Rethinking development in Africa
August 25, 2010
Foreign aid is no more the pillar on which Africa´s future hinges. For the first time since independence Africa is ready to seriously face the future, not just the past. This turnaround has come suddenly and surprisingly in the past few years. While the rest of the world has struggled with recession and pessimism about the future, Africa has moved ahead. The attitude is optimistic. There is a growing self-confidence, missing in previous years.
Africa remains the poorest a region of the world but people there don’t want to be measured against the indicators of the Millennium Development Goals which emphasize poverty reduction primarily in terms of what governments do. There are new signals from Africa where in the past business was often viewed as merely exploitative. With the rise of a new indigenous middle-class and a political leadership anxious to free itself from the straightjacket imposed by the ODA regime there is a serious interest in encouraging investments not only by foreigners but also local entrepreneurs.
Although the exact contribution of foreign aid to African development is not really possible to assess, after fifty years it has little to show for itself. There is a growing restlessness among African intellectuals and policy-makers that something needs to be done about this sorry state of affairs. The time has come to begin drafting a new development regime for Africa.
It took African political leaders half a century to overcome their post-independence inclination to blame the problems of their own countries on the outside world and external factors beyond their control. It took the same time for the rest of the world to realize that Africa is more than a continent to pity. Neo-colonialism is no longer part of the official rhetoric in Africa. Foreign aid is no more the pillar on which Africa´s future hinges.
For the first time since independence Africa is ready to seriously face the future, not just the past. This turnaround has come suddenly and surprisingly in the past few years. While the rest of the world has struggled with recession and pessimism about the future, Africa has moved ahead. The attitude is optimistic. There is a growing self-confidence, missing in previous years.
There is plenty of evidence to back this up. According to a report by the global consulting company McKinsey[1], economic stagnation in the last two decades of the 20th century was followed by annual economic growth of almost 5 percent a year between 2000 and 2008. Africa´s total GDP in 2008 was US$ 1.6 trillion – similar to Brazil and Russia. Perhaps even more significant is the increased readiness to invest in the continent. Africa’s regional investment funds attracted US$ 484 million in the first half of 2010; there was an inflow into these funds for no less than 43 consecutive weeks – quite an accomplishment in a severe global financial crisis. The annual World Economic Forum conference in Africa 2010 was held in Tanzania – a country that perhaps more than most signifies the change of attitude among African leaders.
Africa remains the poorest a region of the world but for two reasons people there don’t want to be measured against the indicators of the Millennium Development Goals which emphasize poverty reduction primarily in terms of what governments do.
The first is that Africans are no strangers to poverty reduction but they do it their way through informal rather than formal institutions. An often massive redistribution of resources occurs in African countries without being officially measured. The most serious omission occurs at OECD level where official development assistance (ODA) remains the benchmark against which member countries are judged. However, ODA is increasingly a much smaller part of resource flows to Africa . It may still be dominant in the Nordic countries, but even there other flows are becoming increasingly important. Taking the total flow of private and public resource flows (excluding investments) into consideration, a large number of countries meets the official aid target of 0.7% of GNI as the following table indicates:
Table: Total transfers to developing countries by select OECD countries: ODA, philanthropy and remittances as % of GNI, 2007
| Country | ODA | Philantropy | Remittances | Total |
| Sweden | 0,93 | 0,02 | 0,26 | 1,21 |
| Luxemburg | 0,91 | 0,05 | 0,24 | 1,20 |
| Netherlands | 0,81 | 0,11 | 0,27 | 1,19 |
| Norway | 0,95 | 0,08 | 0,11 | 1,14 |
| Denmark | 0,81 | 0,03 | 0,19 | 1,03 |
| Canada | 0,29 | 0,11 | 0,62 | 1,02 |
| United States | 0,16 | 0,27 | 0,57 | 1,00 |
| Australia | 0,32 | 0,08 | 0,49 | 0,89 |
| Ireland | 0,55 | 0,16 | 0,17 | 0,88 |
| Great Britain | 0,36 | 0,16 | 0,35 | 0,87 |
| Austria | 0,50 | 0,03 | 0,33 | 0,86 |
| Spain | 0,37 | 0,03 | 0,45 | 0,85 |
| Switzerland | 0,37 | 0,08 | 0,33 | 0,78 |
| France | 0,38 | 0,04 | 0,32 | 0,74 |
This is a much more relevant set of figures than those that refer only to official development assistance. Such figures may have accurately reflected the resource flows in the 1960s and 1970s when foreign aid was the dominant mode but they are clearly out of date (and touch) in 2010. The principal component besides ODA tends to be private remittances – an increasingly significant mode of poverty reduction that builds on an indigenous every day ethic of sharing that is difficult to measure.
The second point against poverty reduction that Africans argue is that following the MDGs is like placing the cart before the horse. You cannot have a sustainable and meaningful poverty reduction unless you first have growth. This especially true in Africa where a driver of change, like a vibrant middle class, is only now beginning to emerge. Not only business people and policy analysts in Africa are critical of what has become in the last decade a conventional truth. African political leaders themselves wish to get out of this hold. President Kagame of Rwanda, President Guebuza of Mozambique, and former president Ben Mkapa of Tanzania are among those who have expressed criticism of the current aid regime. The Executive Director of NEPAD, Ibrahim Mayaka, recently wrote the following:
African leaders must cast aside a tendency to “manage poverty” and instead pursue basic economic growth if they want to improve the lives of their people….If we stick to the paradigm of “how can we manage poverty and reduce it?”, we won´t be able to develop Africa…It has to be radically different (NEPAD Dialogue, issue 264, March 2010).
These are largely new signals from Africa where in the past business was often viewed as merely exploitative. With the rise of a new indigenous middle-class and a political leadership anxious to free itself from the straightjacket imposed by the ODA regime there is a serious interest in encouraging investments not only by foreigners but also local entrepreneurs.
A look to the future
Although the exact contribution of foreign aid to African development is not really possible to assess, after fifty years it has little to show for itself and there is a growing restlessness among African intellectuals and policy-makers that something needs to be done about this sorry state of affairs time has come to begin sketching on what a new development regime for Africa would look like and how it would be brought about. Some of the key components in such a transformation would be:
a) Bringing ODA to an end
This radical measure would be a necessary first step towards the new regime. It would bring to an end the harmful dependency on aid and donors. Such an exit option would compel both donors and recipients to rethink their cartel-like relations which have made them preoccupied with each other at the expense of other actors, notably parliament and civil society.
b) Creating an investment regime
The end of ODA payments would not mean the end of resource transfers from rich to poor countries but it would call for a more productive approach that puts local institutions in a position where they have greater leeway over how these additional external resources are used. The ODA regime has created a grant mentality in African circles that has limited the appreciation of foreign aid and the responsibility for its proper execution.
c) Strengthening the business climate
Development depends ultimately on economic growth and a country´s ability to generate jobs. A shift away from poverty reduction to investment in business and jobs would create more favourable conditions also for the growth of organized labor. By strengthening the formal business sector, jobs would be created that lend themselves to an expansion of the labor movement, always potentially a core member of civil society. It would also help modernize the outlook and attitude of people who are still caught in a dependency mentality hoping that somehow government will come to their help.
d) Improving infrastructure
Infrastructure may be described as Africa´s Achilles Heel. There has never been enough of it and whatever little the continent has had in terms of roads, railways, etc. has been poorly maintained. Donors have been moderately interested in expanding it. In fact, with a few exceptions, like the Americans during the Cold War, the only donors that have consistently supported infrastructural development have been the Asians. They may have done so to give contracts to their own companies and jobs to their own nationals, but their contributions have been lasting and their aid therefore greatly appreciated. The fact that their aid has come without political strings has obviously reinforced the appreciation among Africans, especially those in government.
e) Establishing new public-private partnerships
Many of the projects that would be needed in the future to tap and develop the continent´s resources would benefit from public-private partnership arrangements. They are likely to be capital-intensive; they will be potentially politically controversial; and, they would require technical expertise that is not available locally in African countries. A joint involvement by both private and public capital would be especially suitable in such situations. Such partnerships are not only economically important. They can help generate a better relationship between government and business and institutionalize the type of social capital that is necessary for sustaining a national strategy based on investment and a favourable business climate.
Conclusions
The state in Africa has an important role to play in the continent´s development but it will not do so as long as it is weak and artificially propped up by donor funds. It will only strengthen and become disciplined when it is being forced by circumstances and demands in society to collect domestic revenue in a more efficient and effective manner. Those best placed to exercise such pressure are the emerging middle-class, especially members of the business community who have a vested interested in a predictable and legal-rational environment. With a growing professionalization of this middle-class the scope for a more influential civil society will also grow and thus additional pressure from that direction.
[1]Lions on the Move: The Progress and Potential of African Economies . London: McKinsey Global Institute, June 2010.[2] OECD, Development Co-operation Report, 2009, 2009; Hudson Institute’s remittance calculations from DAC donors to DAC recipients based on data from the World Bank’s Migration and Remittances Team, 2008; GuideStar Data Services, 2008; Charles Sellen, 2008–2009; Stein Brothers, AB, 2008–2009; Council on International Development Annual Report 2008, 2008; New Zealand Red Cross, 2008; Coordinadora Ong Para El Desarrollo Espana, Informe de la Coordinadora de Ong de Para el Desarrollo-España Sobre el Sector de las Ongd, 2008; Vrije Universiteit Amsterdam, Geven in Nederland 2007, 2008; Hudson Institute 2008–2009 and published in Hudson Institute’s Index of Global Philanthropy and Remittances 2009, p. 18.
I very much enjoyed reading this article by Goran Hyden–whose more fiery writing in the past, including “Beyond Ujamaa–” from 1980, inspired (excited) a whole generation of researchers. As a former academic and now Director of Policy at the African Development Bank, I see many of the challenges he describes at close quarters.
Yes, Africa has opened up–it has for example the highest growth of cell phone penetration in the world (blamed by some on that instatiable African need to communicate!), but it is also an important staging point for the entry of illicit drugs into Europe–all this has happened in the past decade. An important change globally–and a driver of some of the economic dynamics in Africa–has been the relative weakening of the western economies and the emergence of China and India as serious contenders for economic superiority globally, they are also willing to compete agressively for African products–including food and the land on which it is produced! They do not hide behind the niceties of the past, do not impose political conditionalities, and focus on narrow commercial interests. They have raised anxieties among developed countries (notably former colonial masters) that had for long considered African markets “captured.”
It must surprise many African watchers that oil seems to be sprouting from all the continent’s corners. Today oil is discovered in Uganda, tomorrow in Ghana, and thereafter Sao Tome and Principe etc–in many cases it is private enterprises and risk capital that are raising the stakes not public or aid money.
Yes, Africa is changing, and very fast. However, for the new opportunities to bring sustainable benefit, especially to the poorest on the continent, will require a new development paradigm based on better governance and improved access to productive opportunities for the still rapidly growing populations. Although aid on its own has failed to bring about rapid economic development in the past, it could still be useful in this “transitional phase” to bring about structural changes in the public sector through the building of capacities to help eradicate the rampant inefficiencies of African governments. The expansion of the private sector is desirable, but incapable states will eventually stifle growth.
Steve Kayizzi-Mugerwa, PhD, African Development Bank, Tunis.
Once again, Professor Hydén shows why he is one of the most well-known and revered scholars on the fundamentals of development and state-building in Africa. Indeed, he is on to something very crucial at this turning point in Africa’s modern history.
For us foreigners who have worked and lived in Africa during the last decade, it is obvious that there is a renaissance in politics, in civil society and in business communities on this vast continent. There is a sense of self-determination and own identity, an entrepreneurial and brighter outlook on the possible path ahead and the resources available, resounding of a “yes we can, too”. The stronger and more self-reliant AU and regional communities like EAC and SADC, the bold and defiant statements of outspoken prominent personalities like President Kagame are just indicators of this emerging new Africa.
Lets face it. It is not the ODA from the large western donors that has brought about this turn-around. It may well have helped in some instances. But one well-known problem with ODA is that the effects of it cannot be attributed at macro-level. At meso or micro-level however, we know how it works; and it varies a lot! There are excellent examples of good development aid projects, and there are some really bad ones too. My own experience from more than ten years in the development industry in Africa, is that there are ODA-financed development activities that do more harm than good. But most evaluations at project-level show a mixed picture. Now, if you start adding it all up, there are so many complexities and contextual factors contributing; you just cannot know whether ODA is good or bad on the whole.
What you repeatedly hear is that complexity should not scare us away from our “responsibility” to help developing countries. Instead of attribution, we should talk about contribution. Fine. But discussing the effectiveness of ODA seems to have become a no-go-area on the political arena. If you question ODA, you are an “evil guy” who do not take global solidarity seriously. This shines through also in some comments on Prof. Hyden’s article; “touche pas a mon ODA!”
SIDA commissioned an interesting study a few years back on the sustainability and incentive structure of aid. The study was coordinated by no one less than Elinor Ostrom, who later was awarded the Nobel prize. The report (Aid, Incentives and Sustainability, published 2002) was a brilliant study on the perverse incentives that the aid industry commonly is associated with. The report was quickly brushed aside by SIDA, who probably felt that it contained too many uncomfortable truths.
However, the real problems embedded in the incentive structure of aid is what create space for the “bad aid” and at the same time makes a facts-based and sober discussion about the effectiveness of aid so difficult. Without proper accountability mechanisms from the spending and upwards to the donor, there will be funds spent on the wrong things. And in our eagerness to show how benevolent we are in the developed world, donors spend less time on creating accountability mechanisms than making sure every krona of the appropriated aid funds are spent. Our well-wishing ambitions also make a critical discussion unwelcome, because who wants to be the “bad guy”?
Most thinkers do agree that ODA should be a temporary solution. So why is not now a good time to actively start doing away with it? Sweden adopted the Policy for Global Development back in 2003, where ODA should only be one part of our total commitment to global development. In practice however, little has changed.
Perhaps now, at the dawning of what might be a new era in Africa, is the time to shift the balance away from ODA to other forms of co-operation. If we do not, African societies will walk away from our ODA anyway. This is already happening. China is already financing most of all trans-national energy infrastructure in Africa, one of the keys to development. Uganda recently opted to finance new hydropower plants from own finances instead of relying on the World Bank. So; do we want to take part of the development of the New Africa? Then we also need to change our way of cooperation. We must come up with something better than aid, or we will be left out. Africa is the future, does the West want to become history?
David Nilsson Department for Philosophy and the History of Technology, KTH. Former SIDA-employee.
I also enjoyed GH’s article, in particular his observations “that aid has little to show for itself” when discussing its contribution to development in Africa. Aid became in many ways Africa’s biggest problem, not because of the amounts were too small or big, but due to the fact that the recipients did not use it for development and that they became accountable to their donors and not to its own people or citizens. The donors greatly overestimated the utalitarian sentiments of the African elites that conquered the state and underestimated its selfishness, if one is to put it simple. The state became the vehicle through which the elites could enrich themselves and pay for their consumption, rather than a force for development and financing that development. There is not yet any fundamental change in this respect, despite some optimism here and there . This process of the state “feeding the rentiers” is now also happening in South Africa, which the brother (Moeletsi Mbeki) of the previous president Thabo Mbeki, is outlining elegantly in a recently published book. What about aid? The problem with aid is that aid directly or indirectly (some donors believe that project aid and “targeted contributions” can circumvent the state, which is naive) fits into the process of feeding the rentiers, who are not accountable to their own people, because the people either don’t know there is external financing or they have very limited possiblities of knowing and influencing the use of the aid. And relatively to other regions (Latin America and Asia) aid is big in Africa and accounts for huge parts of many African government’s budgets. The way politics operates in African states (to generalise could be dangerous, but the similarities how politics operate in e. g. Kenya and Liberia are greater than the differences) follows a clientelistic pattern, that no leader in Africa can avoid and is fundamentally anti-developmental. The only ones who can change this and getting development on the agenda are the Africans themselves, that now are emerging as GH also points out and which is very much welcome. Aid in itselt was not wrong, the design was. Future aid (are there realistic options in the short run?) could do better in supporting these forces than the rentiers of the past.
Hence, I would have liked GH to develop his views further on the role of the state in Africa and how politics operates in society to get genuine development starting. Africa’s recent higher growth is primarily driven by resource exploitation (mercantilistic capitalism), a role Africa and its elite is used to.
I real like this articles for rethinking african development which i think African leaders must embrass if we are to change the future of african new generations.
Africa, Africa and Africa!!! You are all right and wrong at the same time because Africa is a continent and why do you want me to repeat the same thing every day? Because more you talk for the whole Africa, the more it is absolutely vague and just sounds brain washing at all!
Nevertheless, we need to narrow down to a single country in order to see how we could bring a change to it? Take Chad, for example, what is going on there? Could we know its economic situation? What are the real problems over there? What are chadians thinking about their health and their future?
Please, if you are scholars, researchers, whoever you are, black, white or yellow, stop walking on the trace of the lion when you see it directly!