Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent

Capital flight drains resources from Africa. So does debt service on loans that financed capital flight. The human costs of this drain can be glimpsed at the Centre Hospitalier Universitaire de Brazzaville, the main hospital in the Republic of Congo, where patients are carried up and down the stairwells on people’s backs because broken lifts have not been repaired. A French researcher grimly observes, ‘Only the morgue operates at full tilt.’[1]

In 2005 Congo’s government spent $101 million on external debt service – more than it spent on public health. The Republic of Congo is one of five African countries where child mortality increased between 1990 and 2008.[2] Only six percent of children sleep under mosquito nets that protect against malaria, the disease that accounts for one in five of all childhood deaths in Africa.[3]

Congo is not alone. Across sub-Saharan Africa, many governments today spend more on debt service than on health for their people.

Africa’s Quiet Violence

In the decades since independence, violent conflicts have taken the lives of many Africans. Between 1960 and 2005, Africa experienced about 1.6 million battle deaths.[4] The toll is multiplied by deaths due to war-related disease and starvation and the breakdown of healthcare systems. For example, including deaths from these causes, the war in the Democratic Republic of Congo claimed an estimated 5.4 million lives from 1998 to 2008, making it the world’s deadliest conflict since World War II.[5]

In recent years, the number of violent conflicts in Africa and the associated death toll have subsided. We can hope that this trend will continue in the future, and that war will recede as a cause of human suffering and death.

But the continent continues to wage an equally devastating battle against the quiet violence of needless disease and hunger. The majority of deaths in Africa are caused by diseases that are preventable and curable with existing medicines and technology.

Each year, for example, nearly one million children under the age of five die from malaria worldwide. About 75 percent of them are Africans.[6] Diarrhea and pneumonia, both curable diseases, together account for 35 percent of Africa’s child deaths.

Apart from the human cost, the economic impacts of these diseases are also large. It has been estimated, for example, that Africa loses more than $12 billion of GDP every year due to malaria.[7]

Why? Malaria has been virtually eradicated in many places in the world. Premature death rates from other diseases have been greatly reduced elsewhere. But in Africa programs for prevention and cure either do not exist or are inadequately funded.

It may be true, as economist Jeffrey Sachs has remarked, that Africa is ‘really unlucky when it comes to malaria: high temperatures, plenty of breeding sites, and mosquitoes that prefer humans to cattle.’[8] But the real cause of the failure to conquer malaria in Africa is not bad luck; it is insufficient funding for prevention and treatment. Fewer than one in five African children sleep under mosquito-proofed nets. Until recently, as Sachs notes, malaria rarely figured on the agenda of Africa’s international aid partners: ‘Malaria was not on the policy radar screen. The IMF and World Bank were apparently too busy arguing for budget cuts and privatization of sugar mills to have much left to deal with malaria.’[9]

In addition to inadequate international funding, national resources are poorly managed. The problem is particularly striking in the case of resource-rich countries. In Equatorial Guinea, for example, the low coverage of anti-malaria programs contributes to high mortality rates, especially among children. Malaria mortality in Equatorial Guinea is more than twice the African average.[10] While the people battle disease, the country’s elite squanders the nation’s oil wealth on personal luxuries. Teodorin Obiang, the president’s son, is reported to have a $35 million mansion in Malibu, California, as well as multiple foreign bank accounts.[11] In 2011 Global Witness reported that he had commissioned plans for a 118-meter ‘superyacht’ complete with its own cinema, restaurant, bar and swimming pool. The yacht’s price tag would be $380 million, three times more than Equatorial Guinea’s annual budget for health and education combined.[12

In a similar vein, Global Witness reports that one month of private spending by Denis Christel Sassou Nguesso, the son of the Republic of Congo’s president, could have paid for vaccinations against measles for more than 80,000 Congolese babies.[13] Measles is a leading cause of child deaths in his country.

Water-borne diseases are a major cause of ill health and deaths in Africa, especially among children. This is a result of lack of access to clean drinking water and sanitation facilities. In Nigeria, for example, only 58 percent of the population has access to clean drinking water sources, despite the country’s oil wealth.[14] Only 34 percent of Africa’s population had access to sanitation facilities in 2008, only a slight improvement from 30 percent in 1990. In Latin America, by contrast, the corresponding figure is 87 percent.

As a result of inadequate funding from both national and international sources, Africa has too few health facilities, and those that exist do not have adequate equipment or personnel. Africa on average has only eleven nurses and midwives per 10,000 inhabitants, less than half the world average of 28.[15]

Access to the services and facilities that do exist is grossly unequal. Rural households often live far from health facilities, and the poor in general are at a disadvantage since they cannot afford to pay for private health care. In Côte d’Ivoire, for example, among the richest fifth of families, 95 percent of childbirths are attended by skilled health staff; among the poorest fifth the figure is less than 30 percent. In Nigeria, the corresponding ratios are 86 percent for the top fifth of households, and only eight percent for the poorest fifth.[16]

Every year millions of children worldwide die before reaching their fifth birthday. UNICEF reports that ‘malnutrition is a contributing factor in more than half these young deaths,’ and that more than half die at home due to lack of access to health facilities.[17] Thanks to medical progress, child mortality worldwide declined by more than half in the past five decades, from 20 million deaths in 1960 to 8.8 million in 2008. But progress has been very slow in sub-Saharan Africa, which has the highest child death rates.[18] In 2008, the continent lost 86 babies for every one thousand births.

The 2010 Millennium Development Goals (MDG) Global Monitoring Report observes, ‘Sub-Saharan Africa has 20 percent of the world’s children under age five, but 50 percent of all child deaths.’[19] Only Seychelles and Cape Verde have reached the MDG target of 45 deaths per 1000 children, and only a handful of African countries are expected to reduce child mortality to this level by 2015.

Historical evidence demonstrates that while growth in income helps to improve health outcomes, income alone is not enough.[20] Major public initiatives, such as water purification and supply, installation of sanitation systems, the draining of swamps, and mass vaccination campaigns, historically have played a key role in progress in health. For example, it is estimated that as much as half of the reduction in mortality in the first third of the twentieth century in the United States was a result of water purification alone.[21] This underscores the importance of public health expenditure in Africa.

On average, sub-Saharan African governments currently are spending $25 per person annually on health care (Table 4.2). This is less than half the amount spent in the Middle East and North Africa, and less than one percent of public health care expenditure per person in the OECD countries. In some African countries per capita public spending on health care is in the single digits: at the bottom are Guinea at $2/year, Sierra Leone at $4/year, and Ethiopia at $5/year.

In 2008 the MDG Africa Steering Group estimated that the continent needed an additional $10 billion per year by 2010 to improve health systems and reach the MDG targets in child mortality and maternal health. Another $17 billion per year was needed to finance programs in Africa for the control of the major killer diseases.[22] In 2007 total international aid to the health sector in Africa amounted to $3.4 billion[23]….

When Debt Service Is Bad for Your Health

Many African countries devote a significant share of their scarce public revenues to paying external debt service. Much of the debt being serviced was used to finance capital flight, as we saw in the last chapter.

Debt service payments represent the third and final act in the tragedy of debt-fueled capital flight. In the first two acts – foreign borrowing in the name of the public, and diversion of part or all of the money into private assets abroad – there is no net loss of capital from Africa. What comes in simply goes back out again. It is when African countries start to repay these debts that the resource drain begins.