Challenging Apartheid’s Foreign Debt
South Africa’s widely commended Truth & Reconciliation Commission has a blind spot. Surprisingly, no
attention appears to have been given to the foreign corporations, individual investors and Western
governments that helped create and sustain the racial dictatorship which came to be known as apartheid.
The Cape Town -based Alternative Information & Development Centre (AIDC) undertook a study and
produced a report on a strategy for challenging the foreign debt incurred during the apartheid era but which
democratic South Africa is now expected to pay. The Report, located in the search for truth and
reconciliation in South Africa, seeks to address the omission of apartheid’s international face. Post-
apartheid So uth Africa has inherited a foreign debt of $18.7 billion (some R90 billion). The dominant view
amongst economists and politicians is that this sum presents no special problem. According to the
measures most economists use in such matters the foreign debt is not a course for concern.
The AIDC’s Report challenges this complacency on three grounds. First, R90 billion is an awful lot of
money for the vast majority of South Africans who, in varying degrees, remain deprived of the basic
necessities of life. Any u nnecessary and unjustifiable diversion of resources away from meeting these
needs has to be opposed and stopped. Second, the balance of payments, which is already near to the
danger zone, might not be able to bear the additional burden of the debt repayments. These repayments, of
between $1.5 billion and $2.6 billion a year for the period 1997 to 2001, are more than enough to create a
balance of payments crisis. Morality and international law provide the third basis for challenging the debt.
Morality and international law lie at the heart of the AIDC’s strategy. The Report revisits the Doctrine of
Odious Debt, a doctrine of jurisprudence the US Government and US Chief justice helped develop. The US
Government, in the aftermath of the American-Spanish War of 100 years ago, used the doctrine to repudiate
Cuba’s debt to Spain. The US Government argued that the debt was “odious” and unenforceable since it
had been incurred without the consent of the Cuban people and by means of force of arms. The US
Government further maintained that the creditors knowingly took the risk of investment when they made the
In 1923, the Royal Bank of Canada sought to recover debt from the recently established democratic
government of Costa Rica. In the Costa Rican submission, the debt was illegitimate. The new government
argued that the debt has been incurred by a dictator not the people of Costa Rica; the submission being
that, at the time the loans were made, the people had been engaged in a political and military struggle to
bring democracy to their country. The case was heard by Chief Justice Taft, of the US Supreme Court. Taft,
sitting as arbitrator, fully upheld the repudiation of the debt.
The legal authority who did most to codify the Doctrine of Odious Debt was the e´migre´ Russian,
Alexander Sack, while he was a Professor of Law in France. It was his opinion that governments invoking
the doctrine would be required to prove that the debt ill-served the public interest and that the creditors
were well aware of this. Provided these proofs were met, the onus would be on the creditors to show that the
funds were utilized for the benefit of the country. If the creditors could not do so before an international
tribunal the debt would be unenforceable.
Using Sack’s principles, the Report argues that all debts incurred during the apartheid years are illegitimate
because the apartheid regime itself was illegitimate. The UN and the International Court of Justice were the
most authoritative of the wide range of international b odies that proclaimed apartheid to be a crime against