Wednesday, 26 March 2014

Clean up graft, promote transparency: Africa’s Development Road map

I recently came across an interview from 2005, with a Kenyan African Economics Expert James Shikwati titled “For God's Sake, Please Stop the Aid!". According to him, aid to Africa does more harm than good. He spoke about the disastrous effects of Western development policy in Africa, corrupt rulers, and the tendency to overstate the AIDS problem. This got me thinking about the age-long argument of the impact of foreign aid on African countries.

Another article on Why Foreign Aid is Hurting Africa stated that ‘Money from rich countries has trapped many African nations in a cycle of corruption, slower economic growth and poverty’ His panacea: ‘Cutting off the flow would be far more beneficial’.

Despite its good intentions, the developed world and its foreign aid have not made dramatic improvements in curbing corruption especially in Africa. Billions of dollars have been and is still being invested and given to these countries but unemployment, starvation, poor healthcare, under-development and corruption remain major problems in Africa.

While the region remains the poorest in the world, it also remains the most corrupt; corruption has been known to prevent foreign aid from achieving its intended goals in this region.

In the BBC article “Why Aid Doesn't Work”, Fredrik Erixon argues that “if nothing else, aid to Africa seems to have lowered rather than increased economic growth… the tragedy of aid, as been shown in numerous evaluations and by World Bank research is that donors are part of the problem of corruption; aid often underpins corruption and higher aid levels tend to erode the governance structure of poor countries.” (Wilkie, 2008)

In 1999, a paper from the US. House of Representative’s Joint Economic Committee Study Vice Chairman, Jim Saxton suggested that “minimizing IMF lending is one obvious way to prevent IMF assistance from promoting corruption”. (Wilkie, 2008)

Studies have shown that the negative impact of political corruption on investment predominantly affects economic growth. (Mauro 2004:16) notes, ‘there is a close association between corruption and slow growth, as well as between corruption and political instability’.

This view was supported by the World Bank according to (UNODC, 2005:81) which agrees that by distorting the rule of law and weakening the institutional foundation of economic growth, corruption is the single greatest obstacle to economic and social development; noting that the harmful effects of corruption are especially severe on the poor, who are hardest hit by economic decline, and are the most reliant on the provision of basic needs and public services.

A study on the Relationship between Poverty, Conflict and Development (2009) notes that there are certainly ‘corruption-related indicators of poverty’ in Africa that need to be adjusted (these include embezzlement, political patronage, money laundering, bribery, invoicing and over estimation of project and contract); this things impacts on governance negatively in Africa. Also, a Transparency International report has established a link between social conflict and corruption.

As noted by UN Secretary General Kofi Annan in (UNODC, 2005: 92), ‘Corruption is found in all countries – big and small, rich and poor – but it is in the developing world that its effects are most destructive. Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a Government’s ability to provide basic services, feeding inequality…. Corruption is a key element in economic under-performance and a major obstacle to poverty alleviation and development.

Research on aid effectiveness has shown that foreign aid given to countries with poor governance and poor economic policy environments does not aid growth and development, and may actually do the reverse.

According to empirical consensus, foreign aid perpetuates poor governance and bad policies (with corruption being a symptom of both) in countries with these problems. As such it is presumed that foreign aid given to countries with high levels of corruption will fuel that corruption and over a period of time we will see an increase in the levels of corruption (Wilkie, 2008).

Therefore, if aid recipiency increases corruption in highly corrupt countries, it is only logical to expect that donors reconsider the continuous flow of aid to such countries but even now, is this really the case?

The Need for Domestic Reform

Many calls have been made for the need for domestic reform, foreign funds can help only those African countries that undertake political, economic, and institutional reform, but the commitment to reform has been and is still seriously lacking. (Ayodele and Cudjoe, et al., 2005). Without domestic reforms, African politicians will line their pockets, but Africa will remain desperately poor.

In conclusion therefore, my argument is that aid to African countries should be more about providing the support and framework to fight corruption and graft and fast track progressive development and not really the continuous flow of financial foreign aid. As evidence has shown this has led to increased corruption across many African countries, thus tackling the cycle of corruption especially political corruption should be the major focus if there is any hope for Africa to begin to enjoy sustainable development

By Patience Bamidele, Masters Student of IDS