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African Countries Accuse Western Investors of High Interest Costs Due To Prejudice

This post was originally published on this site

According to a 2019 study from the Brookings Institution, the United States was among one of the largest investors in various countries across Africa in addition to France, China, and the United Kingdom. Individually, the report showed that the U.S. has over $30 million in capital investments across the continent involved in over 450 projects and creating over 60,000 jobs in the process. However, many government officials and public figures argue that Western investors are the reason why borrowing costs are so high.

At a press conference back in December, Senegalese president Macky Sall complained to the head of the International Monetary Fund and others in attendance of the impact of the unfair bias.

“This negative-risk perception is not in tune with the reality of our continent,” Sall told the gathering, according to Yahoo Finance. “People think that this is a problematic continent and demand a rate of return that is unparalleled elsewhere in the world.”

For many African countries, they can expect to be charged 5% to 10% on their borrowing by creditors, which is above average in comparison to other emerging markets. Many critics say the prejudice comes from the stigma placed by many in Western countries on its portrayal of African countries in media.

“Some investors really think that Africa is the jungle and there is a lot of chaos; that is the underlying perspective with which they establish their own required return,” said Misheck Mutize to Yahoo Finance, who leads the African Union project to help governments improve credit ratings. These higher rates also contribute to countries spending more to lower their large debt rather than invest in their local governments and healthcare. According to the Jubilee Debt Campaign, countries like Angola and Cameroon spend over five times more than other developing countries to service their debts.

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