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Foreign aid and development: Is Africa on track?

01.02.2019
Article from AFRIC Editorial
Several questions around the effectiveness of foreign aid in Africa still remain unanswered. Foreign aid and assistance have been pouring into Africa since its independence. But the sad reality of this is that the continent has not been able to effectively utilize this to change its development trajectory. One, however, begins to ask the reason behind this wide disparity in the amount of aid received, the impact it has in the recipient countries and what should be done to get the continent back on track.

Are there any appropriate government systems which ensure that the inflow of cash in terms of aid is properly managed? Is there any feedback mechanism or a monitoring and evaluation system to follow up and ensure that loans and foreign assistance are adequately used? An in-depth look into this phenomenon may begin to answer some of the frequently asked questions.

It is a worrisome situation to find out that despite the huge sums of money which have been pumped in Africa, recipient countries have not been able to move from developing to developed nations and most of them still continue to depend on donor countries for more aid which has increased their dependency tendencies.

It has been reported that the entire continent receives approximately $50 billion of international aid annually. In 2017, aid to Africa increased by 3% that is a total of 29 billion and sub-Saharan Africa alone benefitted from a 3% increase.

Mid 2018, countries like the US tried to review its aid policies, chopping down expenditures on aid. President Trump proposed a foreign aid cut which would have affected Africa the most, with about 35 percent reduction. Initially, Africa benefitted from close to 20 percent of U.S. aid, and countries like Egypt, Kenya, and South Sudan were the biggest beneficiaries. Is it, however, true that government and other systems in African countries may flop if foreign aid is reduced? We could only begin to think of the worst if Africa’s economy depends solely on foreign aid.

China, on the other hand, is taking another route completely different from that of the US as it is constantly boosting its aid package to Africa. In September 2018 the Chinese President Xi Jinping on the occasion of the seventh Forum on China-Africa Cooperation (FOCAC) announced aid and loans package of $60 billion to more than 50 African countries.

The International Monetary Fund in its 2018 Regional Economic Outlook for Sub-Saharan Africa noted that public debt went above 50% of GDP in 22 countries at the end of 2016.

However, most people in Africa still continue to live below the poverty line while most countries stagger and are still struggling to find stamina along the development path. It thus raises the question of whether such aids are actually intended for development, hence the rationale behind aids giving still remains highly questionable.

CAN AFRICA RELY SOLELY ON AID?

What could be some of the underlying factors why most countries remain same after receiving billions of dollars in aid? While some analysts have continuously blamed the governments for misappropriation of funds, others have indicated that the strategic interests of donors dominate the aid-giving process. Most donor nations have priority areas of interest thus some aid comes with several constraints. Hence, such countries end up investing in sectors which are not catalysts for its growth and development.

Another school of thought holds that the dependency situation of most African countries on foreign aid and the inability to manage aid received are due to poor leadership, the superiority of self-interest over national interest. Due to this care-free nature of leadership, there is the lack of a solid system which guarantees that loans are well handled. Without such clear cut policies, most countries keep investing in ‘white elephant projects’ which have either never been implemented or whose implementation remains farfetched.

It is widely upheld that aid strengthens corruption and some pundits have gone as far as trying to establish a correlation between increased aid and the significant increase in corruption. This only means that self-interest and greed on the part of those who manage resources can also not be overlooked, thus, money is not evenly shared among the population or used to promote growth.

In any case, it remains clear that Africa needs more than just aid to grow its economy. A review of the economic growth in Asia over the past decades, which received less foreign aid in comparison to Africa, is a good point in case.

A World Bank report revealed that out of the 700 million people who were pulled out of poverty between 1981 and 2010, 627 million of them were in China which clearly indicates that foreign aid isn’t the answer to growth.

Economists have recommended a change in government systems and policies which will attract and favour private investment, which is the real agent for development.

Africa needs more assistance in improving governance because it is considered that without a strong government, the financial assistance will not fulfill its desired goal. Hence, there is a strong call for African governments to develop policies which promote democracy and creates an enabling environment for foreign investment.

Article from AFRIC Editorial

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