Aid in Africa: Blessing or curse?
By Princeton Lyman
Jean-Jacques Rousseau, the French philosopher, once said, ?Man is born free but everywhere is in chains' ? a dilemma over which he agonized for the rest of his life. Development specialists sometimes despair: Africa has received more than $100 billion dollars in aid but remains mired in poverty, disease and hunger. The dilemma ? and controversy ? over the relation of aid to development is as troublesome and inconclusive as any in history. Indeed, because this situation relates to the basic living standards, the very survival, of more than 600 million people, it is not academic but one of the most important issues of our time.
There is no doubt that Sub-Saharan Africa remains at or near the bottom of nearly every measure of development ? life expectancy, adult literacy, school enrolment and per capita GDP. In all these categories Sub-Saharan Africa ranks below developing countries as a whole, and behind every other region of developing countries. But that does not in itself indicate the sum impact of aid. One has to look at some of the trends in Africa during the period of aid, or to ask the counter-factual question: what would be the situation if there had not been substantial aid programmes?
Most African states became independent without strong national identities because their borders had been fixed by colonial divisions of a previous era. Few had strong traditions of civil service, entrepreneurial activity or large numbers of trained and educated elite. Most were dependent on primary products for the bulk of foreign exchange earnings and by and large felt obliged to continue that dependency at least initially to gain the foreign exchange necessary for basic operations and services, as well as for development. Poverty was widespread. In the time since independence there has been significant progress, in no small part because of the availability of aid.
DISEASE
Until the recent downturn from the HIV/Aids pandemic, life expectancy had been rising steadily, from just under 40 years in 1960 to 50 years in the mid-1980s; infant mortality declined from 138 per 1,000 in 1970 to 108 in 2002; adult literacy since 1990 rose from 50.8% to 63.2% in 2002. These figures, however, mask significant variations between countries and some backsliding, especially during the 1990s.
Internationally-led campaigns eliminated the diseases of yaws and smallpox and by the end of 2004 may eliminate polio. Large swathes of African geography have been protected from river blindness, freeing millions of people to farm precious land free of fear of that disease. The debilitating effects from Guinea worm have been largely brought under control. Governments once heavily dependent on foreign experts to man even basic positions are now staffed with their own people, and universities abound across the continent. Aid was a major factor in all these achievements.
The prominence of aid in these various fields has, however, bred another ?disease' ? the aid dependency syndrome. As Nicolas van de Walle of Cornell University has pointed out: ?In the period 1990-1995, aid represented the equivalent of over 50% of African government revenues and 71% of public investments... In many countries in the region, virtually the entire non-recurrent component budget, as well as large parts of the recurrent budget, was financed by the donors.'
AID GROWTH
Moreover, the share of aid in Africa's GDP has grown over the years rather than declined, from 5% in the 1970s to over 10% in the 1990s, many times the share of GDP in lower and middle developing countries in other regions of the world. Of particular concern is the delegation to donors of investment in the key social sectors of health and education. During the period of structural adjustment in the 1980s and 1990s, African governments appeared to have concentrated their expenditures on maintaining the state apparatus while shifting the burden of these social sectors increasingly to donors.
In 1997, Mali's entire health and health education budget was funded by donors. In Uganda, in 1992-93 donors financed 77% of such expenditures. In Zimbabwe, church missions provide two-thirds of hospital beds in rural areas. ?There is considerable variance across countries and across sectors,' writes van de Walle, ?but the best estimates suggest that somewhere between a third and two-thirds of education and health services now completely bypass the state and are the result of a combination of donor, NGO and private efforts.'
?In many countries,' he adds, ?there is a de facto return to the situation during the colonial period when the state's role in social sector provision was peripheral to the effort of the Christian missions.'
CALLS FOR MORE
Despite this, many advocates today argue for even more aid. The United Nations agreed in 2000 on a series of Millennium Development Goals over the next 15 to 20 years, including halving the number of people in absolute poverty, achieving universal primary school enrolment, major advances in health services and increasing access to clean water. It is now fairly widely recognized that many of these goals will not be reached, especially in Sub-Saharan Africa, without massive increases in aid.
The WHO's Commission on Macroeconomics and Health calls on donors to provide an additional $22 billion a year of development assistance to meet the health goals, of which $14 billion would be for the least developed countries, most of whom are in Africa. Sub-Saharan Africa today receives $17 billion annually in aid, meaning that an increase of 60% in foreign aid would be required in health alone. Unesco has estimated that an additional $5.6 billion will be needed annually to meet the education goals.
Other investment needs are also being identified which would require more aid. A recent study by Unido found that if workers in landlocked countries of Africa worked for free, their goods would still not be competitive on the world market because of the high costs of transport. Some of those problems are political and because of tariffs, but there is growing recognition that massive investments in infrastructure will be necessary to enable Africa to compete in today's globalized economy.
Others have noted that investment in agriculture and food production declined steadily during the 1990s, contributing to problems of hunger and malnutrition. African nations recently pledged to spend no less than 10% of their budgets on agriculture, but few have yet met that target.
TRADE-OFF
There is, of course, a trade off between increased aid and debt relief. Africa's aid figures are put better into perspective when one realizes that against the $17 billion in annual aid, Africa's annual debt service runs at $11 billion, leaving only a net $6 billion of foreign exchange input. Recent programmes of debt relief, for example, such as the Highly Indebted Poor Countries (HIPC), link debt relief directly to increased expenditures for education and health by the African governments.
This has produced sharply increased government expenditures in these sectors in countries like Uganda, Ghana and others in the programme. But if Africa's debt service were wiped out entirely ? an unlikely prospect ? there would still be a shortfall in the resources needed to meet critical needs such as those identified in health, education, agriculture and infrastructure.
Where does that leave us? If more aid resources are necessary, will they have the necessary impact? How can they be applied without increasing dependence? The answers are not simple, nor are they the same in each country.
COMPETING PRIORITIES
It is clear that not all aid is as productive as others, and not all of it is targeted long enough, in key sectors, to have the desired impact. There are competing priorities and theories, such as those that argue for more investment in health and education, with statistics to back up the prospective impact on growth. Others insist that aid be concentrated in countries with sound policies and minimal corruption, and for private sector development, the basis in the new US Millennium Challenge Account.
Yet a recent study found that investments in health, education, democracy and similar sectors, however their long term importance, have little short term impact on growth (within four years) while budget and balance of payment assistance, which now constitutes about 45% of aid, has a very positive if diminishing impact on growth, regardless of level of income, or quality of institutions or policies. The balance between short and long term goals, and competing priorities within a still limited amount of resources is almost bewildering.
Recent studies on the impact of aid overall do not give us a clear answer either. Many studies have attempted to measure the relationship of aid to development. Some have found positive correlations, especially in conjunction with sound policies, others have found little or none, or conditioned the results on exogenous factors. Examining 19 such studies, David Roodman, a fellow at the Center for Global Development, concludes that all of them have statistical problems, and that the conclusions need important qualifiers.
?There can be no doubt,? he writes, ?that aid sometimes finances investment, and that domestic policies, governance, external conditions, and historical circumstances influence the productivity of investment....Aid is probably not a fundamentally decisive factor for development, not as important as, say domestic savings, inequality, and governance.?
?Moreover,? he adds, ?foreign assistance is not homogenous. It consists of everything from in-kind food aid to famine-struck countries and technical advice on building judiciaries to loans for paving roads. And some aid is poorly used. Thus the statistical noise nearly drowns out the signal.?
NEPAD
The most helpful recent development is the assertion within Africa itself to address the fundamental problems that confound both donors and recipients. In the New Partnership for African Development (Nepad), adopted by the Africa Union in 2003, African nations have pledged themselves to principles and programmes of democracy, human rights, sound economic policies, investments in key sectors, and regional and sub-regional economic cooperation. African nations have also become more active in bringing an end to the wars that have plagued the continent, taking the diplomatic lead in Congo, Burundi, Liberia, and Sudan.
Democratization is gaining across Africa, making African governments more responsive to their people's needs, and drawing more people into the processes of planning and executing development programmes. African nations have also become more assertive, along with other developing countries, in insisting on the eradication of trade and subsidies barriers in the industrialized countries that severely restrict Africa's agricultural export potential. All of these developments lay a foundation for better usage of aid as well as the attraction of more foreign investment.
But the donors must also recognize that to achieve even the minimal of the Millennium Development Goals in Sub-Saharan Africa, still the poorest of the world's regions, there must be another generation of substantial aid, uninterrupted by shifting priorities and aid fads, short-term political motives or shifting mechanisms for qualifying, that will invest in health, education, agriculture and infrastructure ? a generation of aid levels no less than and probably substantially higher than today's $17 billion. As African nations improve on the goals of Nepad, aid to such countries and to sub-regional groupings of countries may not be the most critical factor in success, that lies with the Africans, but clearly it will still be an essential one.
Princeton Lyman, is Ralph Bunche senior fellow in Africa policy studies at the Council on Foreign Relations. He is a former US ambassador to South Africa and Nigeria.