Doubling of Foreign Aid to Africa will not Lead to a Take-off into Self-sustained Growth

Frontier Centre, Poverty, Uncategorized, Worth A Look

Wednesday, 6 July, 2005 Lagos, Nigeria—As the G.8 Meeting commences today in Gleneagles, Scotland, members will be confronted with the demands of their host, Prime Minister Tony Blair, who seeks to cancel Africa’s debts and to double the amount of aid to African countries.

Commenting on these proposals, Thompson Ayodele, Director, Institute of Public Policy Analysis in Lagos, Nigeria (IPPA), said: “The resources needed for development in Africa can be generated within the continent. From 1970 to 2000 Africa received about U$400 billion in aid. Africa has got enough financial help from overseas. Africa’s lack of development clearly does not stem from lack of funds. More foreign aid will not eliminate poverty and launch African countries to productivity and growth.”

While commending Tony Blair for his concern for Africa, Ayodele maintained that “development in the continent is possible through change which must come from within Africa. If anyone really wants to help poor Africans out of the vicious circle of poverty he must promote free commerce, protect property rights, encourage openness to trade, allow markets to flourish and reduce government intervention in the economy.”

“Foreign aid has caused many countries in Africa to become heavily in debt. The continent has become a laboratory for various donors and development theories. The irony of course is that aid does not trickle down to the miserable people that we see daily on our televisions and who really need it; instead, it provides incentives for mis-governance, propping up dictators, encouraging corruption, financing projects that are irrelevant to ordinary people and making investments which cost billions of dollars in aid money. Many of these projects are never opened or generated payoffs to government officials or boosted bureaucracies or diverted money from projects which would have resulted in long-term growth” Ayodele said.

Ayodele further stressed that the record of foreign aid in Africa should be a lesson for everyone including the G8 Members. “Between 1970 and 1995 aid which started at about 5% of Africa’s Gross National Incomes later peaked at 18% in 1995. When the percentage was a relatively small proportion of GDP, the growth-rate per capita was high. When aid grew astronomically, GDP growth- per-capita nose-dived. So showering more money on African governments would make them heavily in debt and stunt growth and development.”

Trade Not Aid

Ayodele berates the proponents of ‘trade justice’ such as the Make Poverty History coalition who push for more barriers to trade. This would, according to Ayodele, further harm and impoverish the poor and vulnerable. “If countries should relax barriers to trade, it would kick-start entrepreneurial activit! ies. People would discover where goods are most needed and innovate how best to produce those goods. The competition for supply would spur improvements in local production, investment and technology transfer with consequent benefits for everyone, particularly the poor.”

Ayodele stressed: “Prime Minister Blair wants to end poverty in Africa, build prosperity and improve lives. Yet his allies in the G8 and EU continue to cut world market prices for our goods. Africa has less than 3% of the world’s trade.” said Ayodele. “Increased trade and investment, spearheaded by private sector, is the best hope for combating poverty and disease in the continent.”

“The US, the EU and Japan continue to maintain barrage of subsidies and other trade-distorting policies which deny market access to products from African countries despite the Doha agreement.. Between 60% and 80% of the exports of countries such as Nigeria, Benin, Burkina Faso, Burundi, Chad, Malawi, Mali, Rwanda, Sudan, Tanzania, Uganda, Zimbabwe are affected by trade-distorting policies in developed countries,” Ayodele said.

Ayodele specifically calls on Prime Minister Blair to prevail on his friends and allies to remove agriculture subsidies. “Prime Minister Blair should use the same zeal and commitment which he now devotes to promoting foreign aid and debt cancellation to call instead for the phasing-out of trade-distorting subsidies and tariffs among his allies which total U$1 billion a day. Abrogating those policies would do far more to improve the lives of millions of poverty-stricken people in Africa than any amount of foreign aid.”

Ayodele continued: “Far from fixing Africa’s problems, aid worsens it. Growth does not depend on the amount of aid a country gets but on some important factors which can only be built by governments in Africa. These factors include adequate protection for property rights, effective institutions, clear and enforceable rules which are predic! table, an efficient and prompt judicial system and, above all, freedom to trade.”

Ayodele concluded by stressing: “The development aid should be saved for emergencies such as natural catastrophes, war and the massive threats of disease.”

IPPA (www.ippanigeria.org) is a public policy think-tank based in Lagos, Nigeria, which promotes policies that enhance development, fighting diseases, empowerment of individuals and private firms, access to technology and removal of tariffs, subsidies and other trade-distorting policies.

Thompson Ayodele
Coordinator
Institute of Public Policy Analysis
P.O Box 6434
Shomolu-Lagos
Nigeria
Website:www.ippanigeria.org