domingo, 5 de agosto de 2012

The failure of aid in Africa

By Kelechi Anyanwu

The aid architecture in Africa presents an apt sad story because the billions of various aid dollars poured into the continent have failed to make the desired impact as Africans are today even poorer and Africa less developed than it was years before

AVAILABLE records suggest that in the last five decades, African countries allegedly received close to US$1 trillion in aid from donor countries and other development agencies. But it is as if the continent has never got anything, prompting many to say that Africa would have even been better off without the aid. Those who posit that development aid has become a disincentive for economic growth readily point to Africa.
Between 1970 and 1995, according to Fredrik Erixon, Chief Economist at Timbro, a Swedish think-tank, aid to Africa increased rapidly while aid dependency stood at nearly 20 percent in the early 1990s. Measured differently, the mean value of aid as a share of government expenditures in African countries was well above 50 percent between 1975 and 1995. And between 1975 and 1995, GDP per capita growth in Africa shrank and for many years were in negative figures. Indeed, the picture is that the more aid that are claimed to have flowed into Africa, the lower Africans' standard of living.
In a paper published by the Cato Institute entitled African Perspective on Aid: Foreign Assistance Will Not Pull Africa Out of Poverty and authored by Thompson Ayodele, Franklin Cudjoe, Temba Nolutshungu and Charle Sunawabe, the researchers note that per capita GDP of Africans living south of the Sahara declined at an average annual rate of 0.59 percent between 1975 and 2000. Over that period, per capita GDP adjusted for purchasing power parity declined from $1,770 in constant 1995 international dollars to $1,479. For Nathan Andrews in his paper entitled Foreign Aid and Development in Africa: What the Literature Says and What the Reality is, Journal of African Studies and Development, Vol. 1, 2009, a better appreciation of the internal dynamics of the recipients of aid is more likely to ensure aid contributes to sustainable socio-economic development.
Dambisa Moyo writing in The Wall Street Journal of March 21, 2009 said "over the past 60 years at least $1 trillion of development-related aid are said to have been transferred from rich countries to Africa. Yet real per-capita income today is lower than it was in the 1970s, and more than 50% of the population — over 350 million people — live on less than a dollar a day, a figure that has nearly doubled in two decades".
Whither aid?
For critics, aid has not only helped impede economic growth in Africa, but also led to the huge debt burden many African countries are saddled with today. Moyo notes that even after the very aggressive debt-relief campaigns in the 1990s, African countries still pay close to $20 billion in debt repayments per annum, a stark reminder that debt sucks much of the aid. In order to keep the system going, debt is repaid often at the expense of education and health care. Well-meaning calls to cancel debt mean little when the cancellation is met with the fresh infusion of aid, and the vicious cycle starts up once again.
Not a few agree that aid has failed in Africa. Just as it has lost its focus, aid has become another conduit pipe to enrich technocrats in donor countries while also taking good care of the politically connected in recipient countries. This, more than anything else, seems to have been the most compelling reason to keep the cash cow alive even though there are glaring evidence that it is ineffective, opaque, fuels corruption, and has failed to deliver tangible results. Development aid as presently designed has aided political instability, putting money into the pockets of political tin gods, fuelling and oiling the corruption machines across Africa, encouraging civil wars, poor governance and a highly ineffective bureaucracy.
Kurt Gerhardt, a former Country Director for the German Development Service (DED) in West Africa, in a report on his experiences in Africa wrote that “development aid to Africa is a blessing for all those directly involved — both on the giving end and on the receiving end. Functionaries on the donor side, at least those abroad, earn good money. Many of those on the receiving end, for their part, know how to organise things in such a way their own personal interest don’t get short shift”.
Djankev, Montalvo and Raynal-Querol also found that foreign aid could lead politicians in power to engage in rent-seeking activities to appropriate these resources and try to exclude other groups from the political process. By doing so political institutions are damaged because they became less democratic and less representative. “Our findings support this view”, they wrote.
Highlighting the correlation between foreign aid and its negative impact on the political institutions of a country, Djankev et al wrote that the magnitudes are striking. They argue that if the average share of foreign aid over GDP in a country were 1.9 percent over the period 1960-1999, then the recipient country would have gone from the average level of democracy in recipient countries in the initial year to a total absence of democratic institutions. And since most foreign aid is not contingent on the democratic level of the recipient countries, there is no incentive for governments to keep a good level of checks and balances in place. The effect of oil in the long-run is less important: if the average amount of oil revenues over GDP is 12.2 percent over the period, then the recipient country will go from the average level of democracy in recipient countries in the initial year to a total absence of democracy.
Indeed, aid flows into Africa have left the continent worse off. Several aid-recipient countries have seen their primary sources of revenue destroyed completely, thanks to aid-induced complacency and corruption. Continue reading here.

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