Aid for Africa and money for what?

When the G20 Summit was taking place last week in London focusing on the current economic crisis and the reforming of global financial institutions, there is a seemingly being-forgotten issue of the Africa, the black continent that is being even gloomer during this tough times. The only two African representors in G20 gathering were Males Zenawi, Chairman of the New Partnership for Africa's Development and Ethiopian Prime Minister, and Kgalema Motlanthe, South African President. Ridiculously, Zanawi and Motlanthe were not even paid-up members of the G20 and were simply invited by Gordon Brown to make the gathering "more presentative".

In fact, Africa used to be a hot topic on the global geopolitics table. It used to be among the top agenda of the G8 conference in 2005 even though the IMF published a report entitled "Aid will not lift growth in Africa" weeks before. After four years, aid from Western countries to Africa has likely made the poor poorer and the growth slower. More than $US1 trillion of aid has flowed into this continent for 60 years, including charity-based aid, government-to-government aid and aid from such large development institutions as the World Bank but Africa's per-capita income today is even lower than it was in the 1970s and more than 50 per cent of its population (meaning more than 350 million people) still live on less than $US1 per day. An increasing aid does not correspond to a solution for Africa's problems.

The most obviously major reason is that aid from the Western has trapped Africa in serious corruption. With more and more few-or-no-strings-attached aid flowing into African nations, these governments do not need to do anything more, such as raising taxes or encouraging domestic manufacturing and exports. What they really need to do is to court and cater their foreign donors to stay in power as long as possible. While on the contrary, what the people in these poorest countries really need is job, social and economic stability, and a belief in their country's future. Those goals seem to be unachievable with a stream of free but no-goal money.

In 2002, a figure estimated by the African Union showed that corruption has cost this continent $US150 billion a year.  Mobutu SeseSeko, the King and President of Zaire (former name of Democratic Republic of Congo) from 1965 to 1997, has stolen at least $US5 billion, more than one tenth of this country's current GDP. Recently, Malawi's former president Muluzi was reputed to have embezzled $US 12 million of aid money. Chiluba, the former president of Zambia, is also in the court case. Most of the money that they have stolen would be used for health, education and infrastructure development of their own country.

A complementary consequence of corruption is civil strife and war, making Africa the most unstable continent in the world. Civil conflicts are often caused by the want of seizing the seat of power. In such battles, the victor will gain the right to access, and also take into its pocket, the enormous amount of foreign aid. Mauritania, Guinea and Guinea Bissau have been experienced political movements in just the past few months. Madagascar's people were also living through a coup over throwing its government few months ago. Even now each of them has greatly relied on foreign aid.

Another reason is the issue of "Dutch disease", a term describing the decline of a country's export sector due to a large amount of natural resources or capitals inflows from foreign countries. The increasing supply of foreign currency leads to the appreciation of domestic currency. As a result, its goods are too expensive to export and the domestic manufacturing is ruined gradually. Workers in foreign-based companies or factories are paid lower than they were before. Thus, the government has to issue bonds to balance liquidity and to control inflation. For instance, Uganda had to issue bonds worth $US700 million in 2005. Such bonds would cost the country future interest payments.

These aid has also nothing to do to improve the civil service, an important factor of a developing economy, in these bureaucratic cronyism countries, which are rooted to the red tape and complex regulations for businesses. Whereas it only needs 40 days and 19 procedures in US or even 2 days in Australia to start a business, it takes 426 days to perform 15 procedures to obtain a business licence in Cameroon. It means that fewer investors dare to risk their money in a country that 'is unable to stand on its own feet and manage its own affairs in a sustainable way' (Dambisa Moyo).

In short, pushing more aid to Africa is not only unable to provide a solution for this continent but also raising others latent consequences linked to rampant corruption, an uncompetitive domestic market and the risk of civil conflict and unrest. Such kind of aid can only deal with immediate suffering but won't be able to make a prolong sustainable growth. What the Africa needs is the pro-market government and increasing foreign trade with such partners as China. And the Western donors should be more modest to claim more aid to 'the cycle of giving something for nothing.'

Reference:

Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa (Dambisa Moyo)

[caption id="" align="alignnone" width="500" caption="Meles Zenawi, Prime Minister of Ethiopia and Trevor Manuel, Finance Minister of South Africa answer questions from the media in London, 16 March 2009.(@London Summit Flickr)"][/caption]