Addicted: Africa and its unflattering romance with aid

Traditionally international aid has been seen as a way to allow countries to develop by giving them the extra boost they need to eventually becoming self sufficient through sustainable long-term growth. However, the reasons for providing aid are varied and complex. And the impacts and consequences are often unpredictable and unwanted.

Donors expect aid to induce governments to adopt policies and programmes that lead to improved economic performance as well as to facilitate the implementation of such programmes. The reality, however, is that aid is driven by other motivations. International aid is integral to donor countries’ development cooperation policies which in turn are defined by their foreign and security policies.

African countries, since their independence in the 1960s have been compelled to accept aid because of their continued weakness and economic vulnerability and their urgent short-term needs. The economic justification for aid is based on a perceived inherent lack of capacity of the African continent to rescue itself from the quagmire of poverty and crisis. It is indeed an undeniable fact that for the last 50 years, almost all African countries have been not only compelled to accept aid but also to vocally demand international aid even just to survive. Even though estimates differ according to who made them, trillions of dollars in aid has been given to the continent over the last sixty years. China alone has committed USD 75bn on 1,700 aid and development projects in Africa during the past decade.

Yet, several African scholars and observers argue fiercely that this aid hasn’t brought about the developmental changes it is supposed to bring.

Dambisa Moyo, the author of “Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa,” strongly argues the a huge amount of aid money which has been given to Africa in the past 60 years, particularly government-to-government aid, and funds from large monetary institutions like the World Bank and IMF are not working. She cites the doubling of the number of people that live on less than USD 1 a day, in the last 20 years and most foreign government aid being pocketed by corrupt politicians as an example.

Others also argue the resources provided to Africa over the past 50 years have only intensified its poverty; development aid promotes insurmountable distortions in the functioning of the markets. These resources have only led to corruption, lack of accountability, and ensured the continuation of undemocratic and repressive governments.

The donor organizations and countries political and economic interest in the recipient nation have also created havoc and chaos, rather than bringing positive changes in the lives of the poor. Aid can bring short term remedies but it creates a state of dependency among beneficiaries, unless it empowers the people. As the late Tanzanian President, Julius Nyerere once said: ‘if development has to take place, people must be involved.’

On the contrary pro aid economists and politicians argue that the development aids given to Africa help to build basic infrastructure facilities so that trade, foreign investments and microfinance opportunities can provide a better future for Africans. They also refer to the bilateral aid used in humanitarian relief work and the support given to help strengthen fragile or strategic states and improve their standing. Moreover, the Aid Africa receives helps it to develop its rich minerals and resources in abundance to help its citizens prosper, they argue.

Several times in the past half a century the situation in many African countries has reached emergency proportions time and again, and aid has been absolutely necessary. It has helped to save millions of lives and to see the future hopes of the continent.

It is a fact that, now there is an acceleration of economic development. While the West is in crisis, and China and India are giving signs of economic fatigue, the economies of most African countries continue to grow at an average rate between 6-7% per annum.

The prevailing progress of Africa is not only on GDP growth, but also on the reduction of foreign aid. As the domestic private sector becomes the engine of growth across much of Africa, an increasing number of African countries are beginning to step away from aid dependency. Currently, at least a third of African countries receive aid that is equivalent to less than 10 percent of their tax revenue.

According to a comprehensive look at African resource mobilization by the African Economic Outlook 2011 report, on average, Africa has managed to raise an estimated 441 dollars in taxes per person per year while receiving 41 dollars per person per year in aid.

In the discourse of aid and Africa, groups which advocate the continuity of aid to Africa argues that international aid indeed stirs economic growth in Africa. Their calls for more aid to Africa are growing louder, with their pushing for doubling the roughly $50 billion of international assistance that already goes to Africa each year.

They argued with empirical evidence that Kenya’s development for instance, is donor-driven, and aid has been useful in building sustainable infrastructure. In similar fashion, Ethiopia’s infrastructure development is donor assisted. Many road and infrastructural development projects were financed by the country’s major development partners such as the World Bank, the European Union, the African Development Bank and the like. The construction of these roads greatly accelerated the country’s product movement and domestic trade.

By the same token, this has attracted private investors and had a positive direct and indirect impact on taxes, as people establish and expand already existing businesses. According to African Economic Outlook 2011 report, from Africa’s 54 countries, aid exceeds taxes in only 12 extremely poor countries.

Yet evidence overwhelmingly demonstrates that aid to Africa has made the poor poorer, and growth slower. The insidious aid culture has left African countries more debt-laden, more inflation-prone, more vulnerable to the vagaries of the currency markets and more unattractive to higher-quality investment, according to a recent article on The Wall Street Journal. The most obvious criticism of aid is its links to rampant corruption. Aid flows destined to help the average African end up supporting bloated bureaucracies in the form of the poor-country governments and donor-funded non-governmental organizations.

Much empirical evidence shows that a complete and sudden break from foreign aid is neither possible in the foreseeable future nor likely to be accepted by some countries at any time. Functional and well-developed financial systems that could support high levels of investment are one of the best ways of reducing aid-dependency. Local manufacturing is also another path that can lead African countries out of aid-dependency. Even a small increase in the share of manufacturing in GDP has a potential to facilitate an exit from aid-dependence.

No country has ever achieved economic success by depending on aid to the degree that many African countries do. Rather than calling for more aid, African governments need to attract more foreign direct investment by creating attractive tax structures and reducing the red tape and complex regulations for businesses doing. African nations should also focus on increasing trade. Africa needs to stand on its own.