00:10Welcome to the special edition of Business Africa, coming to you live from the venue of the Paris Club anniversary
00:17meetings.
00:17I'm your host, Afolake Onloye. Here are the top stories this week.
00:22Can the International Monetary Fund finally help Africa break out of its multi-generational loop of rescue and repayments?
00:33Here is how Nigerian businesses are using staple coins to buy past traditional banks to fight inflation.
00:42Meet the South African micro-wine maker conquering global markets right from their own backyards.
00:51As the Paris Club marks its anniversary, African nations find themselves back under mountain debt pressure,
00:58highlighting the limit of past relief efforts and the need for deeper financial reform. Have a look.
01:05Africa accounts for less than 3% of global debt.
01:09Yet this year, the continent faces an unprecedented $90 billion external debt repayment wall.
01:15The crisis stems from a 60-year loop.
01:19Post-independence infrastructure borrowing triggered severe defaults in the 1980s,
01:24forcing decades of harsh IMF-mandated spending cuts.
01:28Massive debt relief in the 2000s briefly wiped the slet clean,
01:32but nations soon tapped new private and bilateral credit, causing a new debt crisis.
01:39In response, the IMF has dramatically scaled its concessional lending to Africa to a record $36 billion,
01:46while expanding its executive board to include a third African chair to give the continent a louder voice.
01:53Yet with four out of five African governments still spending more on debt servicing than on health care,
02:00emergency firefighting is no longer enough.
02:02This raises questions about whether the global financial architecture can help deliver economic independence
02:09for developing nations without creating structural dependence.
02:18To unpack this generational crisis and chat a definitive road ahead,
02:22we are joined by the newly appointed Director of IMF for African Department, Zen Zandan.
02:28Well, thank you very much for making our time for this interview.
02:30Thank you for inviting me.
02:33Now, over the past four decades, Africa has gone through structural adjustment programs,
02:38debt relief initiatives, and IMF so much supported reforms,
02:42and yet debt crises continue to reappear across the continent.
02:46Why has the cycle proven so difficult to break?
02:49A lot of African countries have actually broken the cycle,
02:54and we should recognize that Africa, like the rest of the world,
02:58went through shock after shock since 2000, with the COVID-19, with the Ukraine war, with the latest shock.
03:04So these shocks also have affected fiscal position and debt vulnerabilities.
03:11It's true that also policy mistakes and policy slippages in some places also have led to higher level of debt
03:20and high debt vulnerabilities, but the one thing I want to keep with you is that also an optimistic note.
03:27So if you look to 2025, the fastest growing region is Africa.
03:34If you look to their fiscal position over 2025, they have all improved as a region.
03:40If you look to their debt vulnerabilities, they are coming down.
03:42If you look to their current accounts, it's really a region that has also made a lot of progress
03:50in terms of improving their policy framework, and that has contributed to a better economic performance.
03:57When African countries find themselves in recurring debt distress,
04:01why does the IMF believe the primary responsibility lies with borrowing governments,
04:07with creditors or with shortcomings in the international financial architecture itself?
04:13First, you have to recognize that external shock played an important role in debt dynamics in Africa.
04:20So I was talking about now this, but also you can talk about capital flows globally,
04:27some supply shocks affecting the high interest rate now, so interest rate going up and cost of borrowing up.
04:36So that external environment has played an important role, and also natural disasters,
04:41and conflict that affected the performance.
04:47But also you could clearly it's important for countries themselves to take responsibility of their fiscal policy
04:57and bring that down.
05:00And that certainly requires a lot of policies, strengthening their policy framework,
05:08strengthening implementing structural reform to have faster economic growth
05:12so that you can have debt-to-GDP dynamics that goes in the right direction.
05:17And certainly the international community needs to continue to play an important role
05:21by providing cheap financing to Africa, because the financing needs remain large.
05:27And so it's important that the international community continue to support Africa
05:32to finance its development at a lower cost.
05:35Many African countries are told to invest in infrastructure, energy, climate resilience,
05:40and industrialisation while also keeping debt levels under control.
05:44Are we asking countries to achieve development with finance and tools that are fundamentally inadequate?
05:52For that, two ways.
05:55First one is really for countries to create the fiscal space to be able to invest in these areas.
06:01Yes, and that means what?
06:02It means raising more domestic revenue, so tax policy reform, strengthening their tax administration
06:09to be able to raise more revenue for their government.
06:12Second is also to improving the composition of spending.
06:16You have a lot of inefficient spending in many places, so phasing out the inefficient spending is very good.
06:23And then when you invest, you make sure that you have value for money for investment,
06:27so more efficiency, and actually, if you look to the number in Africa,
06:31for example, the efficiency gap in healthcare and infrastructure,
06:36you will see that the efficiency gap in Africa are twice the gaps
06:40for the rest of the emerging market and developing economies.
06:43Well, Mr. Zendin, thank you so much for your time.
06:47Thank you. Thank you for your invite.
06:53In Nigeria, a quiet financial revolution is underway.
06:57As inflation rises and cross-border fees remain high,
07:01millions are turning to stable coins instead of traditional banks to keep their businesses running.
07:06Here is how the digital dollar is gaining ground.
07:10For small business owners in Nigeria,
07:13getting foreign exchange through normal banks is plagued by dollar shortages,
07:18high fees, and endless delays.
07:21Sending a simple $200 remittance through traditional African banking channels
07:26costs an average 9% in fees, well above the global 6% average.
07:32Stable coins move money in minutes for a fraction of the cost.
07:36That's triggered a massive wave of adoption.
07:39According to the IMF, Nigeria has captured a staggering 60% of all stable coin inflows
07:46into sub-Saharan Africa since 2019,
07:50pulling in $59 billion in overall crypto assets in a single year.
07:55Globally, people often buy crypto to speculate and get rich quick.
07:59But in Africa, it's a daily shield against inflation
08:02and a cheaper way for the diaspora to send money home.
08:06But the IMF warns this leaves central banks in the dark,
08:10making it harder to control the economy or track financial crimes.
08:14Their advice?
08:15Don't ban it.
08:17Instead, stabilize local currencies,
08:20regulate crypto platforms,
08:22and upgrade traditional banks so they can compete with the speed of the digital world.
08:28South Africa's wine industry generates $3 billion a year,
08:33but entering that market often requires major investment.
08:36In our final report, we meet with micro-winemakers,
08:40breaking that barrier using small urban plots and direct sales
08:44to prove that local identity can compete with deep pockets.
08:49In a sector where high land costs keep most people out,
08:52winemaker Natasha Jacka is rewriting the rules.
08:55Her enterprise, Alinea Vineyard,
08:57covers just a tenth of a single hectare
08:59to beat the high cost of expansion.
09:01She uses an innovative business strategy.
09:04She grows a small amount locally to build an exclusive brand,
09:08but buys extra grapes from independent farmers
09:11to keep production viable.
09:12Her tiny run of under 1,000 bottles
09:15is already exporting to Europe and America.
09:18I prune, I sucker, I tie, I'll do everything.
09:22So it's having that touch,
09:24or that I'm involved in every single step of the process.
09:28From that early stage of planting or putting each vine in the ground,
09:32that for me is very special.
09:34The other side of that is that it is extremely labor-intensive,
09:37that the work is hard, it is back-breaking.
09:40Operating on a micro-scale also means losing bulk purchasing power
09:44for Kathy Roloffs at nearby Hout Bay Vineyards,
09:47buying small amounts of bottles and labels drives production costs sky-high.
09:52To survive, these small businesses keep crowded supermarket shelves entirely.
09:56Instead, they sell directly to local neighbors and tourists,
10:00a strategy that now drives nearly half of all revenue for small-scale wineries.
10:04By opening their doors twice a year for neighborhood testing days,
10:08they turn their small size into a massive local advantage.
10:11The larger you can purchase, the cheaper things become.
10:16And as a small producer, you are only buying small amounts of bottles and labels
10:20and any of the materials that we may be using.
10:23So a big challenge for us is obviously the costs, the high costs.
10:27And, you know, the customers don't necessarily understand why you need to charge slightly higher.
10:35They don't understand what goes into the production of making a quality red wine on a smaller scale.
10:42Africa accounts for less than 5% of global wine production,
10:46yet countries such as South Africa have built internationally recognized brands
10:49that compete in some of the world's most demanding markets.
11:05businessafricanews.com.
11:07See you soon.
11:14Business Africa was presented by Turkish Airlines.
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