• World
    • Africa
    • Asia Pacific
    • Central & South Asia
    • Europe
    • Latin America & Caribbean
    • Middle East & North Africa
    • North America
  • Coronavirus
  • Politics
    • US Election
    • US politics
    • Donald Trump
    • Brexit
    • European Union
    • India
    • Arab world
  • Economics
    • Finance
    • Eurozone
    • International Trade
  • Business
    • Entrepreneurship
    • Startups
    • Technology
  • Culture
    • Entertainment
    • Music
    • Film
    • Books
    • Travel
  • Environment
    • Climate change
    • Smart cities
    • Green Economy
  • Global Change
    • Education
    • Refugee Crisis
    • International Aid
    • Human Rights
  • International Security
    • ISIS
    • War on Terror
    • North Korea
    • Nuclear Weapons
  • Science
    • Health
  • 360 °
  • The Interview
  • In-Depth
  • Insight
  • Quick Read
  • Video
  • Podcasts
  • Interactive
  • My Voice
  • About
  • FO Store
Sections
  • World
  • Coronavirus
  • US Election
  • Politics
  • Economics
  • Business
  • Culture
  • Sign Up
  • Login
  • Publish

Make Sense of the world

Unique insight from 2,000+ contributors in 80+ Countries

Close

Africa Needs Its Own “New Deal”

African countries will need a New Deal to collectively recover from the pandemic and address the mounting debt crisis.
By Betsy Henderson • Sep 17, 2020
Betsy G. Henderson YPFP, Africa COVID-19, Africa economy, Africa development news, FDR New Deal, Africa infrastructure news, Africa debt crisis, investment in Africa, Africa post-pandemic recovery, Africa unemployment

Road construction near Malindi, Kenya, 2/26/2018 © Jo Jones / Shutterstock

In the midst of the global COVID-19 pandemic, Africa faces an unprecedented level of starvation, poverty and suffering that will last far beyond 2020. A lack of medical facilities and resources to offset economic losses is expected to push 37.5 million more Africans into extreme poverty this year, adding to the more than 400 million people already living on less than $1.90 a day.

Compounding these challenges, African governments are encountering a major debt crunch. Over the past 15 years, African countries have been building new infrastructure projects, from roads to football stadiums, and collectively taking on $417 billion in debt from lenders like the World Bank, the Chinese government and private investors. The pandemic has also drawn attention to the amount African governments pay in servicing these loans, where countries like Ghana spend five times on annual debt payments as on health care.


Can the India-China Confrontation Play Out in East Africa?

READ MORE


As Africa struggles to provide crucial medical services and build the necessary infrastructure, it is clear that African countries will need a new approach to collectively recover from the pandemic and address the mounting debt crisis.

Calls for Debt Relief

In response to the effects of COVID-19, African finance ministers have called for a $100-billion relief package, including $44 billion in delayed debt payments over the next two years. African countries that are unable to make debt payments risk having their credit ratings downgraded, which would limit their financing capabilities for future economic growth initiatives. Countries that default on these loans may also face nightmarish predatory vulture funds or a repeat of the 1980s debt crisis.

To alleviate immediate concerns surrounding debt repayment, the International Monetary Fund (IMF), the G20 and other multilateral institutions froze debt payments through the end of 2020 to help African governments respond to the pandemic. They are now discussing additional measures, including involving more private lenders. There is a global dialogue about redistributing IMF special drawing rights for additional resources, while questions remain how China — Africa’s largest bilateral creditor — will manage its remaining African debt, with broad debt forgiveness looking unlikely.

logo

Make Sense of the World

Unique insight from 2,000+ contributors in 80+ Countries

Make Sense of the World
Unique insights from 2000+ contributors in 80+ countries

While these measures will each have some effect, any meaningful approach to debt relief in Africa must help countries survive today while building a foundation for future economic recovery. Therefore, investing in infrastructure and creating jobs in the short term is crucial to Africa’s economic recovery and advancement.

Infrastructure is widely viewed as a critical element for development and economic growth in Africa. Bureaucratic hurdles, lack of investment and perceived risk, however, remain key barriers to obtaining the estimated $130 to $170 billion of infrastructure funding the continent requires. Infrastructure construction in Africa is currently critical because it would expedite provision of basic services and regional trade, both necessary for alleviating economic pain from the global recession. 

For example, improving regional road networks would allow countries to trade food more regionally rather than facing current shortages from reduced food imports. In addition, building power-generating facilities would increase access to electricity and the internet for students learning from home during the pandemic, power health centers and facilitate future investments.

Increasing physical infrastructure across Africa would also advance implementation of the long-awaited African Continental Free Trade Agreement (AfCFTA), which policy leaders consider an important mechanism for the continent’s economic recovery and resiliency to future shocks. Whenever the AfCFTA comes into force, having more regional infrastructure in place will only accelerate its ability to boost regional income by 7% (or $450 billion) by 2035, despite COVID-19. The faster Africa’s economies can recover and grow, the sooner countries can alleviate debt and address citizens’ needs.

How Do We Get There?

Africa requires a “New Deal” approach to debt relief and economic recovery, a mechanism to provide jobs and infrastructure that helps African economies recover from the worst recession since the Great Depression. In the 1930s, US President Franklin D. Roosevelt’s New Deal created the Works Progress Administration (WPA) on the heels of the Great Depression. The WPA alone put 8.2 million people to work and built 78,000 bridges, 800 airports and over 650,000 miles of paved roads across the United States in less than eight years.

As Roosevelt’s New Deal focused on much-needed job creation, a similar plan could be adopted in Africa. Although not a silver bullet to the continent’s high unemployment rates, jobs generated by regional infrastructure projects could reduce the number of people living in extreme poverty and provide skills training needed for future work, another oft-cited barrier to investment. Perhaps most importantly, creating more jobs in Africa during a generational recession could save lives and livelihoods.

The underlying principles of the New Deal could be applied in Africa in several ways, but creating a short-term pan-African fund for infrastructure projects could be most effective. Leaders could set up the fund as a special purpose vehicle or a designated initiative within an existing pan-African organization such as the African Union, the UN Economic Commission for Africa or the African Development Bank.

Embed from Getty Images

Like the New Deal’s WPA, this infrastructure fund could have a defined lifespan (five to seven years) and include appropriate financial oversight for donors like the United States, the European Union and private sector partners. The WPA was dissolved after the completion of its mandate, and adopting a similar approach for this initiative could focus efforts on critical projects, after which African leaders could choose how to address remaining infrastructure needs.

This fund should allow leaders to identify and implement infrastructure projects with the highest potential for economic recovery and regional development. Having a central entity with authority to coordinate infrastructure projects among African member states could significantly fast-track execution and reduce bureaucratic red tape that often hinders infrastructure projects. A wealth of information about African infrastructure needs and opportunities already exists to facilitate project selection.

Infrastructure in Africa has long been viewed as a national issue that individual countries must address rather than a regional challenge that requires broad international collaboration. Through a New Deal approach that incorporates collective infrastructure investment into global debt relief efforts, international partners have an opportunity to help Africa weather unprecedented challenges today and build a foundation for an accelerated economic recovery that can be sustained well into the future.

*[Fair Observer is a media partner of the Young Professionals in Foreign Policy.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

Share Story
CategoriesAfrica, Economics, Global Change, Global inequality news, Inequality news, Insight, World News TagsAfrica COVID-19, Africa debt crisis, Africa development news, Africa economy, Africa infrastructure news, Africa post-pandemic recovery, Africa unemployment, Betsy G. Henderson YPFP, FDR New Deal, Investment in Africa
Join our network of more than 2,000 contributors to publish your perspective, share your story and shape the global conversation. Become a Fair Observer and help us make sense of the world.

Fair Observer Recommends

East Africa Faces a Cascade of Crises East Africa Faces a Cascade of Crises
By Bettina Rudloff & Annette Weber • Jun 04, 2020

Post navigation

Previous PostPrevious Insecurity in the Sahel Region
Next PostNext The NY Times: Liberal or Neoliberal?
Subscribe
Register for $9.99 per month and become a member today.
Publish
Join our community of more than 2,500 contributors to publish your perspective, share your narrative and shape the global discourse.
Donate
We bring you perspectives from around the world. Help us to inform and educate. Your donation is tax-deductible.

Explore

  • About
  • Authors
  • FO Store
  • FAQs
  • Republish
  • Privacy Policy
  • Terms of Use
  • Contact

Regions

  • Africa
  • Asia Pacific
  • Central & South Asia
  • Europe
  • Latin America & Caribbean
  • Middle East & North Africa
  • North America

Topics

  • Politics
  • Economics
  • Business
  • Culture
  • Environment
  • Global Change
  • International Security
  • Science

Sections

  • 360°
  • The Interview
  • In-Depth
  • Insight
  • Quick Read
  • Video
  • Podcasts
  • Interactive
  • My Voice

Daily Dispatch


© Fair Observer All rights reserved
We Need Your Consent
We use cookies to give you the best possible experience. Learn more about how we use cookies or edit your cookie preferences. Privacy Policy. My Options I Accept
Privacy & Cookies Policy

Edit Cookie Preferences

The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.

As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media.

 
Necessary
Always Enabled

These cookies essential for the website to function.

Analytics

These cookies track our website’s performance and also help us to continuously improve the experience we provide to you.

Performance
Uncategorized

This cookie consists of the word “yes” to enable us to remember your acceptance of the site cookie notification, and prevents it from displaying to you in future.

Preferences
Save & Accept