Fifteen years ago, as the horror of genocide ripped apart Rwanda, Paul Rusesabagina became a hero. A humble hotel manager, he saved 1,268 people who had sought sanctuary from the machete-wielding mobs, an act of such courage it was rapidly immortalised in print and on screen. Rusesabagina spent days pleading with bands of killers to spare his charges, buying lives with alcohol when that failed, then spent nights on the one phone line that had not been cut off sending faxes to kings and presidents begging for international help to stop the butchery.

Today, Rusesabagina is once again calling for international action. Why, he asks, is Britain handing out so much aid to his nation when its ruler is fighting a proxy war in the Congo; when its elites are getting rich on stolen minerals; when democracy is a sham and dissent is stifled? "We know what happened in the past. But that does not mean we close our eyes to what is happening now," he told me this week. "I did not keep silent in 1994 and I cannot keep silent now. The British taxpayer is financing a proxy war. We need justice, not aid."

He is right to be alarmed. Britain is Rwanda's biggest donor, pumping in £52m this year in direct contributions, a form of aid-giving reserved for those that have proved good governance. But human rights groups are increasingly concerned by restrictions on freedom of speech in Rwanda; even the BBC has not escaped a ban on its local language service. And other major donors, including the Netherlands and Sweden, suspended direct aid after a UN report highlighted Rwanda's role in eastern Congo, where war has claimed the lives of six times as many people as the Rwandan genocide.

Paul Kagame, Rwanda's charismatic president, plays the guilt card with such skill that his regime has, literally, got away with murder. His defenders point to impressive economic growth rates, improved health and education, and the healing of some of the genocide scars. But the case of Rwanda illustrates a glaring problem with British foreign policy, most notably in Africa. And it is a problem that raises uncomfortable questions at a time of looming spending cutbacks.

Many of the issues revolve around the Government's golden child, the Department for International Development (Dfid), set up by Tony Blair in 1997 as a dramatic gesture of modernisation. Dfid is seen as the sexiest branch of Whitehall, attracting the brightest entrants who find the prospect of improving schools in Mozambique far more enticing than improving schools in Middlesbrough. Its staff were encouraged from the start not to play by the normal fusty rules of Whitehall.

Dfid behaves more like a charity than an arm of government, armed with soaring wealth and driven by its laudable, if rather ambitious, mission to eliminate poverty. Its first budget was £2.6bn, twice that of the foreign office. A decade later it was handed £5.3bn and next year, as the Government pushes on to meet its Gleneagles commitment to increase aid to 0.7 per cent of gross national income, it will be given just under £8bn. These budgets are set to keep on rising, whoever wins the next election.

This raises several problems. First, and most obviously, this torrent of money must be spent. People tasked with doling out aid rarely win promotion by finding reasons not to spend it. But there are only a finite number of countries that need aid, deserve aid and are not so shattered that it is like pouring water into a sieve. So when decisions are taken to back regimes, officials tend to stick by them.

As a result, there is no criticism of Kagame. And aid flows into Uganda, where Yoweri Museveni's regime has been accused of torture and repression. Britain increased total aid to Ethiopia even after Meles Zenawi, another poster boy for this supposed new wave of African leaders, oversaw a brutal clampdown following a blatantly rigged election and waged war on Somalia. A strange paradox seems to be emerging: the more money spent on aid, the less chance of criticism.

Second, despite soaring budgets, the number of full-time civil servants working for Dfid has actually fallen slightly since its creation. The number of staff appointed "in country" has also been reduced in recent years. This is commendable productivity. But it means more reliance on charities and consultants, more pressure to hand over aid directly and, inevitably, less effective scrutiny.

Third, money is power. Much of Britain's foreign policy in sub-Saharan Africa is now dictated by Dfid, not the Foreign Office as elsewhere in the world. The Foreign Office, of course, has a far from perfect record. But this sends out a sign that we see Africa as a place in need of salvation, rather than a complex continent of 53 nations deserving respect as our equals. And for all the honeyed words of ministers and officials, the result is too much emphasis on the ambiguous cause of development rather than relentless focus on good governance, human rights and long-term strategic issues.

The most outrageous example was in Kenya, where Dfid officials tried to prevent the British ambassador from speaking out against obscene corruption. Only last week I heard of a senior minister who, told he was signing agreements with one of Kenya's most corrupt politicians, glibly replied that he was less interested in the man's record than the desire to get children into education. Little wonder Kenya remains plagued by corruption.

Then there are wider issues about the effectiveness of our approach. Dfid has won global respect for its tenacity – and there can be no doubt British aid has led to improvements in the daily lives of thousands. But for all the new schools and clinics, justified questions remain over whether pouring in vast levels of aid help or hinder a country's long-term development. As Richard Dowden, director of the Royal African Society, says, it is noticeable that none of the most passionate advocates of aid are African – and some of its harshest critics are, such as the Zambian economist Dambisa Moyo.

Immense sums have been poured in over the decades and significant economic growth remains elusive. Studies have indicated that aid is subject to diminishing returns as it is increased, ceasing to be effective after it reaches 16 per cent of a country's gross domestic product. Africa was close to that level before Gleneagles – and by 2005 aid was already accounting for a quarter of Rwanda's GDP. On top of this, the sacred target of handing over 0.7 per cent of national income, first calculated more than four decades ago, appears increasingly arbitrary and outdated.

Our approach to the continent is riddled with contradictions. We pour in billions in aid while erecting trade barriers that squeeze out African firms. We encourage land tenure in Africa, then drive farmers out of business by dumping cheap produce. We pay lip service to good governance, then prop up repressive regimes, do deals with despots and allow our banks to launder their plunder. We retain prohibitive drugs laws that are spreading chaos through some West African states, having wrecked parts of South and Latin America already. Then we complain when migrants flee the consequent poverty and unrest.

Few would argue for aid spending to be savaged. And emergency relief remains vital, not least since climate change will exacerbate Africa's difficulties. But our approach to aid, driven by pop stars and designed to appease domestic audiences, seems anachronistic. In the current economic climate, even some of those who helped create Labour's policy on Africa admit privately that it is hard to offer Dfid immunity from cuts based upon its effectiveness in encouraging lasting development. Maybe it is time to ignore the hype and end the hypocrisy.

i.birrell@independent.co.uk