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1 June 2010
Africa - the continent that keeps failing?
"Aid to Africa"
By: Nicholas Newman Almost every day we hear that the West is to blame for Africa’s problems. However, every day we hear the only solution is more European Union (EU) aid is needed for sub-Saharan Africa, despite the EU spending some € 13.5 billion over the last five years in development aid. There are many theories as to why foreign aid policy has failed in Africa. It certainly worked in South-East Asia which has transformed these economies into economic tigers. Such theories that try to explain why sub-Saharan Africa remains stubbornly poor could fill many shelves in a library. Such theories as to why Africa has failed range from poor leadership to the terms of trade being unfair to developing countries. The blame of the continent’s woes has often been blamed on predatory and corrupt leadership. Certainly, Mugabe and Mobutu have been accused of amassing massive fortunes while bankrupting their countries. However, it’s difficult to simply put it down to just corrupt leadership. Indonesia’s Suharto; despite amassing a similar-sized fortune, still managed to achieve records in economic growth and poverty reduction. Then there is the snag, about the gullibility of much of the development community to the latest propounded policy initiative. They are always on the lookout for the next policy elixir on which to place there over optimistic hopes. Seeming to forget the realities of life in Africa (yes even cynical journalists get caught up in the spin of simplistic hypotheses). It is not surprising that when reality finally strikes home, we hear pronouncements that the EU has betrayed Africa, again. It is often said that opening up a poor country to world trade benefits its people. A good example of this is China. The trouble is the lowering of trade barriers can have its benefits and disbenefits. One idea propounded is the removal of import tariffs on goods produced in poor countries. The danger is such a policy ignores many of the political and economic implications that would arise. If India implemented such a policy and opened up its rice markets to poorer Vietnam, the world’s second biggest rice exporter, India's rice prices would fall, causing many an Indian farmers into bankruptcy and the Indian government in deep political difficulties. Yet, even where tariffs are used to promote domestic production, known as import substitution, the disbenefits can be high as Malaysia found to its cost. In 1985, Malaysia decided to establish a domestic car industry, and this political project gained much political kudos for PM Mahathir. For Malaysia, the disbenefits have been significant. High import tariffs on foreign-made cars have sparked a major car smuggling industry, increased the cost of motoring and cost the Malaysian taxpayer billions. To make things worse exports of the Proton to Europe have had to be heavily subsidized to keep prices competitive. Many car industry experts see little prospect of the Malaysian car industry ever truly being competitive in the world markets. In Africa, import substation has been found to damage the economy, discourage efficiency and does little for the poor. Instead, we find the only ones who seem to benefit are the ruling political elites as they profit from the bribes local business have to make to import avoiding import tariffs. The dilemma is, more often or not, going on past experience, when an African country is given some slack, it will use it to hang itself, just like oil rich Nigeria has done many a time. So if trade policy, is unlikely to work in solving Africa’s problems. What will? Well, two fashionable solutions are to continue to give aid, but in a different manner, and the second is to end foreign aid all together, and leave African’s to sort it out. The list of approaches to resolving Africa’s problems include, cutting back aid by half, or requiring African ministers to make public their banking details. The difficulty with requiring ministers to publish their bank details ignores the fact that it is very easy to hide stolen money, as a recent investigation into the corruption in the Kenyan government, by Transparency International, discovered to its amazement. Another idea popular amongst aid givers, is the system of budgetary support, a system where aid givers, simply deposit money into countries treasuries and governments, are given the freedom, to decide, how best to spend the money. Kenya and Uganda were amongst the first to try out this scheme, but the results were what old Africa hands had expected. Much of the money disappeared, or went on arms spending rather than the intended aim of poverty reduction. Perhaps one of the most interesting solutions suggested is to end the Gosplan style (top down central Soviet inspired planning approach) so prevalent in the development of Africa today. This has resulted in the continent being littered with over-ambitious schemes of white elephant dams, palaces and stadiums. Such planning did not work well in its homeland of Eastern Europe, and seems to be equally ineffective. Another approach involves where development policy mimics the free market. Here, at the rural level villages or families are given vouchers to purchase aid and development programmes. Governments would be bypassed, and aid providers would have to compete with each other in their attempts to aid their customers. At least, this is a novel approach, but it does have its problems. The operators of such a market would have to have some system to overcome the demands of local corrupt intent on making money out of the scheme for their benefit, to the issues of how to maintain resources for unpopular but highly necessary services. Finally, an approach gaining much popularity amongst donor countries is targeted project based aid; where there is a specific goal is expected to be achieved. Here aid providers have total control through all the phases of the project, having direct contact with locals and avoiding contact with a state's government. China’s growing influence in Africa is seen by many corrupt leaders as a fresh source to enrich themselves, but already they are in for a disappointment. The Chinese in Africa seemed to be more hard headed than the West has ever been when it comes to development aid. It is clear, that there are as many theories as to why Africa has failed, as there are solutions. It looks like no one has got it right, not even the experts, rock stars and press commentators. So when asked, what is the solution? I answer, who knows? by Nicholas Newman - 1 June 2010 | ||
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