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Foreign Aid to Africa: A Vicious Cycle

Introduction

Africa has been a historically underdeveloped and financially disadvantaged region due to various factors, both internal and external. According to the neo-liberal school of thought, the problem is rather internal, with the blame focused on Africa’s corrupt and inefficient governments. Others disagree with the claim, suggesting that most of Africa’s problems can be adequately explained by the nature of the international economy. Therefore, the underdevelopment of the region is caused by the West exploiting African economies through unfavorable terms of trade and unequal exchange of resources (Thomson 2016). Both the perspectives have valid points, which is why it is essential to determine whether the foreign aid provided to Africa harms or benefits the economy. Besides, considering the debt crisis that captured almost all of the region’s economies, external support has been extremely valuable to Africa, yet the true implications of such support are to be debated. Even though Africa has experienced a range of socio-economic challenges throughout the history of its development, it is doubtful whether the aid is genuinely beneficial.

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Problem Background

Proving developing countries with aid in different forms such as social, economic, and humanitarian has been a priority for many nations, especially those that have established themselves in the international arena as strong economies and independent states. In their hundreds, non-governmental organizations have been working on making the world a better place, fighting fatal illnesses, handing out water and food, providing education, and so on. It is unmistakable that there is a moral imperative for ensuring that humanitarian organizations participate in alleviating the burden of tsunamis or dangerous disease outbreaks. For Africa, such aid is imperative and can prevent the immediate suffering of the population, although it does not offer a long-term solution, nor does it provide a stable platform for the countries’ sustainable development. Therefore, it has been debated as to whether humanitarian aid offered to Africa has indeed been helping the countries receiving it or whether it has been causing harm.

Africa has managed more than double its population over the last thirty years and simultaneously has steadily got poorer because of losing half of its share of global markets and experiencing a loss of income of around $70 million throughout the 1970s, 80s, and 90s (Moyo 2009). Thus, supplying humanitarian aid to Africa has remained one of the biggest ideas of the modern world, with millions of people marching for it, governments being judged by whether they participate in it, and celebrities proselytizing for the need for it. The calls for more aid to Africa have been growing louder, with the advocates for supporting the region pushing towards doubling the $50 billion of international assistance that has been going to Africa every year (Moyo 2009). However, the overwhelming evidence shows that aid to Africa has made the poor even poorer and the economic and social growth slower. The culture of receiving aid has made African countries debt-ridden and more prone to inflation as well as vulnerable to other fluctuations of the currency and investment markets. Moreover, aid resulted in an increased risk of civil unrest and conflict, especially considering the fact that around 60% of sub-Saharan Africa’s population is under twenty-four years old and with few economic opportunities (Moyo 2009). Therefore, it can be suggested that aid to Africa is a relentless and unmanageable political, economic, and humanitarian problem.

History of Foreign Aid to Africa

In the 1950s, several grand models were developed concerning the new nations in Africa, such as the colonial extraction model, the state-led industrialization and state farm model, as well as an agricultural capitalism model based on small-scale farms and plantations (Eicher 2003). Despite the refusal of African governments to adhere to the colonial model, the burden of colonialism captured the vast human potential of the region. Starting in the 1950s, the traditional developed economies have been exploring the idea that significant donations given to the impoverished areas could become the solution to the savings gap. Besides, it was argued that donors that gave foreign aid to other countries could also benefit themselves, with higher incomes in emerging countries being translated into the expanding opportunities for trade. However, it has been difficult for nations to determine whether foreign aid could be useful in boosting growth and alleviating poverty.

Throughout the 1960s, the political leaders of many African countries decided to abandon their agricultural efforts and invest in industrialization because of the potential to accelerate growth and catch up with industrial nations around the world (Eicher 2003). However, without foreign support, countries soon discovered that any substantiate growth would be impossible. Thus, while Africa started its independence as dependent on agricultural trade, in the 1970s, it became dependent on international aid (Eicher 2003). Even though the beginning of the 70s was a volatile period for the global economy because of the growth of oil prices by four times and the spike in grain prices throughout the world food crisis of 1972-1974 (Eicher 2003). Despite this, international donors responded by increasing global aid to agriculture, with the period turning out to be the Golden Age of donor aid to agriculture because of the significant success of the Green Revolution in Asia and the optimism of bringing the same level of success to Africa (Eicher 2003). Nevertheless, as time passes, the 1980s were characterized by the development of Afro-pessimistic attitudes toward aid to Africa, which prompted a new reform issue linked to the need for debt relief and the transition from donor support toward program support in the region.

In the 1990s, the global aid to Africa plummeted as the established international agreements intended to establish peace and steady development in the region essentially failed, with more and more Africans having to live in poverty. As mentioned by Africa Renewal (2002) report, throughout most of the decade, Africa’s economic growth averaged at around 3%, which was a highly disappointing result. In order to reach at least a 6% economic growth, a minimum of $30 billion in net official development assistance would be needed from the donor countries, and such service would need to grow by an average of 4% every (Africa Renewal 2002). Instead, Africa saw a 43% decline in aid from $28.6 billion in 1990 to $16.4 billion in 2000 (Africa Renewal 2002). Throughout the ten years of significantly expanding global trade, the economies in Africa continued their dependence on export opportunities even though they were increasing very slowly, partly because of the reliance on a minimal range of primary commodity export. However, most of the international trade expansion involved manufactured goods and services.

In the last two decades, aid to Africa has been changing in its trends, with more governments consulting businesses, civil society groups, and farmers’ associations to understand the need for potential projects and the desired level of economic aid (Harsch 2005). Such a strategy, as exemplified by the government of Madagascar, was intended to shape foreign assistance in a way that was realistic. By establishing clear goals, it became more apparent to international economies where their money would be going, although the progress was expected to be slow and gradual.

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Implications of Aid to Africa

The comparison analysis of the economic growth of Asia over the past decades, which received significantly less foreign aid compared to Africa, should be considered when exploring the connections between foreign aid and countries’ development. World Bank reports showed that out of 700 million people who got out of poverty between the 1980s and 2010s, 627 million of them were from China alone, which leaves everything else around the world at roughly 73 million (Lyons 2014). Put simply, 89.6% of the population that recovered from poverty was from China, which did not receive any substantial economic aid from foreign countries, suggesting that aid is not the answer (Lyons 2014).

If one is to focus on sub-Saharan Africa, foreign aid budgets have been going toward the budgets of Chad, Nigeria, and Angola. However, despite the investment, the level of progress was significantly lower compared to the amounts that the countries received consistently (Lyons 2014). Even though the continent receives an investment of around $50 billion every year, the expected improvement has not been observed. Instead of enhancing the life quality of 600 million people that live below the line of poverty, the aid hinders the region’s economic growth and encourages vicious cycles of corruption.

Aid has been shown to strengthen corruption in the region, especially in countries where it has already been quite widespread. The most prominent and frequent recipients of foreign aid are in Sub-Saharan Africa, which is where the majority of the lowest-ranked countries are, especially considering the issues of corruption. As a result, foreign financial support reinforces the number of resources that are available to the already corrupt and elite groups of people. In addition, the influx of aid creates an imbalance of power, with the most wealthy and powerful having the most money and influence, disregarding the needs of the populations living in poverty.

The money given in aid by foreign investors is being distributed unevenly among the population or employed inadequately. Instead of using the funds to help the populations in poverty; instead, the money is distributed to purchase military equipment or spent on ‘white elephant’ projects, such as Ghana’s Hope City (Tran 2014). In addition, the money has also been unethically used by political leaders who fear losing their positions and want to implement their policies as quickly as possible. An example of such policies is increasing the number of civil servants to reduce the rates of unemployment, even though, in reality, it has no positive influence on solving the problem at its root. Besides, it is notable that aid results in dependence on it. The countries that have been consistently receiving significant financial support have shown to promote local businesses less because of the availability of money at their disposal and do not need to work hard. This results in the lack of improvement in terms of per capita income as well as overall stalled human development.

White Elephant Projects

When it comes to foreign aid to Africa, the ‘white elephant’ projects have presented a significant challenge. During the Cold War, assistance to the region was significantly misused by African leaders. There are plenty of examples of failed projects that emerged as a result of foreign aid. For instance, in the 1980s, Norway’s development agency attempted to teach the nomadic kettle herders of Kenya how to lead and manage a fish-freezing factory. However, the project failed entirely, and the factory had to close before it had begun production and got abandoned for many years. Another example of the ‘white elephant’ project is the Mufundi pulp and paper factory in Tanzania, the work which had also occurred around the 1980s. Approximately $200 million was given as an investment, but the loan was too significant while the technology was too advanced, which made it complicated for the Tanzanian party to adhere to a complex plan, and the project turned unsuccessful. In the end, the country had to pay the $200 million loan, and it was burdened by it for almost twenty years.

White elephant projects present a significant challenge in the context of foreign aid because the donor countries and developing countries fail to learn the lesson of the disastrous projects implemented in the past and avoided making the same mistakes. In addition, there is controversy as to who is to blame for the failing white elephant projects, with some arguing that donor countries should be more aware of the potential negative implications of their financial input. However, due to the significant problem of African nations being influenced by corruption, there is a little guarantee as to how the aid given by foreign countries would get to the poor populations in need of financial support (Kenny 2017). According to the findings of the Center for Global Development, around seventy percent of the global aid given to developing countries is being stolen off the top (Kenny 2017). Nevertheless, it is imperative to note that a lot of resources go toward tracking the failures of projects from foreign aid while there are not enough accountability efforts set for ensuring that projects succeed.

Recommendations and Conclusions

Considering the extensive evidence suggesting that foreign aid to Africa has done more bad than good, it is essential to point out several important factors. The argument that aid is a crucial component of support to such developing regions as Africa fails to stand. If there are conditions for development other than capital available, the capital that is required is likely to be accumulated either locally or be available commercially from external sources from governments or businesses. However, in Africa’s case, the necessary conditions for development are not available, which is why the aid has shown to be ineffective and wasted in the majority of cases. This implies that the region can only be developed by means of attracting private investments.

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In the last ten years, nations such as Malaysia and China have been severely investing in Africa, with the foreign aid to the region rocketing from under $100 million in the past to more than $40 billion (Calabrese 2020). However, it is expected that the countries would learn from past mistakes and also take control of the persistent corruption issues. Whatever mistakes were made, they were made through a collaborative effort between Africa and its foreign donors. It is essential that any foreign aid to be provided to Africa is implemented with consideration of the white elephant problem created by the misguided foreign efforts regardless of the fault taken for it.

To conclude, foreign aid to Africa has been structurally faulty from the very beginning because it did not consider the specifics of the region. If foreign aid is not working, it needs to be reconstructed, and if global actors cannot help facilitate appropriate developmental efforts, they at least should not make things worse. Therefore, it is necessary to put together new incentives and policies for showing successes and not failures. For example, the needs should be converted into trade efforts. The capabilities of citizens’ creators need to be advanced in order for them to become creators of wealth and entrepreneurship so they can live off their activities. The comprehensive and complete policy and appropriate economic management, in the case of Africa, matter more compared to foreign aid for developing countries. Stable and strong development is only possible if Africa invests its own resources initially and uses foreign aid as a means of advancing its endeavors and strengthening its economic position. Living off financial aid from foreign investors is not a long-term solution, and considering the fact that corruption in the region halts its development, there is limited evidence to show any benefit stemming from foreign aid. In the end, foreign aid to Africa must be reconceptualized and reconfigured in order for the region to gain an advantage from external investments.

Bibliography

Africa Renewal. 2002. “A ‘Disappointing’ Decade for Africa.” UN.org. Web.

Calabrese, John. 2020. “Towering Ambitions: Egypt and China Building for the Future.” MEI.edu. Web.

Eicher, Carl. 2003. “Flashback: Fifty Years of Donor Aid to African Agriculture.” Web.

Harsch, Ernest. 2005. “Focusing Aid on Africa’s Own Priorities.” UN.org. Web.

Kenny, Charles. 2017. “How Much Aid is Really Lost to Corruption?” cgdev.gov. Web.

Lyons, Juliette. 2014. “Foreign Aid is Hurting, Not Helping Sub-Saharan Africa.” Le Journal International, Web.

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Moyo, Dambisa. 2009. “Why Foreign Aid Is Hurting Africa.” The Wall Street Journal, Web.

Thomson, Alex. 2016. An Introduction to African Politics. New York: Routledge.

Tran, Mark. 2014. “Will Ghana’s Hope City Join Africa’s Herd of White Elephant Projects?” The Guardian, Web.

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