Aid dependency, the risk in receiving!
Africa continues to be a recipient of aid and following decades of such practice, it became some sort of an ‘acceptable norm’, tied to our development process, thus exposing itself to the challenging dangers of always being on the receiving end. The continent is said to account for around 20 percent of U.S. aid. (Photo: John Baimba Sesay, author)
The idea has been; large aids can remedy poverty. Such an idea, according to Daron Acemoglu and James A. Robinson “has dominated the theory of economic development — and the thinking in many international aid agencies and governments.”
They argued, in ‘Why foreign aid fails – and how to really help Africa’, that foreign aid has little to do with moving people out of abject poverty, rather, “it is due to economic growth in countries in Asia which received little aid.”
Sound economic growth is what nations need in their efforts towards tackling poverty. Asian nations did same. Today, they serve as lead examples.
China, for instance, continues to enjoy remarkable economic growth, with the World Bank saying, that country’s GDP growth “has averaged nearly 10 percent a year”, the fastest sustained expansion by a major economy in history.
It has lifted more than 800 million people out of poverty, and continues to do so, all thanks to their prudent economic steps they continue to take.
Africa, no doubt, enjoys rich natural resources and market potential. However, it is in need infrastructure and development finance to stimulate her growth. The continent has six of the world’s 12 fastest-growing economies – Ethiopia, DR Congo, Côte d’Ivoire, Mozambique, Tanzania, and Rwanda.
Despite all these beautiful stories, it continues to be donor driven. Take her engagement with China; aid has been a critical instrument used by the Chinese in engaging the continent. By 2011, Chinese investment in Africa, reports state, grew from USD 210 million in 2000 to 3.17 billion.
The 2018 FOCAC meeting in Beijing saw China pledge $60 billion to the continent in loans, grants, and development financing: $20 billion as credit lines, $15 billion as aid and interest-free loans, development financing taking $10billion, $10b for investment and the remaining $5b to finance imports.
But at what price should it continue receiving aid for development?
Much, the continent has not done, in fully exploring her potentials for growth. This has been one major challenge affecting her development efforts, to the point of over relying on external interventions, risking any chance of acting or speaking as an ‘independent’ continent.
Her unexploited deposit of minerals alone can be a source for our growth, when properly utilized, plus other potentials in agriculture, tourism and even taxation. The continent’s commitment to utilize revenues coming from taxation alone could be a good starting point, depending there is an encouraging culture towards paying taxes.
Africa is home to many of the world’s large and unexploited deposit of minerals, accounting “for three-quarters of the world’s platinum supply, and half of its diamonds and chromium. It has up to one-fifth of gold and uranium supplies and it is increasingly home to oil and gas production with over thirty countries now in this category”, writes Carlos Lopes. (Read: Africa must benefit from its mineral resources.)
These large deposits of natural resources, writes Ayodele Odusola, Chief Economist, UNDP Regional Bureau for Africa, “promise a bright future for developing value chains” that agriculture and the extractive sectors are prerequisites of national, regional and global value chains.
Building on existing positive trends in a bid to maximize foreign investments is all what Africa needs. Macroeconomic environment should be strengthened, with investment in quality education given priority, added to skills development in areas of technology.
Working on strong regional economic integrations could be vital. This will help in removing those barriers to free trade, which is detrimental to the growth processes of countries. Further, the need for cohesive regional and sub-regional approach to development should be pursued more so at policy levels. Economic free zones have form the base for growth among East Asian nations. Africans should learn from this.
Not being able to properly identify priorities of growth and pursuing them forms the crux of our challenge. Job creation, lower levels of investment could explain Africa’s slower growth. However, “it is the slower productivity growth that more sharply distinguishes African growth performance from that of the rest of the world”, says a study by the International Bank for Reconstruction and Development / The World Bank on Challenges of African Growth Opportunities, Constraints and Strategic Directions.
Africa today goes through what I would call development inertia. Reasons abound for this, added to what I have started above. Recovering from this growth inaction involves drastic and radical actions.
Another reason for our donor-driven nature; the mineral sector. Africans have not seen how much our minerals have been of benefit, except for a few countries. We are donors, giving out our minerals to developed nations and end up receiving paltry support from them in the form of budgetary support, support to infrastructure and the rest. Ridiculous!
In ‘The case for mineral resources management and development in Sub-Saharan Africa’, Lloyd A. K. Quashie calls for a development agenda that places “more emphasis on the exploration, development, exploitation, and rational management of its mineral and energy resources for sustainable economic growth.”
Here are examples; Zambia had to raise taxes for mining companies from 25 to 30% and introduced a windfall tax for exceptional profits, earning the country an extra $415 million in supplementary revenues. Early this year, the DRC, Africa’s largest copper producer and world’s biggest producer of cobalt, signed into law a new mining code that increased royalties and taxes that mining companies pay.
Reforms in the mineral sector, when undertaken, are bound to defeat the challenges donor dependency comes with. Development activities should lead to increase linkages to other economic opportunities.
Economic diversification is also critical. Agriculture can be a strong source of growth. Statistically, the continent hosts 60% of the world’s uncultivated arable land, said to have produced, in 2015, 13% of global oil, up from 9% in 1998. Investments in this sector, therefore, need to be increased.
It remains highly risky, to be too reliant on external funding for growth. The effects, tend to be noxious; In terms of policy making, we do not enjoy autonomy, thus undermining our independence.
Fact is, Africa’s voice on global issues tend to be weak. For instance, her call for a reform of the UNSC has not achieved much, much to the humiliation of our collective sense of pride. Donors determine what to do when shaping our development path, as against what should be determined by elected officials.
There is a risk in always receiving but there is a lot we could do to address this. Time to get things right!
John Baimba Sesay
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