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8 African Governments That Misused Their Eurobond Money

8 African Governments That Misused Their Eurobond Money

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In recent years, African governments have turned to Eurobonds as a way of funding deficiencies in their development budgets. Some of the countries include Kenya, Ivory Coast, Uganda, Zambia, Namibia, Gabon and Angola among others.

Money raised from Eurobonds has in some cases been diverted from its intended use to other non-development matters. Here are eight African countries that used their Eurobond money for the wrong reasons:

Note: A Eurobond is a debt instrument that is issued to another country that uses a foreign currency denomination. It is called Eurobond because it was first issued in Europe.

Sources; The Lusaka Times, Global Risk Insights, Bloomberg

GhanagasGhana

In 2007, Ghana became the first country in Sub-Saharan Africa to issue a Eurobond. The government however used the money to increasing salaries for its civil servants in the hope that it would raise enough revenue from cocoa, gold and oil exports to repay the debt. The prices collapsed and Ghana sought assistance from International Monetary Fund to repay the debt and stabilize her economy.

zambianwatchdog.com
zambianwatchdog.com

Zambia

The Zambian government used money raised from a Eurobond  on a range of activities that could not generate income and help in repaying the loans. Like Ghana, the money was used to pay civil servants salaries, which make up 52 percent of the nation’s annual budget. By-elections and creation of more districts are other avenues that the money was spent on.

capitalfm.co.ke
capitalfm.co.ke

Kenya

In June 2014, the government raised US $2.21 billion from sovereign bond meant to fund different infrastructural projects. The government has been unable to detail the projects that were funded by Eurobond proceeds as requested by the opposition. About $750 million of the bond was used to pay civil servants and also run day to day activities of various ministries, while another $600 million was used to pay a syndicated loan.

Seychelles
Market Street, Victoria, Mahe Island, Seychelles. Photo: Jan Greune/Getty

Seychelles

In 2008, the nation was unable to pay $230 million Eurobond, due to excessive spending by the government on projects that generated no income to offset the loan.

Congo brazzaville election election
Congo opposition supporters in 2011 show what they claim are badly printed photocopies of election ballots found in Kinshasa. Photo: Jerome Delay/AP

Equatorial Guinea, Gabon and DR Congo

These three African governments raised money through Eurobonds in 2015, but these money is expected to be used to finance general elections rather than development projects. The three have general elections set for this year and the governments are expected to use the Eurobond money for political patronage and ensure the incumbents stay in power.

topnews.in
topnews.in

South Africa

Over $2 million from the European Union was used in HIV/Aids awareness play, Sarafina 2. The money was used to buy buses for the crew and cast.  This was 20 percent of the nation’s annual budget set for fighting the epidemic.

herald.co.zw
herald.co.zw

Tanzania

The East African nation used $10 million to build a cashew nuts -processing factory, without feasibility studies to determine its viability. The plant’s capacity was three times bigger than the entire cashew nuts production. The costs of processing cashew in the country was more than taking them to India.

Wikipedia.org
Wikipedia.org

Mozambique

In 2013, Mozambique raise $850 million in bonds from investors, including Credit Suisse and VTB Capital, to finance it to buy a flotilla of tuna boats. What the Mozambique government did not disclose in their offer documents was that the fleet contained a number of anti-pirate patrol boats. It only said the Eurobond money will also be used for training and “general corporate purposes”.