. It’s an opportunity to have not just a South–South discussion but a North–South discussion — to learn from each other, avoid making the same mistakes of the past and think together about which path would be best for us all. We hope it’s widely read!


Source : Jacobin

Chris Dite

is a teacher and union member.

Maha Ben Gadha

is the economic program manager at the Tunis-based North Africa office of the Rosa Luxemburg Foundation. She is the coeditor of Economic and Monetary Sovereignty in 21st Century Africa, published by Pluto Books.

Translation(s)

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