Étiquette : economic growth

Is financial aid helping Africa?

Posted on by Rubrique Analyse Economique

“Give a man a fish and you feed him for a day ; teach a man how to fish and you feed him for a lifetime”. In simple words this saying explains the complexity that lies behind financial aid. Back in 1970, the United Nations General Assembly adopted resolution 2626, it was agreed that: “Financial aid will, in principle, be untied […] Developed countries will provide, to the greatest extent possible, an increased flow of aid on a long-term and continuing basis.”

Half a century later, hundreds of billions of dollars have been transferred from rich countries to Africa, yet as the percentage of its population living under the poverty threshold ($1.90/day) has decreased, the total number of people living under this same threshold has increased ; a real paradox. An explanation alone will not do, there is a need to find a solution as well. The Organization for Economic Co-operation and Development (OECD) in its 2015 edition report recorded that $55 billion were given by its member to Africa. Contrary to popular belief, the biggest receivers are not African countries but Asian countries. Afghanistan, Myanmar and Vietnam are the top receivers of financial aid in the world, whereas in Africa the biggest receivers are Egypt ($5.5 billion), Ethiopia ($3.8 billion) and Tanzania ($3.4 billion).

 

Of the $55 billion given to the continent, the biggest donators are the United States ($8.9 billion), the International Development Association (IDA) ($6 billion) and the European Union ($5.9 billion). Almost half of these $55 billion were allocated to the social sector which includes education, health and water treatment. This choice is not random, focusing on such a crucial sector facilitates the development of a country through the expansion of its production function which is allowed by improving the available factors of production. Furthermore, it can be argued that the Millennium Development Goals (MDGs) were directly targeted through such policies. Surprisingly, the economic sector accounts for only one fifth of the $55 billion given. This raises many questions especially when considering that under this category fall transport, communications, energy and banking. By leaving aside such important components, economic growth is hindered and development is in harm’s way.

Usually, the receivers are blamed first when there is a lack of effectiveness from financial aid. Bad governance is pointed out; it is true that some leaders did not hesitate to embezzle financial aid. No one really knows how much wealth Mobutu Sese Seko gathered (even though some claim it to be $13 billion) while his country was running at the time with a debt of no less than $13 billion… Although, even when good intentions are present, mismanagement is another problem. Sadly, the white elephant (Expensive investments that serve no purpose) has become the most widely observed animal in Africa as financial aid is spent on non-essential sectors, due to a lack of expertise. Yet, this should not mean that the responsibility falls solely on the receivers.

The roles of the donators can also be questioned. 46 years ago it was agreed between the UN and the donating countries that each year, they would donate 0.7% of their gross national product (GNP) to developing countries. As of today, only five countries meet this criteria: Denmark, Luxembourg, Norway, Sweden and the United Kingdom… Then again, giving too much money can also be a problem as it causes a dependency on financial aid. Even more troubling is tied aid, its consequences are gruesome as entire populations are deprived because their governments do not satisfy the political criteria established by the community of donators.

Last but not least, the arrival of new donators should be welcomed cautiously. Even though most of the donators are western countries, new ones are emerging. The BRICS (Brazil, Russia, India, China and South Africa) as well as Turkey are more and more contributing. Furthermore, with economic downturns for the western economies, their donations has substantially decreased. This has allowed these new actors to rise, China for instance has pledged to donate $60 billion to Africa during the last China-Africa summit. However, the arrival of new donators does not necessarily lead to a more favorable situation for the receivers ; in the end good governance and inclusive growth are both the reactants and the products in this equation.  

 

Meanwhile, Africans living outside the continent send more and more money home to their families. It is only a question of time before remittances outweigh financial aid given to the continent… A strong reminder that Africans have the power to change Africa foremost.

 

Riad KAID SLIMANE

 

REFERENCES

OECD, Development Aid at A glance, Statistics by region, Africa, 2015 edition. http://www.oecd.org/dac/stats/documentupload/2%20Africa%20-%20Development%20Aid%20at%20a%20Glance%202015.pdf

MOYO Dambisa, Dead Aid: Why aid is not working and how there is a better way for Africa, 2009, p.208

The African Diaspora : the Holy Grail of Africa

Posted on by Rubrique Entrepreneuriat

The Challenge of returning home

There are many brilliant minds who have left the continent in search of a better education and better opportunities for work. It is easy to accept this phenomenon if we think that the final target is to acquire relevant and solid expertise that will be used to benefit their respective countries and lead to economic development. However, it is often observed that students who travel abroad to pursue their studies usually feel some hesitation at the prospects of returning to their home countries after completing their studies.

There is no surer means of developing Africa than through the efforts of her citizens who have gone to study in foreign countries. In addition, they must take up the challenge of returning home, in order to create and develop their countries. Africa is in great need of her returning Diaspora. On the other hand, we cannot over state the importance of attractive opportunities, this will enable the returning Diaspora to easily integrate and participate in wealth creation. When we speak of wealth creation, we mean ‘‘the creation of new sources of wealth’’. This is because the last thing Africa needs is the return of over qualified citizens, whose sole aim is to find a stable job and cling to it no matter the consequences. Such state of mind will certainly not resolve Africa’s current issues.

Nurturing an entrepreneurial state of mind

Without any doubt, Africa needs innovation and creativity. This means the ability to detect problems in the society and find solutions to resolve them. In fact, ideas that may seem simple in more developed economies can become innovative projects if they are adapted to the local environment and if they can cater to the basic needs of the African population. In this respect, entrepreneurship is the best way to bring about an economic boom across the continent. There is nothing more important than the creation of companies and innovative start-ups which will improve the daily life of people and at the same time create employment. The latter not only decreases unemployment but will also allow the other Africans in the Diaspora to realize that it is possible to make a difference with a little consistency and a touch of creativity. Fortunately, it seems like this state of mind is slowly spreading amongst the African Diaspora. Although the beginnings of this movement seem slow, we still see entrepreneurial initiatives spear headed by young graduates of the African Diaspora springing up. We are proud of their efforts and we urge them to continue in this path so that their projects can serve as models to others who wish to return home and launch out their businesses.

Entrepreneurs from the African Diaspora who have returned home

Abdoulaye_ToureAbdoulaye Touré, a young Senegalese engineer, is a graduate of France’s Ecole Polytechnique. He specialised in the field of Energy. With six other young graduates, most of them Senegalese, he founded a start-up company called Baobab Entrepreneurship. The aim of this company is to promote entrepreneurship in Senegal through the use of Information and Communications Technology (ICT). Abdoulaye is of the opinion that Africa presents a lot of opportunities that entrepreneurs can take advantage of, as there are many problems and unsatisfied needs which need solution-driven minds. Furthermore, one of the factors that prevent the African Diaspora from coming home is the fact that they are already well integrated in the professional standards in the Western world. However, this can be resolved by increasing from France the career and entrepreneurial opportunities that exist in Africa.

  Olabissi_AdjoviOlabissi Adjovi is another entrepreneur of the Diaspora. He is from Benin but he is based in France and conducts his business in Senegal. He founded a start-up, Ouicarry, with some of his Senegalese colleagues. The objective of the start-up is to enable the mailing and delivery of parcels to and from Paris and Dakar. For him, Africa’s major advantage is the prospects for growth that the continent presents. Also, one of the reasons that people of the African Diaspora do not return home is because before their departure they did not have a firm intention to return home after completing their studies. He is convinced that if more young people lead by example, others will be convinced to take the leap.

Malick-Diouf-300x221Malick Diof is another Senegalese entrepreneur. He is the co-founder of the startup-Lafricamobile. It offers communications solutions for African companies and the Diaspora around the world. For him, one of the important features that encourage entrepreneurship in Africa is the flexibility of clients, suppliers, employees, etc. Also, the labor force is becoming qualified and hirable at competitive rates. However, the lack of infrastructure prevents people from returning home. Malick believes that one of the ways to persuade young people of the Diaspora is to challenge them and highlight that they have an important role to play in the economic development of their respective countries. He is greatly convinced that Africa can and will only be developed by her sons and daughters. That is why he is motivated to do his bit.

In conclusion, it is encouraging to see initiatives spear-headed by people of the African Diaspora flourish. These entrepreneurs have dared look beyond the assumptions of logistic difficulties and tough conditions of Doing Business by launching their own projects. We hope that this generation of entrepreneurs will inspire a movement of innovation across the continent.

Translated by Onyinyechi Ananaba