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From: Berhane Habtemariam (Berhane.Habtemariam@gmx.de)
Date: Mon Oct 04 2010 - 08:45:21 EDT
Why Good Governance Matters More in Africa Than Aid
Monday, 04 October 2010 08:45
Heads of state from across the developing world arrived in New York last two
weeks for the annual United Nations meetings. Heading up the agenda this
year was a summit examining the U.N. Millennium Development Goals (MDGs).
These leaders - generally clad in expensive suits and heading enormous
entourages - again shamelessly moaned and complained over the lack of
adequate progress on the MDGs as if they and their governments were helpless
bystanders in whether or not the MDGs are met.
There is nothing egregious about the eight MDG targets. Halving poverty,
increasing education, and reducing maternal and child mortality are
desirable outcomes. The only problem is that in the poorest countries the
goals will not be met because they are based on a failed development model
of relying on external aid rather than internal policy change to facilitate
economic development and growth. And internal policy change is resisted
fiercely by the very leaders expressing anguish over the lack of progress
because they and their families, friends and allies benefit richly from the
current system, which focuses on securing foreign aid from Western nations
to be spent on thousands of carefully schemed but wasteful interventions
undertaken locally, in apparent pursuit of the MDGs.
Such complex interventions, with little transparency and accountability on
donor spending, means few credible audits have been conducted on the
billions of aid money spent over the years. Such expenditures should have
resulted in development improvements, but have only served to entrench the
very governments and policies that impede development.
African leaders in particular have been doing the math on how much they need
to perpetuate their loot. um, I mean finance the MDGs. As the argument goes,
"They ask why can't the rich Western countries provide $70 billion annually
to meet the MDGs? It's only a fraction of their annual GDP. They can easily
spare it, but it would mean so much in the developing world." Western aid
advocates do their part by painting gory pictures of famine and disease in
Africa to justify the demand.
Yet, some way, somehow, African leaders have been able to squeeze close to
$150 billion per year from their poor, developing countries to enrich
themselves. This figure didn't diminish even with the global financial
crisis or following former Nigerian President Obasanjo's admission of this
habitual theft by African leaders and mock lamentation of corruption at the
G-8 summit in Gleneagles five years ago.
In other words, African leaders have made a habit of stealing 25 percent of
the continent's GDP and squirreling it away for their benefit rather than
the citizens of their countries. As if that is not enough, wasteful
spending, legal plunder, prohibitive business environments, and entrenched
cronyism can be found even in the Africa's most acclaimed democratic success
stories such as Ghana.
Ghana's democratic foundation is built on the politics of Grand National
development plans which are presented to win voter support. These plans are
largely sustained by aid, which demands little or no accountability. Voters
continually fall for promises, by both political parties over the past two
elections, that if elected they will guide Ghana toward middle income
status. These promises are slippery with target dates first of 2015 and then
2020 and, doubtless, 2025 soon.
Ghana has seen an increase in aid during the tenure of these political
parties. But the result has been depressing. Ghana slipped five places from
(the 87th position to 92nd) on the World Bank's Doing Business 2010 Index
and dropped in global competiveness from 110th position in 2009 to 114th out
of 139 countries in the 2010-2011 rankings by the World Economic Forum
Global Competitiveness Index (GCI).
A government's development agenda informs its macroeconomic policies, its
private sector development strategy, its posture to taxation and tariffs,
and its orientation to financial regulation and oversight, and public debt
management among other issues. These matters are crucial to serious
investors considering Ghana - or, for that matter, Africa - as a destination
for significant investment. These critical policies, however, become
secondary considerations to governments focused on keeping aid money pouring
in.
For instance, in 2005, 80% of Ghana's debt was canceled. This was intended
to give the country a fresh start and more independence to focus financial
resources on development priorities rather than debt service. It allowed
Ghana to borrow $750 million from the international financial markets in
2007. But in 2008, all of that was squandered. Determined to chase votes,
the government approved a spending deficit equivalent to 20% of the
country's GDP. This was a world record - even more than Greece's 10%
deficit. In the end, the government was voted out of office, but left a
legacy of debt and lower economic growth from an impressive 7.3% growth in
2008 to a disappointing projection of 3.5% for 2010.
And remember, Ghana is a model performer in Africa. Imagine what the less
exemplary countries are doing.
At the MDG summit, German Chancellor Angela Merkel called for a balance
between aid and good governance as a necessary condition for attaining the
MDGs. Unfortunately, African governments generally prefer an imbalance with
more aid and less accountability. Donor nations need to understand this
reality and get away from platitudes like the MDGs and aid targets and
insist that African governments enact policies that will unleash the
entrepreneurial spirits of Africans to create wealth and support national
governments through taxation. Aid may help governments that have already
begun to tread this path, but providing ever-more aid in hopes that they
will only perpetuates the status quo.
*Franklin Cudjoe is head of Ghanaian think tank, IMANI, a non-profit,
non-government organization dedicated to fostering public awareness of
important policy issues concerning business, government and civil society.
He is also editor of AfricanLiberty.org The Foreign Policy Magazine named
IMANI, the fifth most influential think tank in Africa in 2010. Franklin was
named Young Global Leader 2010 by the World Economic Forum. This article was
originally published by the Heritage Foundation's Foundry.
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