24 June 2024 (Arusha, Tanzania) – “Natural Resource-Backed loans are non-transparent, expensive and make debt resolution difficult”, the president of the African Development Bank (AfDB) Group, Dr Akinwumi Adesina strongly remarked during a visit by the International Monetary Fund (IMF) Managing Director, Kristalina Geirgieva at the bank headquarters in Abidjan, Cote d’Ivoire, in October 2023. The President of the AfDB further reiterated that this situation is facilitated by the fact that it is increasingly becoming more difficult for African countries to access concessional financing because of an unfair global financial architecture.
Despite the daunting situation created by Resource-Backed loans in Africa, another highly worrying situation is the rising levels of odious debts in Africa facilitated by corruption as well as the lack of monitoring mechanisms by creditors as to the proper utilisation of loans secured.
In light of such happenings, the Pan African Lawyers Union (PALU) has, on behalf of a South Sudanese citizen, Mr. Kanybil Noon, supported by three other concerned East African citizens, Ms. Diana Nyakairū Gichengo, Mr. Andrew Karamagi and Mr. Deus Valentine Rweyemamu, and backed by a group of South Sudanese activists, filed a case against the Government of South Sudan, at the East African Court of Justice (EACJ) demanding that a huge oil-backed loan taken by the Government be declared an odious debt that is neither binding to nor payable by the citizens of South Sudan. The loan was contracted with a private entity domiciled in the United Arab Emirates (UAE), an arrangement that that will see the oil reserves and oil revenue of South Sudan tied up for the next 20 years. This is information contained in a Head of Terms document that has been made public by various media houses and further confirmed by the Panel of Experts on South Sudan which is established pursuant to United Nations Security Council Resolution 2206 (2015) who published a Report with the title “Final Report of the Panel of Experts on South Sudan submitted pursuant to Resolution 2683 (2023)”. The UNSC Panel opined that while the agreed interest rate in this particular agreement is lower than many of the Respondent’s existing commercial loans, the Agreement expressly specifies that all oil delivered as repayment for the loan will be discounted by 10$US per barrel, substantially reducing the value of South Sudanese oil exports.
It is also important to point out that this loan agreement was not tabled in parliament as required by law, neither were the citizens of South Sudan involved in making the decision on this deal where an illegitimate government has mortgaged the entirety of the oil reserves of the country, the main source of sustenance of the country’s economy for current generations and generations to come. As a result, in the event the court declares the transaction an odious debt, this will help strengthen African litigation on sovereign debt, coming after the very successful landmark case of the Mozambique hidden debts case.
This is just part of the legal advocacy that PALU is undertaking towards prudent debt management. Through this emblematic case, the aim is to demonstrate that Resource-Backed Loans are of particular concern given that they exacerbate debt levels and impose a burden on citizens. Moreover, they are problematic because they are poorly designed, poorly negotiated, and often violate Public Finance Management laws by exceeding debt ceilings. They frequently turn into commercial loans due to international price manipulations. There is a need for African countries to realize that Resource-Backed loans present an inter-generational economic complication which will affect their own children and grandchildren and other future generations. Africa is a resource-rich continent that has for decades sold itself cheaply to countries of the west, in return for high interest rates and other unfavourable loan terms. Africa holds the bargaining chip and should be able to dictate terms for the loans they receive, without involving natural resources which are in its absolute sense, irreplaceable.