Impact of Aid in Africa: Reflections on the Debate

In gauging the net impact foreign aid has had in Africa, speakers at Cambridge Union Society reframed the debate as the antithesis of aid-fuelled statism and home-grown entrepreneurship. By concentrating capital in government hands, foreign aid was said to crowd out the domestic private sector: “We don’t need aid, we have so many entrepreneurs, creative people,” Andrew Mwenda argued for the proposition that aid has done Africa more harm than good. In a speech that tipped public opinion over to the opposition side, Lord Boateng pointed out that what African entrepreneurs need is connections to markets – and one of the things aid does is to build roads.

In Ghana for example, Chinese construction firms are doing just that: rehabilitating and expanding road networks to facilitate access to trade with the Economic Community Of West African States (ECOWAS). But this is Aid 2.0, Chinese direct investment that reaches the market without being sifted through the state bureaucracy. The impact of such infrastructure projects on local communities is nevertheless problematic: Chinese firms tend to employ Chinese workers and use Chinese machinery. More concerning than the issue of hidden tied aid seems to be the combination of China’s burgeoning mineral extraction projects and outpour of cheap manufactures. A trade relationship in which African countries export raw materials and import finished goods does look a lot like a reversion to a colonial status.

Ways to improve the aid system lie beyond dichotomies of state vs. market, the West vs. China, aid vs. no aid. Prof. Caselli cited evidence that food aid reduces the likelihood of civil war in recipient countries. However, a “better, more sustainable [approach] than sending food aid,” head of USAID Raj Shah suggests, is through public-private partnerships. USAID’s recent collaboration with PepsiCo not only employs 10,000 rural women in Ethiopia, but also ensures the produce is sold and benefits the wider community: the chickpeas production is purchased by the World Food Programme, which then produces “advanced humus” to feed malnourished children in the Horn of Africa.

Innovative solutions like this one also serve as a reminder of the ultimate goal of aid: to enable individuals, communities and governments of developing countries to become self-reliant. Or, in Tony Blair’s words, Africa needs “aid to end aid.” If Mo Ibrahim would have participated in the debate, he surely would have insisted that the responsibility of development belongs to African leadership and that fostering good practice in government should be a priority. Paradoxically, a recent ActionAid report shows, more aid actually leads to less and less dependency on behalf of poor countries. How to use foreign aid to mobilize local resources therefore emerges as the key question in this “new narrative on the role of aid.”

With the 4^th Hugh Level Forum on Aid Effectivenesstaking place in Busan, Korea at the end of the month, the potential of aid to catalyse development remains under scrutiny. The forum in Paris focused on local ownership and the one in Accra on project synchronization – will Busan see an increased role for collabo

ration between the state and the business sector?