Date: Tue, 13 Oct 2015 13:14:16 +0200
When creditors sneeze...these countries can't help catching a serious cold.
THE debate around Africa and aid is never far away, and on October 1, it continued at London City Hall, where experts in international development and business had a no-holds-barred intellectual brawl about its effectiveness.
The boldest comments of the night came from Titi Banjoko, Managing Director of Africa Recruit, whose opening statement was: ‘‘Aid in most countries needs to go.’’
She argued that aid undermines governments’ accountability. ‘‘If government is forced to do what it should do, then you will begin to see change,” she said, and alluded to her home country, Nigeria: “Why does Nigeria get aid? [With] the amount of money they have – where is it?” With millions—billions even—leaving the country every year, she added: ‘‘Africa is rich in resources…we are not poor but resources are poorly managed.’’
Her statements echo infamous books such as the “Lords of Poverty” by Graham Hancock or “Dead Aid” by Dambisa Moyo which question why western governments give aid and argue that it has choked off economic growth, sponsored corruption, and fostered dependence on foreign donors.
For certain African countries, it seems that after long periods of high levels of aid, this has has become the problem other than the solution. The problems of aid dependency are serious as governments lose their ability to lead and their accountability to citizens is eroded, and they are also stubborn and hard to overcome.
Data now show that two-thirds of the countries in sub-Saharan Africa are projected to receive less aid in 2017 than last year—worthy of celebrating if the donors weren’t worried that they are not increasing aid to already-dependent recipients. Today, after more than half a century and a trillion dollars poured in by donors, some African governments are starting to raise more money from citizens and companies than from foreign donors.
There are however several states which are still highly dependent on aid. The most recent statistics, with the most comprehensive cover, on aid dependency come from the Organisation for Economic Co?operation and Development. Its definition of aid dependency looks at the percentage of the gross national income that is made up of country programmable aid (the portion of aid that donors programme at country or regional level) and, worryingly, there were several African countries that stand out:
Malawi: 28.59% of national income
With Malawi currently struggling to feed itself, it can not afford to lose resources without this having dire impacts on the most basic services such as schooling and health care. Its extremely high aid dependence was seen most starkly with the coming into the limelight of the “cashgate” scandal - when donors withdrew aid in response to government corruption. This crippled the government’s ability to manage the needs of the country including pay salaries to teachers, nurses and other public servants. There were public service cuts and districts were left without the funds to provide for the most basic items like medicines.
Liberia: 27.13% of national income
In 2010, Liberia’s president declared that the country would be aid-independent within 10 years - an ambitious statement as in 2008, foreign aid to Liberia represented 771% (yes, 771) of government spending. Between 2000 - 2013, there were 5,598 projects funded by official development assistance, on which a whopping $4.63 billion was spent. Aid organisations flourish in the country, and well-qualified Liberians are being drawn away from government or civil society positions by higher wages in donor organisations - further perpetuating the aid dependence problem. There is heavy criticism that this is an externally-facing government which has become accountable more to taxpayers in the West rather than to its own people.
The Gambia: 15.87% of national income
The importance of aid in the Gambia stems from it being the main source of capital flows and financing for investments, as well as its impact on macroeconomic stability. Between 2000 and 2013, there were 3,007 official development assistance projects in the country, of which $499.86 million were spent. The impact of aid withdrawal was seen following the EU’s decision in 2014 to block €13 million ($14.6 million) of aid due to lack of progress in several areas of human rights, including the introduction of a tough law against homosexuality. In the same year, the number of Gambians claiming asylum in Europe trebled to 11,515, according to EU data.
Mozambique: 14.32% of national income
Despite recent tensions, Mozambique has been seen by donors as a success story of peace, stability and growth since the end of its devastating war in 1992 - thus aid continued to pour in to assist with growth and reconstruction. Between 2000 - 2013 there were 18,392 projects as a result of ODA on which $9.68 billion was spent. The dependence blossomed and today reductions in spending would still hit capital expenditures - such as the building and repair of roads, schools, hospitals.
Mozambique’s huge energy gas finds could change fortunes and reduce aid dependence.
The dependence as a source for financing the state budget is on the decline, but this does not mean that total aid dependency will go down. For example, the Economist Intelligence Unit’s projections indicate that by 2017, mining revenue will have become substantially larger than donors’ cash - but it may not all go into the right channels.
Rwanda: 13.80% of national income
Rwanda has been able to push through some remarkable development successes over the last two decades following the devastating genocide in 1994 - including high growth, rapid poverty reduction and reduced inequality. But this has been largely on the back of donor funding. Earlier this year Christine Lagarde, the Managing Director of the International Monetary Fund (IMF), said that the country needs to reduce its dependency on international aid if it is to achieve its vision of achieving middle-income country status by 2020. This lack of financial independence means that it is highly vulnerable to fluctuations in aid flows. In mid-2013 for example, Rwanda experienced a lagged effect of the aid shortfall experienced the previous year, causing economic growth to decelerate to 4.7% from the average 8%. Another effect of high aid dependency is that its tax-collection efforts have fallen below its peers in Africa - making it even more dependent on foreign contributions.
Lesotho: 11.45% of national income
Between 2000 - 2013 there were 3,586 projects that were classified as ODA, on which $871 million was spent. In 2013, more than 20% of total government expenditure was financed by ODA grants and concessional loans. Such high reliance on aid, in its various forms, has seen under-development in some of the country’s sectors. For example, UN’s Food and Agricultural Organisation (FAO) has been supporting agriculture in the country since 1983 while the UN’s World Food Programme (WFP) had been feeding people in Lesotho since 1965. By 2010, about a quarter of the population was still in need of food assistance whilst 40% of the population needed food aid in 2013. Continued food and agricultural support, coupled with falling production and droughts, led some to believe that aid might actually be at the root of the problem in the country.
Mali: 10.94% of national income
Mali’s experience is that rather than using aid to develop, state institutions have been crippled - with a “mentality of aid dependency” created. Between 1996 and 2005, aid represented three quarters of the special investment budget and 27.6% of the state’s general budget. Some analyses have described “aid [as] not a mere financial and technical tool to support national initiatives: it has replaced any national political reflection on development in the country.” This was evident in 2013 opinion polls when one of the most frequently-cited perceived causes of the country’s various crises was “weakness of the state.”