Dambisa Moyo: Aid dependency blights Africa. The cure is in the credit crisis

Far from being a catalyst, foreign aid inhibits the continent's growth

Share
Related Topics

The credit crisis was – inevitably – the dominant theme of the annual World Economic Forum that concluded in Davos over the weekend. And while other subjects – diversity and culture, the Israel-Gaza conflict, and even Zimbabwe – did get a look-in, there was little said about the opportunity the crisis presents for aid-dependent African countries.

Setting aside the debate on how (or indeed whether) sub-Saharan Africa will be affected in the short term by the ongoing financial turmoil, there is every reason to believe that what is happening could in fact be the best thing for Africa's long-term development prospects.

The crisis presents Africa with a unique opportunity to overhaul its development strategy away from the aid-based model (which despite its over one trillion-dollar injection has achieved little in terms of delivering growth and alleviating poverty over the last 50 years) and move more aggressively towards the kind of market-driven interventions that have fundamentally transformed the fortunes of emerging countries, such as the well-known BRIC economies – Brazil, Russia, India and China – but also, closer to home, South Africa and Botswana.

In the last five years Africa's economic performance has been encouraging. Its economies have grown by an average of five per cent per year, and at the end of 2006, three out of the top 10 fastest-growing economies in the world were African (Angola, Sudan, and Mauritania). In just two decades, Africa's GDP has roughly doubled from $130bn in the 1980s to around $300bn today. The question is how best to make this development trajectory stick.

I have long believed that far from being a catalyst, foreign aid has been the biggest single inhibitor of Africa's growth. Among its shortcomings, aid is correlated with corruption, fosters dependency, and invariably instils bureaucracy that hinders the emergence of an essential entrepreneurial class. For Africa to grow in a sustained way, foreign aid will have to be dramatically reduced over time, forcing countries to adopt more transparent strategies to finance development.

What the credit crunch has effectively done is to instigate this process by default. With Western donors facing mounting fiscal pressures and gaping deficits, foreign aid flows are in inevitable decline (Italy has already cut its foreign aid budget by half), and with this comes a chance for Africa to chart a strategy that delivers long-term economic growth. This is, after all, ostensibly the goal of any individual or institution that wishes to see Africa become an equal partner in the global community.

The development finance policy that has been the hallmark of consistent growth across the world has almost universally comprised a mix of four essential elements: Trade and commerce, Foreign Direct Investment (FDI), microfinance, and access to international capital markets.

As such, despite negative headlines over China's expanding role in Africa's burgeoning economy, African governments should be minded to accelerate alliances with China and the rest of the rapidly emerging world. Rather than continue to spend millions of dollars each year attempting to gain greater access to Western trade markets, they should focus their attention on markets such as China, where, with 1.3bn people to feed and just seven per cent arable land, African produce is welcome.

And with roughly $4 trillion of foreign reserves, China is undoubtedly a better bet for much needed FDI in the foreseeable future than its Western competitors. Furthermore, the reserves profile of not just China but also the Middle East suggests a class of new investors with likely appetite to take on African risk via the bond markets.

In the past 18 months the sovereign bond issues of Ghana and Gabon (as well as a number of corporate and bank issues) have shown that innovative thinking towards more transparent methods of financing Africa's development may be catching on – but there is clearly scope for improvement.

No one can say for sure how long market-based financing would take to yield sturdy growth for Africa, but one thing is for sure, it will be faster than continuing to rely on aid. These dark economic times are just the opening Africa needs to show that it can at last contribute meaningfully to the global economy rather than perennially being viewed as a drag.

Dambisa Moyo is a former economist at Goldman Sachs and the author of 'Dead Aid: Why Aid is Not Working and How There is Another Way for Africa', to be published by Allen Lane on Thursday. www.deadaid.org

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
iJobs Job Widget
iJobs General

Recruitment Genius: Clinical Lead / RGN

£40000 - £42000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: IT Sales Consultant

£35000 - £40000 per annum: Recruitment Genius: This IT support company has a n...

Recruitment Genius: Works Engineer

Negotiable: Recruitment Genius: A works engineer is required in a progressive ...

Recruitment Genius: Trainee Hire Manager - Tool Hire

£21000 - £25000 per annum: Recruitment Genius: Our client is seeking someone w...

Day In a Page

Read Next
 

I don't blame parents who move to get their child into a good school

Chris Blackhurst
William Hague, addresses delegates at the Conservative party conference for the last time in his political career in Birmingham  

It’s only natural for politicians like William Hague to end up as journalists

Simon Kelner
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
Markus Persson: If being that rich is so bad, why not just give it all away?

That's a bit rich

The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

Coleman on course to end half a century of hurt for Wales

Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference
Rugby World Cup 2015: The tournament's forgotten XV

Forgotten XV of the rugby World Cup

Now the squads are out, Chris Hewett picks a side of stars who missed the cut
A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

Britain's Atlantis

Scientific study beneath North Sea could revolutionise how we see the past