Trump’s tariffs, Africa’s debt: G20's chance to rewrite the script

Key topics:Trump imposed tariffs and cut $12.7B in US aid to African nationsAfrica’s debt crisis worsens as interest payments top health, educationRamaphosa urges US to lead G20-backed debt relief for Africa.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Justice Malala.In Africa, as in many other parts of the world, Donald Trump’s policies have made him the embodiment of the pejorative stereotype of the ugly American – ignorant, arrogant and dangerous. He destroyed the 25-year-old African Growth and Opportunity Act, which granted African products duty-free entry to the US, imposing punishing tariffs on the continent. He canceled billions of dollars in aid, worth $12.7 billion in 2024. He angered African leaders with his White House ambush of South African President Cyril Ramaphosa. And he’s ramped up his previous insults against African nations by belittling countries such as Lesotho, an impoverished kingdom of 2.3 million, while nearly obliterating its economy with tariffs of 50%, the highest initially slapped on any country globally. Nevertheless, the US president has an opportunity to change the narrative without reversing any of the measures he’s taken against Africa. Following their May 21 brawl, Ramaphosa announced that after months of proclaiming that neither he nor his officials would participate in the Johannesburg G-20 meetings this year, Trump will attend the all-important November summit after all. If he does, Trump should join in with — or even lead — South Africa’s initiative to resolve the continent’s unprecedented debt crisis. Twenty low-income countries in Africa are in, or at risk of, debt distress, according to World Bank statistics compiled by the activist network one.org. External debt owed by African countries is equivalent to 24.5% of their combined 2023 gross domestic product. The most damaging aspect comes from the cripplingly high interest rates these countries pay compared to their western counterparts. Portugal and France have debt-to-GDP ratios of 99% and 111% respectively, with interest payments consuming 5% and 3% of total government revenue, according to former UK Prime Minister Tony Blair’s A New Deal For Africa report. “By comparison, Malawi, Kenya and Ghana, each with total debt-to-GDP ratios lower than both Portugal and France, use approximately 26% of their tax revenues for interest payments.” .Read more:.BN Briefing - Cyril's take: President Trump will attend G20 in SA, our meeting was a great success.The Boston University Global Development Policy Center and the Institute for Economic Justice report that, on average, African countries spent 16.7% of government revenue on interest payments in 2023, up from 6.5% in 2010. S&P Global Inc. warned in 2024 that an early warning sign of a potential sovereign debt default is when interest payments approach 20% of national revenue. As the chart below shows, those alarm bells are ringing all across the region: .That payment burden is “driven by investors’ heightened perception of risk in African economies,” according to the Blair Institute. Former Nigerian President Olusegun Obasanjo brands it an unjust “African premium.”The effects are heartbreaking. At least 30 African countries allocate more funds to servicing debt interest than to public health, according to Boston University and IEJ. In 2023, for the first time, sub-Saharan African nations spent more on debt interest payments than on education. At the same time, Africa paid more in debt repayments — $68.7 billion — than it received in aid — $59.7 billion. What are these countries doing about it? They’re paring investment in health, education and infrastructure to deliver what are ostensibly fiscally prudent budgets. Faced with a debt-to-GDP ratio of 76% this year, South African Finance Minister Enoch Godongwana tried to hike value-added tax to 17% from 15% in February, triggering a mutiny from both his African National Congress party and opposition parties. His second attempt at a budget, proposing a 0.5% hike every year for two years, was rejected in April. His third attempt on May 21 proposed no tax increases. With Kenya’s debt-to-GDP ratio now topping 70%, the country will spend 32% of its government revenues just on interest payments this year, says Fitch Ratings. More than 50 people were killed last June when youth-led protests broke out, forcing Kenya’s government to abandon a set of tax hikes worth $2.68 billion. In early May, three days after a protester hurled a shoe at Kenya’s President William Ruto while he spoke about the cost of living at a rally, the government announced that it won’t impose new taxes or increase existing ones in this year’s budget, scheduled for June. Mozambique, Ghana and Botswana are also cutting planned expenditure to meet ballooning debt bills. “African nations are not defaulting on their debt but are defaulting on the development prospects of their own people,” says the Institute for Economic Justice. It’s not a public-sector problem only. These high interest rates translate into higher borrowing costs for companies investing in Africa — averaging 18% percent versus 4% percent in high-income countries, argues the Blair Institute. The continent’s nations dare not raise more cash from already overstretched taxpayers. Ratings company Moody’s Investors Service warned in a May 2 report that African countries should steer clear of increasing taxes to finance budget deficits because of the adverse impacts on low-income earners and economic activity. Cue Trump. South Africa’s Ramaphosa has made debt sustainability a key priority of the country’s G20 chairmanship this year. Eight former African leaders have called for a comprehensive debt relief deal for the continent that includes “comprehensive debt restructuring involving all creditors – private, bilateral, and multilateral – through a predictable and inclusive process.” Given that China has become Africa’s biggest bilateral lender, a US call for a debt reset would pack a hefty punch — and help bring reluctant private creditors to the table for a renegotiation. By joining this initiative, Trump and the US can become part of a remedy that would soften the impact of aid cuts and tariffs and improve the lives of millions — a beautiful solution to an ugly problem..© 2025 Bloomberg L.P.

Trump’s tariffs, Africa’s debt: G20's chance to rewrite the script

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