By Bernard Bwoni
In the case of Africa, aid is like the dreaded gonorrhoea, it
seems to stick with most countries for life. African governments however cannot
continue to rely on aid forever surely because something is going to give or to
put it bluntly, something might already have given in. President Jakaya Kikwete
was recently quoted as saying ‘Western donors were setting degrading conditions
for aid’ and that his government could be forced to tell them to ‘keep their
aid’. This comes following delays in donor payments over concerns from Western
donors about ‘corruption, poor governance, slow pace of reforms’ and a host of
other conditions often reserved for African governments. The worrying thing is
that the withheld $500 million in budget support for Tanzania has a knock on
effect on government budget and government capacity to provide public goods for
the people of Tanzania. Malawi has had her aid suspended on several occasions
‘for failure to address concerns over economic management, governance and allegations of corruption’.
The suspension of aid to a country like Malawi where nearly 40% of its budget
comes from donors has damaging effects on public services.
This is the same story on the African continent with nearly
all governments heavily reliant on international donor funding to provide
services such as healthcare provision, education, sanitation, education,
infrastructure and so on. President Kikwete is right in saying that his
government would start working on ‘weaning itself from this dependence on aid’
to fund services for the people. The reality is that anywhere else in the world
it is a function of government to provide these services through taxation and
other public funding mechanisms. Public services and goods should not be funded
by charity for it is governments that pay for such.
It is said that African governments receive roughly over $50
billion of international aid assistance annually. This is not free money by the
way because yearly the same recipient African governments have to pay back in
the region of $20 billion in debt repayments per year. It is a vicious cycle in
that paying back $20 billion will inevitably mean they will have to borrow
again to be able to pay for these public goods. When Mr Kikwete says his
government will ‘wean itself from this dependence in the 2016 budget’ what he
is basically stating is that his government will in future not abandon the
basic mandated function of government to provide public services. What Mr
Kikwete is bringing to the fore is courageous and commendable but then it comes
with a heavy price tag. This will mean people will have to go through a dark
period to eventually emerge at the light end of the shaft. In the case of
Tanzania if $500 million is going towards government budget, if then this
amount is removed, how else is the government going to fund such essential
services to the public? The key is for African governments to take the ultimate
responsibility for funding public services or public goods and this can be
achieved through self-sustaining growth models.
The lectures continue to come thick and fast on how African
governments should grow their economies. It is now nearly over 50 years since most
African countries gained their independence but their economic growth remains
mostly stagnant if not negative and poverty remains rife. The question to pose
is, how do you expect positive economic growth when you do not own the means of
production? The reality is that Aid is not a catalyst for economic development
but rather fosters dependence. There is enough available literature, evidence
and case studies to that effect. As Mr
Kikwete lamented, the aid freeze has now led to the domestic currency weakening
significantly. Aid in most African countries and other developing countries is
often associated with rising exchange rates which undermines export
competitiveness and thus a negative effect on economic growth. It is expecting
too much for economies that dependent on aid and imports to post any real growth.
Aid greatly contributes to low productivity in this sense because it inevitably
depresses exports. According to a 2005 IMF Report ‘Aid will not lift growth in
Africa’, it highlighted a fundamental point that productivity growth is the
most important determinant of living standards.
There are many types of aid namely food aid, technical
assistance, project aid, programme aid, budgetary support aid, aid that is
given in the form of loans or grants. There is aid that is given to promote
growth and there is humanitarian aid. Those around the world who provide
humanitarian assistance should be commended for there are cases when it is
urgent and required for example in disaster zones, war torn regions of this
world, natural disasters such as the recent Nepal earthquake, flood victims,
the tsunami in Asia, famine in drought prone regions and many other
humanitarian requirements which local governments are not able to cope on their
own. As human beings we are compassionate beings, we have a conscience and
empathy and many who give selflessly to those in need.
There are of course arguments to the discourse that food aid
can have a negative impact on farming in the recipient country in that farmers
may become over reliant on food aid, food aid can drastically reduce the price
of locally produced products to that point that it becomes less viable to farm.
Some have even argued that food aid is a way of some governments in the
developed world to dispose of their excess agricultural produce. The counter
argument is should the developed world governments let famine persist and allow
people perish? That would be inhuman and the world is made up of many good
people with noble motives. The other counter argument is that by continuing to
aid the same governments, this means that they may never take responsibility.
They will just continue to be happy to have the electorate fed and people who
are not hungry often do not take their governments to account. How then do you
create balance? That of course is the
$50 billion question. With aid being used to fund government budgets then why
would any government seriously work towards a self-sustaining economy? There is
nothing as easy and free as free money. The problem comes when you are
entangled in the web of ‘degrading’ conditions and the vicious cycle of having
to repay the money. There is also the other argument that with free money the
propensity for corruption is high and there could some truth to that.
It is not rocket, the reality is that by its very subtle
nature, the aid culture especially in
Africa has not brought about economic growth but rather further sunk most
governments into a vicious cycle of debt and unsustainable debt repayment terms. As Mr
Kikwete highlighted that without that $500 million, Tanzania would be more
vulnerable to rising exchange rates, inflation, reduced export capacity and low
productivity. Foreign direct investment remains scarce as African governments
are accused of poor governance, corruption and slow progress in reforms. These
accusations against African governments makes investors especially those from
the west view the countries as risky investment destinations. The key is for
African governments to get their priorities in order and start looking at
empowering citizens to own the means of production, to own their God-given
abundant natural resources and prioritise productivity. Indigenisation and
economic empowerment are home grown initiatives that have the best hope of
lifting the continent out of this mire and mud. It is economically empowered
citizens who will eventually create jobs and jobs will eventually lead to a
bigger middle class that pays taxes to fund public services.
It is the government-to-government aid and aid from large
institutions like the World Bank and IMF which continue to sink African
countries into economic abyss. The case of Tanzania as highlighted by Mr
Kikwete is clear evidence that the free flow of aid money fosters dependence
rather than aid growth. That is the
reason why Kikwete is talking about weaning his country off aid dependency. If
governments continue to receive billions in aid year in, year out it basically
makes them complacent and there is no need whatsoever to work toward home grown
initiatives to grow the economy. Dambisa Moyo in her book ‘Dead Aid’ makes a
very compelling argument that ‘Aid allows African governments to abdicate their
responsibility to provide public goods’ and contributes to the dysfunctionality
of Africa. The ‘degrading’ conditions that Mr Kikwete was lamenting will
persist for he who blows the piper dictates the tune. At the end of the day it
is their money and it is important to play by the rules of the game or just do
not accept it.
bernardbwoni.blogspot.com
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