Letter to Zimbabwe – 2
The term aid describes everything from emergency humanitarian assistance to NGO programmes, multilateral loans, loans and grants provided direct to government treasuries.
Such payments are either transferred as loans or grants and in the opinion of some have proven to be both ineffectual and maybe even harmful. Over the last half a century over $1 trillion has been poured into Africa and yet as anyone who has visited the continent will confirm poverty levels have continued to rise. Might it be that the very system designed to help the most vulnerable members of society stifles initiative and reduces the ability of Africa to cure its own problems?
Why has this belief begun to gain support? In the opinion of a growing body of research those who support this observation say that it reduces the accountability of government to its citizens, chokes entrepreneurial zeal, creates bureaucratic obstacles that encroach of the business sector’s ability to create wealth and has a detrimental effect on the value of the local currency. The volume of such flows also promotes corruption and so leads to the wider populace becoming disappointed with the democratic process.
A number of observers have gone as far as calling aid ‘the slow killer of growth’. Thought this belief is not a new one, indeed, I was lectured to by Professor Bauer, who went onto to be a member of President Reagan’s economic team that Africa needed technical skills and little, if any money. But that was ‘academic’ and seldom was heard by the ordinary people who contribute their hard earned money to charitable causes that are a main source of aid money. They too accept that part of their taxes will also be channelled into aid. To-day, the ‘ordinary’ citizen of Britain, US or many other developed economies are fully aware that there is a high risk of embezzlement of the money they gave to assist those less fortunate than themselves.
Perhaps it is now the time to switch from aid to trade? Maybe the current global financial crisis is the time for African business to seek ways into the international capital markets?
By issuing bonds national governments would have to produce sound fiscal and monetary management procedures or risk being unable to raise monies. Failure to meet such requirements would result in a slowdown of the process of development and would expose regimes whose accountability and transparency was less than that required by global capital institutions.
A government who did not meet the rules of the international capital market would be frozen out and their people would quickly know why. At present the aid system often sees the worst behaved governments being given yet more money and it too gets swallowed up in the corrupt schemes that we all know exist across the continent. Put bluntly the badly behaved government benefits from the current aid model.
Is it now time to encourage domestic savings, especially amongst women and develop micro loan systems? Africa needs to mobilise investment in small and medium scale enterprise, which is known to be an engine of economic growth.
It may also be the time to change the emphasis away from aid dependency as the ‘west’ will be focused on resolving its own economic problems and aid budgets may be amongst the first to be cut. Those countries who react fastest to the changing conditions that are emerging within international capital markets may be fortunate in attracting funds from the BRIC countries – Brazil, Russia, India and China and possibly Indonesia – as all have money to invest, require raw materials to drive their domestic industries and often feel closer to the current position of most African countries than the more mature and former colonialist economies of northern Europe.
Surely, Africa’s economic salvation lies beyond the restrictions of global financial markets which are dominated by countries that will for quite a time to come be less likely to lend than they once were.
Aid and trade should be the new model for development and then the people of Africa can feel more in control of their own destiny.
It sounds to be a brave move but it might just be the making of a continent that has been powerless for too long.
John
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