Restating the Case Against Aid

In “Is Developmental Aid Stifling Africa’s Growth?” I presented Andrew Mwenda’s argument that the key to Africa’s future growth will be free trade and responsible governance, not developmental aid. It seems that this meme is getting more popular by the day.

The African Executive writes in “Aid: Losing Global Popularity?“…

The world seems to be warming up to the fact that free and open trade is better than aid. In the recent Turkish-African CSOs Forum at Istanbul, Prof. Ali Engin Oba (Ambassador Rtd. And Representative of TASAM Ankara office) observed that “it is now widely accepted that trade is better than aid.”

In another meeting where some 120 members of parliament drawn from different countries and regional blocs gathered in Nairobi for a seminar to discuss among other issues, aid effectiveness, Moses Wetangula, Kenya’s foreign minister said that African countries must shun aid dependency and embark on trade and harnessing of their resources. The meeting aimed at scrutinizing the role of parliament in donor negotiations as well as sensitizing parliamentarians in East and Central Africa on the Paris declaration in promoting development.

Members drawn from 100 countries now gathered in Accra, Ghana to review how effective aid is in helping developing nations deal with poverty seem to be warming up to the view that the answer lies in freeing up trade. A major World Bank report on growth and development in May observes that trade “is an important factor behind poverty alleviation.” Will trade soon take center stage?

and Arthur Okwemba’s piece, “Africa: Continent Tells Off Donors On Aid” states…

Delegates to an Aid forum in Accra, Ghana have accused donor countries of not being accountable on utilization of development funds.

Several speakers have said between 60 per cent and 75 per cent of the donor money do not get to the recipient countries, but remain in the donating country.

“You cannot demand or expect us to produce results or alleviate poverty when only 25 per cent of the donated money gets to us,” said Patrice Bemba, an official from the Democratic Republic of Congo Ministry of Finance.

He said a lot of the donor funds meant for programs to help uplift vulnerable groups such as women and children from poverty or manage diseases, end up as fees and salaries to experts from the donating country. Other monies are lost as overhead costs.

“Much of the aid remains in the hands of consultants and companies in Europe, America and Asia, or is just tied aid,” said Robert Fox, of Oxfam Canada and Head of Oxfam International delegation to Accra talks.

“Donors cannot run away from this fact when two thirds of the money goes back to their countries as technical assistance and transaction overhead costs and less than 20 percent gets to developing countries as aid,” said representatives from Catholic and Protestant participants at the Accra forum.

A Kenya government official, who sought anonymity, said at times the donors send highly paid experts from their countries to offer services even in areas that do not need such assistance or where the country has enough technical experts.

“If you raise this issue, they tell you provision of such services was part of the contract the government signed with them, and as an officer, there is nothing you can do.”

There is a growing sense that ‘cradling’ the African continent has made for little progress over the past thirty years. At least not enough progress relative to the amount of Aid being given. Meanwhile, increased investment from the Asias ^{[1] [2]} is helping to push an economic boom of sorts throughout the region. One simple matter of economics: aid is (by nature) not sustainable, free trade is. Despite the growing concerns over the lack of accountability tied to the funds acquired from trade with Asia, that trade is increasing and it’s changing the continent for better or for worse.

Where do you stand on the issue?