Africa Has a Debt Crisis: Momentum From G20 in South Africa Can Help Find Solutions
The end of South Africa’s G20 presidency does not mean the end of its ability or responsibility to promote the issues it prioritised during 2025. It can still advocate for action on some of these issues through its further participation in the G20 and in other international and regional forums.
In this article, I argue that going forward South Africa should prioritise the financial challenges confronting Africa that it championed in 2025.
South Africa established four overarching priorities for its G20 presidency. Two of them dealt with finance. One sought to “ensure debt sustainability for low-income countries”. The other was to mobilise finance for a just energy transition.
The importance of debt, development finance and climate to Africa’s future is clear. Over half of African countries are either in debt distress or at risk of being in distress. More than half of Africa’s population live in countries that are spending more on servicing their debt than on health and/or education.
In addition, 17 African countries experienced net debt outflows in 2023. This means that they were using more foreign exchange to pay their external creditors than they received in new debts that could be used to finance their development. The continent is also experiencing extreme weather events that are adversely affecting food security and human wellbeing.
In short, African countries are caught in a vicious cycle. The impacts of climate and their struggle to meet their debt obligations are interacting in ways that undermine their ability to meet their sustainable development goals.
South Africa’s priorities
South Africa’s priorities for its G20 presidency were ambitious. Success required meaningful action at three levels:
Awareness. South Africa would need to bring the international community to a better understanding of the nature of the debt and development finance challenges confronting African countries and of the consequences of failing to address them.
Process. South Africa would need to convince the G20 to correct the shortcomings in the Common Framework it had devised to deal with low-income countries seeking debt relief.
The examples of Zambia and Ghana showed that the Common Framework was cumbersome, slow and unduly favourable to creditors. For example the framework requires the debtor to engage separately with each group of its creditors in a sequential process. This means that it should not negotiate with its commercial creditors until it has successfully negotiated with its official creditors.
Commercial creditors can’t give debt relief until the official creditors are satisfied with their deal and are confident that the commercial creditors will not receive more favourable treatment from the debtor than they have received.
Another complication is the IMF’s multiple roles in debt restructurings as an advisor to and a creditor of the debtor countries. In addition, it does the debt sustainability analysis that determines the amount of debt relief that all other creditors are expected to provide to the debtor country in order for it to regain debt sustainability. The more optimistic its assessment, the smaller the contributions the various creditors, including the IMF, are expected to provide. These contributions can either be in the form of new funding or new debt terms.
Substance. The current debt restructuring process treats debt as a technical financial and legal problem rather than as the complex multifaceted problem that is experienced by debtor countries. The former perspective limits the scope of debtor-creditor negotiations to the terms of the financial contracts.
The negotiations focus on the adjustments that must be made to these terms because the debtor cannot comply with its originally accepted obligations. They treat as largely outside the scope of the discussions the adverse impact the debt situation has on the sovereign debtor’s other legal obligations and on the social, political, environmental and cultural situation in the debtor country.
This approach in effect leaves the debtor to deal with these other issues on its own. This artificial distinction between the debtors’ other legal obligations and those it owes to its creditors makes it very difficult for the debtor to escape the vicious debt, development and climate cycle in which it is trapped. It forces it to choose between its commitments to its creditors and its development obligations.
Over the course of 2025, South Africa has been very effective in raising awareness of the African debt crisis and its dire impact on African countries. South Africa persuaded the G20 finance ministers and central bank governors to issue a declaration on debt sustainability at the end of their October meeting.
The declaration is the G20’s eloquent acknowledgement of the problem and of the need for more discussion of how these debt issues are managed by both debtors and creditors. Unfortunately, it does not contain any firm G20 commitments on what it will do to remedy the situation.
There has not been substantial progress at the process and substance levels. This is unlikely to change in the remaining weeks of South Africa’s G20 presidency.
But there are three actions that South Africa can take beyond the end of its term to ensure that the African debt crisis continues receiving attention.
Three actions
First, it should ask a group like the African Expert Panel that it established to advise the president to prepare a technical report that identifies and analyses all the barriers to Africa accessing affordable, sustainable and predictable flows of external development finance.
This report should be submitted to the South African president in the first half of 2026. Next year, South Africa will still be a member of the G20 Troika, which consists of the current, immediate past and the incoming G20 presidents. Consequently, next year, it will still be able to table the report at the G20. South Africa can also use the report to promote action in other appropriate regional and global forums.
Second, South Africa and the African Union should create an African Borrower’s Club that is independent of the G20. This club should be a forum in which African sovereign debtors can share information and lessons learned about negotiating sovereign debt transactions and about responsible debt management. When appropriate, the club can work with regional African financial institutions.
The club, working with regional organisations like the African Legal Support Facility, can also sponsor workshops in which interested African sovereign debtors can share information and more critically assess their financing options. They can also work to improve their bargaining capacity in sovereign debt transactions.
The African Borrower’s Club should also be mandated to establish an African Sovereign Debt Roundtable that is modelled on the Global Sovereign Debt Roundtable. This entity should be an informal forum, based on the Chatham House Rule in which the various categories of stakeholders in African debt can meet to discuss the design of a sovereign debt restructuring process that is effective, efficient and fair and that adopts an holistic approach to a sovereign debt crisis.
Third, South Africa should capitalise on the fact that the impacts of climate, inequality, unemployment and poverty on Africa’s development prospects are now acknowledged to be macro-critical, and so within the IMF’s macro-economic and financial mandate. South Africa should call for a review of the IMF’s operating principles and practices and its governance arrangements.
This call should note that the multilateral development banks have been the object of G20 review for a number of years and that this has resulted in important enhancements in their capital frameworks and operating practices. On the other hand the IMF has not been subject to a similar review despite the fact that its operations have had to undergo possibility even more extensive revisions.
