G20@20: Africa’s Moment – The Once and Future World Order

According to the African Development Bank (AFDB) and the International Monetary Fund (IMF), Africa’s public debt has nearly doubled since 2010, with debt servicing costs now consuming almost 30% of government revenues—money that could have and should be building schools, hospitals, and climate resilience. This isn’t just a financial crisis; it’s a development emergency that threatens to derail Africa’s progress for a generation.  

South Africa’s hosting of the G20 sees an end of this forum hosting by the Global South cycle. With the likelihood the next host – the United States – may deprioritise or not maintain the same focus on Global South priorities, this is an opportune moment to launch an ambitious yet practical strategy to address the long-standing issue of debt and the rising cost of capital for developing and African economies.   

 The African Expert Panel appointed by South Africa’s finance minister Enoch Godongwana to help the African Union make inputs into the November G20 summit is using this as an opportunity for such a strategy to be tabled amongst the systemically most powerful economies. Chaired by former South African finance minister Trevor Manuel, with the Mapungubwe Institute providing secretariat and research support, the panel has twenty-one people from different parts of Africa and six from South Africa.   

 The roots of Africa’s debt crisis can be traced back to the Structural Adjustment Program era but the 2008 global financial crisis remains a tipping moment. When central banks in wealthy countries flooded their economies with cheap money, capital flowed prematurely to African markets seeking higher returns. More African countries, including despotic states, could access easy international capital through bond issuances rather than on the traditional multilateral concessional finance. That was the good news until it was not good anymore.  

Bond financing proved more expensive than concessional lending, while shortened debt tenures intensified rollover risks. Meanwhile, non-Paris Club lenders, particularly China and the Gulf states, expanded their lending to African governments, using debt as soft power and economic leverage. This has created a more complex creditor landscape which the normal debt resolution mechanisms are unable to resolve.  

The Covid pandemic and subsequent global economic shocks exposed these vulnerabilities. Rising interest rates, slowing growth, and volatile commodity prices resulted in countries which had borrowed during the boom years struggling to service debts that had become more and more expensive. The immediate effect of this can be seen by governments being forced to prioritise debt payments over basic needs.   

Apart from this context, African countries face some very specific challenges in raising capital. Key factors include political and economic risk perception with many states perceived as high-risk investments due to political instability, policy uncertainty, fiscal mismanagement and weak governance structures. No matter the veracity and variability of this perception, it results in increasing the cost of capital and low foreign investor appetite. This is worsened by the persistence of shallow capital markets with limited institutional investors, few listed companies, and low trading volumes, impacting the ability to raise equity capital domestically.  

Many African economies are heavily dependent on commodity exports, making them vulnerable to price volatility and reducing the diversification that investors often seek. Furthermore, currency and inflation volatility makes international investors demand higher returns and creates challenges for long-term capital planning. These factors combined result in African issuers often facing higher borrowing costs in international markets due to country risk premiums. Sovereign credit ratings tend to be, often unfairly, lower, while access to sophisticated financial instruments is limited. 

Domestic factors also impact on the ability of African states to raise capital. These include institutional and regulatory weaknesses such as inconsistent legal frameworks, weak property rights protection, and unpredictable regulatory environments. Many countries lack the financial reporting infrastructure and discipline expected by international investors. Furthermore, local savings and deposits are nearly non-existent making possible reliance on domestic resource for investment nearly insurmountable. The continent’s capacity to structure debt deals, manage investor relations, and navigate complex capital markets has been eroded by decades of brain drain reinforcing unfair terms of credit. 

The G20’s Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI), agreed upon in 2020 when Saudi Arabia hosted the Summit, has proved painfully slow and limited in scope. Countries like Zambia, Chad, Ethiopia, and Ghana entered the Common Framework process years ago, yet negotiations drag on with little progress. The framework excludes lower-middle-income countries, such as South Africa, with access to private capital markets, leaving some of Africa’s most dynamic economies without support options. Challenges plaquing the common framework on debt treatment points to a lack of rigour and ownership of decisions agreed to at the leaders’ summit.  Not only does this delegimitise the institutional integrity of G20 but also buttress perception of skewness towards western interest.  

Amongst the proposals shaping current thinking as we head for the 2025 G20 Summit and beyond include an overhaul of the G20 Common Framework, with access being extended to all middle-income countries. The new framework should seek to “bail in” (crowd in) private creditors, including emerging bilateral creditors like China, rather than bail them out, with parallel rather than sequential negotiations ensuring fair burden-sharing. This period requires the development of a comprehensive debt refinancing initiative for low and lower-middle-income countries, including refinance obligations at more sustainable terms, and mandatory private sector participation. This would allow for additional fiscal space which could be directed toward development and climate investments.  

Critically there is a need for a “borrowers club” as a forum for sharing knowledge, promoting responsible borrowing practices, and amplifying the collective voice of debtor nations in international negotiations.  A protocol for sustainable management between borrowers and creditors is urgently required.  Equally important is the need for a debt-dividend compact between the borrowers and the AU or Pan African Parliament as representative of the people on whose name the debt is acquired. These structures must interface with creditors to reflect on the development impact of borrowing with a view to converting all debt into concessional finance.  

 There are several positive developments on the African continent such as Africa’s mobile money success showing how technology can leapfrog traditional infrastructure. Countries can develop fintech solutions, digital lending platforms, and blockchain-based systems for more efficient capital allocation. This is particularly promising for small and medium enterprise financing. Furthermore, the African Continental Free Trade Area (AfCFTA) and regional economic communities are standardising regulations and harmonising listing requirements, thus creating larger, more liquid markets. Cross-border trading platforms and mutual recognition of securities regulations will help pool capital more effectively. 

 Individual countries have been taking some bold steps. For example, Nigeria’s Investment and Securities Act of 2025, its most comprehensive capital markets reform in nearly two decades, explicitly recognizes digital assets and aims at strengthening regulatory frameworks. Kenya has pursued comprehensive capital market reforms, including demutualisation of the Nairobi Securities Exchange and introduction of Real Estate Investment Trusts (known better as REITS) and derivatives markets, helping deepen domestic capital markets. South Africa has implemented exchange control reforms that allow multi-currency listings and non-ZAR collateral for derivatives, making its markets more competitive internationally.   

Without urgent reform to the international debt architecture and strong support for African countries to build their domestic financing capabilities, Africa and the Global South risks losing another development decade. The G20 offers a unique opportunity to reverse course, but only if voices of the Global South are amplified, heeded, and translated into action.  

Dr Yacoob Abba Omar
Director Operations at the Mapungubwe Institute, served as South Africa’s Ambassador to Oman (2003 to 2008) and the United Arab Emirates (2008 to 2012)