SADC debt

Photo: Morgan / Flickr

SADC governments spending over R320 billion a year on debt repayments

ActSA has warned wealthy nations they could be accused of neo-colonialism unless they address issues with illegitimate debt owed by SADC countries.

SADC debt

Photo: Morgan / Flickr

Research conducted by the Action for Southern Africa (ActSA) suggests the Southern African Development Community (SADC) is spending $21.1 billion (R324 billion) on external government debt payments per year.

The report, titled The Money Drain: How Trade Misinvoicing and Unjust Debt Undermine Economic and Social Rights in Southern Africa, shows the crippling scale of debt owed by governments within the SADC.

SADC debt spiralling out of control

It came with a warning that wealthy countries may be accused of neo-colonialism if nothing is done to help pull the African region out of this financial hole.

The main issue is that the preception of that some of the debt is becoming odious or illegitimate.

Debt is deemed to be odious when the creditor is aware (or there is a reasonable assumption they should be aware) that the interest earned from said debt is used oppress the people who are paying the interest.

Debt becomes illegitimate when the terms of the loan put an undue burden on those responsible for repaying it.

Distiguishing between legitimate and illegitimate debt in the SADC

This is not to say the debt owed by SADC is either of these things, because it is important to remember how much money has been borrowed and lost to things like corruption and state capture in South Africa.

Debt is not illegitimate and odious if the debtor is at fault for the situation they have ended up in, only if the creditor is behaving unfairly.

According to ActSA, though, at least part of the debt owed by SADC is odious and illegitimate.

The group’s report shows losses in SADC in this area can be attributed to three main causes.

Unrealised economic and social potential

ActSA believes more has to be done to develop economies within the SADC to help alleviate rampant unemployment to unlock the region’s full potential.

As it stands in their report, four of the 10 worst performing nations in the world, in terms of realising the economic and social potential, are located in the SADC.

More than 30% of youth are unemployed, the number is over 50% in South Africa, 5.4 million people are undernourished, and 40% of people in the SADC do not have access to basic sanitation services.

Quite simply, fully realising the potential of a country, in any shape or form, is next to impossible under these conditions.

Trade-related illicit outflows

This term includes the ‘illegal movements of money or capital from one country to another’ and would include things like tax avoidance and trade mis-invoicing.

According to the report, trade-related illicit outflows cost the SADC nearly $9 billion per year.

“After falsely declaring the price, quantity or quality of a good or service on an invoice submitted to customs, criminals can use intermediaries in secrecy jurisdictions to capture and divert illicit profits to offshore accounts,” ActSA said in a press release published alongside the report.

“The report estimates that South Africa alone is drained of at least US$5.9 billion a year due to trade-related illicit outflows.”


Eternal government debt payments

The report itself does not make the claim that debt is bad or evil in any way.

In fact, it goes to great lengths to explain the creditor-debitor relationship can be incredibly beneficial to both if the lendor and borrower work together to ensure the debts are contracted and spent properly.

Over-indebtedness is a huge concern, especially when you include ideas like corruption and state capture, which would likely result in the money not being spent what it was intended for.

However, ActSA argues that some of the debt owed by the SADC is either illegal or odious.

“A recent example of this is the US$2 billion of secret loans to Mozambique by the UK branches of Credit Suisse and VTB Capital in 2013 and 2014 (two of these three loans only came to light in 2016),” the report read.

“Campaigners in Mozambique claim that these loans breached the country’s laws as they were not agreed by the Mozambique parliament.”


ActSA believes it is imperative for foreign creditors to identify and elimate anything debt that could be construed as illegal or odious in order to free up more capital for SADC governments and avoid potentially being dubbed neo-colonialists.

You can view the entire report by clicking here.