This could be Africa’s decade, but not if it relies on aid
In the last decade, six of the world’s 10 fastest growing economies were in Africa. While everyone was talking about China, Angola was in fact top of the list, growing at an extraordinary 11 per cent per year. With the current Euro crisis, Angola has even bought assets from its ex-colonial master, Portugal. Even Ethiopia, a country which has a painful recent history of famine and war, experienced 10.9 per cent GDP growth last year. A growing list of African countries including Ghana, South Africa, Botswana, Namibia and Morocco are on the up. So does this mean that the provision of international aid is finally working?
Unfortunately, the answer is no. As Tanzanian journalist Andrew Mwenda puts it, aid is about reducing poverty, not creating wealth. Whether it is food aid or sending in peacekeepers, the objective of aid is to mitigate the effects of poverty, war or famine. While it achieves some good, it tackles the symptoms, not the causes of Africa’s ills. The awakening African economies are the ones which have a growth strategy. As Mwenda says, ‘do you know anybody who grew rich by holding out a begging bowl?’
Angola’s oil and diamond revenues last year totalled more than double the entire African aid budget. At the same time there are 16 Sub-Saharan countries whose foreign assistance accounts for more than half of the total government expenditure. As a proportion, aid to these countries represents more than aid to Germany under the Marshall Plan. First of all this shows the extent of the differences between African economies. And secondly it shows how the countries that receive the most aid are not the richest. In fact, there is a strong case to be made that aid is harmful to Africa.
For many African governments, aid generates more revenue than taxation. Aid destroys the incentive to cooperate with and invest in local entrepreneurs and business leaders, because governments find it more profitable to negotiate with international institutions such as the IMF and World Bank. Thanks to aid, graduates in many African countries know that they will earn far more as a civil servant than they can ever hope to in business. Aid feeds what George Ayittey has called the ‘vampire state’ – corrupt governments that suck the vitality out of the economy.
An interesting case in this debate is Somaliland, the northern autonomous region of Somalia, which has tried but failed to gain recognition as an independent country since 1991. As a result of its status, the government of Somaliland is not eligible for foreign assistance. Nick Eubank argues that this has been Somaliland’s saving grace. With no external funding available, the government has to negotiate with its own citizens and business leaders. The owners of Somaliland’s main port withheld tax revenues from the government, and released them in exchange for democratic reforms. Somaliland has become a thriving democracy, thanks to the fact that the government was dependent on and beholden to its own populace rather than to foreign aid.
A widely held belief is that Africa needs micro-finance projects – small targeted investments into local schemes. As Angus Kennedy pointed out at this year’s Battle of Ideas festival, ‘micro-finance is by definition micro. It’s neither here nor there’. Instead, Africa needs to think big and harness its own resources. A new joint project between Somaliland and Ethiopia involves the construction of a pipeline to tap into Ethiopia’s natural gas reserves.
Rather than preach sustainability, micro-finance and aid, we should welcome developments such as these. Africa is an awakening giant. If more African countries can free themselves from the shackles of aid, this may indeed be Africa’s decade.
Throughout October and November, The Independent Online is partnering with the Institute of Ideas’ Battle of Ideas festival to present a series of guest blogs from festival speakers on the key questions of our time.
Nick Thorne is a journalist and charity fundraiser.
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