The Horn of Africa States And Heavily Indebted Poor Countries Initiative (“HIPC”)

By Dr. Suleiman Walhad
July 14th, 2022

Of the four Horn of Africa States, Somalia and Ethiopia, have qualified for the HIPC initiative. Neither Eritrea nor Djibouti have applied for the program as yet. Eritrea, though eligible for the HIPC initiative, must first face an unsustainable and full application of all the traditional debt relief mechanisms.  These mechanisms include the Naples terms under the Paris Club agreement, which involves, basic terms for either cancelling and/or rescheduling the debts of very poor countries. Djibouti is in a whole different ball game when it comes to debt. Most of its external debt are owed to the Chinese, which worries many if the country is exposed to an oncoming debt trap.

No doubt, all four countries of the Horn of Africa States are poor, though they do own some potentially lucrative resources, some obvious and others not so obvious. Those obvious ones include among others using the strategic location as a source of revenues such as building together major inter-connected infrastructures and benefitting together from the services offered by these infrastructures such as ports railways, roads, and airports, ship refueling stations and dry docks for ship repairs and generally ship building and related activities. With a long coast and beautiful beaches and bays, it could also develop as a major tourist attraction where massive tourist infrastructures such as hotels, tour guides scuba-diving and other related activities such as water sports can be developed together.

The region is a vast farmland with some native grains and other food plants that can feed millions of people, many millions more than currently live in the region. The region also owns substantial sub-soil and above soil wealth and we have mentioned this many a time in various writings. What is important is that the region is substantially impregnated with many possibilities, but only if the leadership of the region, and working with others, both governments and investors, can put their heads together and relief their populations of the miseries of poverty and hence resultant ills, which they can!

Instead of being in the HIPC programs, they could become a source of funding for others and would enjoy an upper hand and not the lower begging hands as is the case nowadays, although they do not owe much to others. The region’s debts were reported to be as follows in the year 2020:

Somalia US$ 4.7 billion

Ethiopia US$ 30.3 billion

Eritrea US$ 3.8 billion

Djibouti US$ 2.7 billion

Total US$ 41.5 billion

The GCC countries raised sovereign debts of some US$ 50.5 billion in 2017 alone, higher than all the debt raised throughout their existence of HAS collective debt of some US$ 41.5 billion. This shows that the region needs to calm down and take advantage of their God-given assets to create wealth instead of being the poor they are today. Note the GCC countries used to live on handouts from the Horn of Africa prior to the sixties of the last century. They simply calmed down and let investors come into the land and exploit the oil and gas under their sandy feet. They were able to manage the investors instead of fighting with them or fighting among each other. Note the GCC countries are also clans and tribes as much as the Horn of Africa States presents itself too.

This heavily indebted poor country status could be reversed, and this is in the hands of the governments and people of the region and not with others. Wealth is created through peace and not through violence and investors would never come to a region that is violently trying to rip itself into fractious parts. We know that the region owns sufficiently large personnel to assure of its security and an equally large labor-force to work out its economic production facilities (farms, fishing and factories). We also know that the region owns a young population and a sufficiently large educational base and also a significantly improved communication and infrastructure. The region needs to instill in the land and people the art of abiding by the law and avoiding corruption, nepotism and all the ills that lead to societal disharmony. The region must develop a Horn of African States citizen that is fully confident of his/her abilities and region.

The region needs to find employment for its large young population and there are many investors across the globe who would be willing to install their works in the region, should the region be able to allow them to do so. The Horn of Africa States should reinvent itself as the place to invest and stay, instead of the terrible conflict-ridden place it presents itself to be today.

Instilling in the population of the region that they can live off the land with ease and comfort is a prime necessity and the leadership of the region should know that the art of leadership is not through force/clan/ethnic grouping but through justice and fairness and abiding by the law. No one should be above the law and accountability is the key in this process. The US$ 41.5 billion current external debt will soon become peanuts and the region would be able to be talking of much larger wealth and numbers. It all boils down to re-invigorating the leadership and having them see the bigger picture. They are sitting on goldmines wherever one looks. All they need to do is coming together and working together for the betterment of the Horn of African States citizen and giving them what he or she deserves, and we all know they deserve better than what they have today.

Here is how this can be done:

  • There needs to be economic integration of the region i.e., movement of goods, services and capital among the four states.
  • There needs to be stability in the region i.e., ending the ongoing civil conflicts and clan clashes. A peaceful region is attractive to many an investor, intrepid or otherwise and would allow proper exploitation of the resources of the region be it above soil or sub-soil.
  • There needs to be abiding by the law, for without abiding by the law nothing works anywhere. It is enforceability of contracts that instills comfort in investors venturing into the region and doing business with the region.
  • There needs to be political stability in each of the countries as well as creation of a higher institution they all share in, not different from the European Union infrastructure. A collective bargaining chip will allow the whole region to take advantage of the power of the collective.

Perhaps the most important step the collective Horn of Africa States can take is to encourage the population of the region to look back into agriculture and hence produce local food for the people. No one would feed another’s population and therefore, it is on the onus of the leadership to emphasize on food production through development of agriculture both in terms of subsistence and commercial aspects. The fortunate part of this is that the region owns its own native grains and food plants and does not need to import seeds from beyond. Over the past several decades, there were efforts to destroy the traditional seeds of the region, but they have not fully succeeded in these efforts, and the original seeds are still available. These should be saved and replanted in large quantities to feed the population. The local millet, sorghum, the teff and the ensete are all available and they can easily feed the population if the leadership of the region would encourage the people to farm and use their lands for food production.

The processes of transforming local products through manufacturing and extractive industries should be second to the food production process. This would later be followed by industrialization. It does not mean that these cannot be done parallel to each other. It is only emphasizing that the population should have food in order to become useful to the region and beyond, and there is nothing better than producing one’s own food instead of relying on others for food. The ongoing Ukraine war is a great lesson to learn from when it comes to food production.

The region of the Horn of Africa States need not be in the HIPC processes, and this is not that tall an order! The region has enough resources to repay the sins of its previous leaders and avoid falling into others.

 

*DrWalhad writes on the Horn of Africa economies and politics. He can be reached at [email protected]

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