“Mispriced risk bleeds Africa of USD 74 billion a year,” former SA finance minister Trevor Manuel tells G20

July 16, 2025 in Business, Finance, Foreign News by Editor

Africa’s debt burden and the need to reform the global financial architecture have taken centre stage at the G20 Finance Ministers Summit underway at the Zimbali resort in Durban. As the continent grapples with rising borrowing costs and constrained fiscal space, a high-level Africa Expert Panel has presented 11 key proposals aimed at easing access to finance and lowering the cost of capital.

According to Daily Maverick, former South African finance minister Trevor Manuel, who chairs the panel, told journalists on Monday that Africa’s interest rate burden has surged alarmingly, worsening debt sustainability across the region.

“Debt squeezes out development, it impoverishes countries,” said Manuel. “There are elements of the cost of capital that need particular attention — including credit ratings. When interest rates are very high and rising, we have a growing problem.”

The Africa Expert Panel’s recommendations target systemic reforms in global finance, including a reduction in Africa’s cost of capital by challenging how rating agencies and risk premiums are determined. The panel also advocates for an overhaul of the G20’s Common Framework to make sovereign debt restructuring more effective and transparent.

The 11 proposals include:

• Reforms to credit rating practices and the Basel III framework to lower risk premiums.

• Scaling up support from Multilateral Development Banks (MDBs) such as the World Bank and African Development Bank (AfDB).

• Development of deep local-currency bond markets to reduce exposure to foreign exchange shocks.

• Strengthening domestic capital markets to allow African countries to borrow in their own currencies.

• Mobilising climate finance for a just transition.

• Prioritising social spending over debt service in national budgets.

• Promoting intra-African trade and economic integration through AfCFTA support.

Despite low default rates on long-term infrastructure investments, Africa loses an estimated USD 74.5 billion annually due to sovereign risk mispricing — a discrepancy that penalises the continent with inflated borrowing costs.

AfDB vice president and chief economist Kevin Urama noted last month that African countries pay up to five times more in interest when borrowing from global capital markets compared to MDBs. Debt service costs on the continent are projected to reach $89 billion in 2025, drawing funds away from vital sectors like health, education, and infrastructure.

Manuel emphasised the urgency of South Africa using its current G20 presidency to rally global support for African-led solutions, including fairer debt terms and more predictable multilateral partnerships.

He also pointed to the impact of trade unpredictability on regional economies, warning that arbitrary tariff decisions in major markets can have ripple effects on neighbours such as Botswana, Lesotho and Namibia — and by extension, South Africa.

“It’s impossible to plan when you have a head of state arbitrarily shifting tariff rates by 50pc from one day to the next,” Manuel said.

The proposals come at a time when African economies are struggling to balance fiscal consolidation with urgent development needs. Leaders at the summit are expected to deliberate on how to build a more resilient global financial system that better serves the continent’s development aspirations.

Source: Daily Maverick
Reporting by 256 Business News