Issue 231

AID, aid, and more aid to Africa was the mantra that emerged from last year’s Group of Eight (G-8) summit in Gleneagles. In April, however, in the run-up to the forthcoming St Petersburg G-8 summit, where the past year’s development progress with be under scrutiny, there was a very different message from Britain’s Chancellor of the Exchequer, Gordon Brown. Add the promised crackdown on corruption by World Bank president Paul Wolfowitz and it could signal the start of a radical reappraisal of a flawed and failing strategy.

“In the 19th century,” said Brown in Maputo, “the issue was what we could do to Africa; in the 20th what we could do for Africa; and now in this century the issue is what Africa, empowered, can do for herself.” And who can doubt that empowerment is overdue, or that donors are losing the battle for the continent’s recovery?

The aid business in Africa may be booming. Yet the region is failing, and living standards are falling. Fifty years after most of its countries achieved independence and some $500bn of western aid later, Africa’s citizens are poorer than ever, and the gap between them and the rest of the world is widening.

This is bad enough. But other statistics suggest that Africa has lost confidence in itself. Annual capital flight of some $15bn equals annual aid inflows. About 40% of the stock of African savings is held outside the continent, compared with 6% for east Asia and 3% for south Asia. Every year, 70000 of Africa’s best and brightest leave to work abroad; and every year 100000 foreign “experts” come to work in Africa. Many of them will be helping to spend the additional aid promised by the G-8 leaders at Gleneagles 12 months ago.

Western taxpayers are entitled to ask why their dollars should be put into a continent where development returns are so poor; and where an elite among its residents channel foreign funds back to their accounts in Europe and north America as fast as they can manage — with the discreet help of western banks.

If the Gleneagles pledge is kept, there will be even more in the pipeline to fuel this folly: aid to Africa is due to reach $25bn by 2010. At the same time, about $55bn of external debt owed by 18 countries — 14 in Africa — will be written off.

But a new generation of Africans is uncomfortable with foreign aid. They recognize that most aid saps initiative, creates some of the very problems donors are trying to resolve, and undermines self-respect.

There is growing support for measures that would allow the region to finance its recovery through its own resources, creating an environment that encourages the private sector and foreign direct investment. This leads to a middle way — between those who despair of aid in Africa ever working, and the unfounded optimism of those who believe that aid can work, provided it is doubled.

Let donors and Africa agree on a phased withdrawal of most forms of aid over the next five years, and at the same time lay the foundations for re-engagement, beginning with the aim of replacing foreign lending by African resources. It can be done. Here are some examples: were Africa’s domestic savings to rise to 25% of gross domestic product over this five-year period — no higher than Asian levels — Africa would have a pool of funds several times the value of existing aid flows. Were donors to underwrite local development savings certificates, or education bonds, at guaranteed interest rates, these savings could be even higher; and were pension funds better managed, returns would be bigger.

More than any other reform, a radical overhaul of land ownership — only 1% is officially registered — is long overdue, and would lead to greater use of land and houses as collateral. Other steps are: incentives to secure a higher share of foreign direct investment; taking advantage of international trade reforms — as it is, Africa’s share of world trade has fallen from 6% to 2%, each percentage point represents some $70bn in lost revenues annually; implementing measures to encourage the private sector and reverse capital flight — there could be an amnesty for those who admit breaking the law, and return their ill-gotten gains — and tougher action by banks to stem illegal transfers.

The aid lobby will warn that such an alternative strategy could go disastrously wrong. But Africa already is a disaster: 3-million children under the age of five die every year of preventable diseases, and most social indicators point the wrong way.

“Declare victory and withdraw” was the advice offered to the US government as its army sank into the mire of Vietnam.

“Admit defeat, and re-engage” should be the message to western donors struggling to reverse their losing battle in Africa. With minds concentrated by the five-year timetable, these proposals will not only pave the way to Africa’s empowerment. They will hasten the day when donors finally disengage, having allowed Africans to take charge of Africa’s recovery.

Holman is an author and former Financial Times Africa editor; Dr Mills is director of the Johannesburg-based think-tank, Brenthurst Foundation.

Source: Business Day

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