Saddled with apartheid debts

(May 22, 1997) Nelson Mandela used a world economic forum in Harare this week to argue that South Africa’s major problem is servicing the massive debts run up by apartheid governments.

A new organisation is campaigning for the cancellation of “odious debts”, arguing that the money is better spent on infrastructure inside the country.

Millions of South Africans lacking basics such as housing, decent schools and hospitals toil daily to service the billions of dollars borrowed by former apartheid regimes and used, ironically, to oppress them.

When apartheid fell in 1994 it left behind a debt which is now the second largest component of South Africa’s annual expenditure after education. In the 1997/1998 budget, debt service payments were projected at 8.8 billion dollars.

But the Alternative Information and Development Centre (AIDC), a non-governmental organisation based in Cape Town, says South Africans need not shoulder the burden and be penalised for a system that oppressed them.

Taking the lid off a potentially explosive subject, AIDC says the Truth and Reconciliation Commission (TRC) — a body set up to investigate apartheid-era human rights violations — has opted to turn a blind eye on the foreign companies, individual investors and Western governments that funded apartheid.

”The work of the TRC would be deficient without giving attention to the financing of apartheid which provided the means and opportunities for the perpetration of gross human rights violations which occurred within and beyond the borders of South Africa,” notes the AIDC.

”Just as in the case of the Rwandan genocide, credit to the apartheid government was critical in financing the system that denied the majority of South Africans their human rights, that confiscated their land and homes…,” it adds.

South Africa is labouring under a debt of 71 billion dollars expected to reach 110 billion dollars by the turn of the century.

An NGO campaign against this ‘Odious Debt’ will be launched at the end of May, says Brian Ashley of AIDC. The lobby’s targets will include international financiers such as the World Bank and International Monetary Fund.

Debt servicing is one of the greatest burdens on the people of the South as they continue to transfer wealth to the North. Between 1980 and 1992, it amounted to 1.6 trillion dollars — three times the original amount owed in 1980. Developing nations still owe 1.3 trillion dollars and are calling for debt cancellation if development is to be sustained.

The South African debate on debt relief runs along the same lines but also calls into play an international legal instrument known as the Doctrine of Odious Debts.

The doctrine was applied in 1923 when the Royal Bank of Canada sought to recover debt from a new democratic government in Costa Rica, which got away with not paying by arguing that the debt had been incurred by a dictator and not the country’s people.

”If a despotic power incurs a debt not for the needs or interest of the state, but to strengthen its despotic regime, to repress the population that fights against it etc, this debt is odious to the population of the State,” says the doctrine.

”The creditors have committed a hostile act with regard to the people; they can’t therefore expect that a nation freed from a despotic power assume the odious debts which are the personal debts of that power,” it adds.

Apartheid was declared a crime against humanity by numerous international bodies including the United Nations and the International Court of Justice.

The AIDC, which suggests debt cancellation as a form of reparation by nations and bodies that supported apartheid, plans to make a submission on South Africa’s ”odious debt” to the TRC.

The TRC’s Christelle Terreblanche says the issue of reparations is still being finalised but the commission is willing to listen to the AIDC submission.

Internal organs and mechanisms that have financed the debt include civil service pension funds, bonds and stocks issued by the government and private sector finance such as banks and insurance companies.

The prominent view among economists and business people is that the debt requires no special favours, especially if South Africa wants to maintain its debt ratings.

”While I can understand the motivation of people, the implications on the new South Africa would be so negative it is not even worth contemplating going that way despite the odiousness of the debt,” says economist Jim Buys of Business South Africa.

”Their argument is easy to understand but South Africa is trying to establish a track record as a sovereign debt nation,” says Buys.

Ironically South Africa itself has cancelled debt owed to it by Namibia, deeming it odious.

South Africa’s ”foreign and domestic debt was incurred by and large under the apartheid regime and should similarly be declared odious and written off,” says Archbishop of Cape Town Njongonkulu Ndungane, who is also spearheading the campaign.

Gumisai Musume, Mail & Guardian (Johannesburg), May 22, 1997

Categories: Africa, Odious Debts, South Africa

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