African Development for the Completely Bloody Ignorant

Over its first eight chapters, the Report of the Commission for Africa discusses a huge range of the obstacles facing Africa’s development, from the continuing prevalence of conflict to the scourge of AIDS. It also proposes a range of solutions to these problems, from policy shifts to massive infrastructure projects. Almost everything proposed, however, has one thing in common - a price tag.

Improvements in health and education, such as abolishing primary school fees, have huge potential benefits, but carry a weighty price tag - in the case of education, $7-8 billion a year (p64). Although they don’t always say it outright, it’s clear most of this investment is expected to come from rich countries.Yet the period since 1990 has seen a steady decline in aid.¹ So where does the Commission believe the money will come from? They tackle this in the eighth chapter, imaginatively titled “Where Will The Money Come From?”

To its credit, the Commission doesn’t attempt to downplay the extent of its financial demands. The total cost of its proposals, it says clearly, is $75 billion every year. To put that in perspective, it’s equivalent to the amount spent in the United States each year on healthcare relating to smoking.

“There is no prospect,” the Commission notes, “of Africa paying for this alone.” The report cites evidence showing that neither remittances from expatriates, nor increased savings, nor foreign investment, will be enough to kick-start African growth without aid. Instead, the Commission puts forward another headline figure: a doubling of aid to Africa by 2010 (p101).

Like many of the report’s spending plans, its fundraising plans take a two-stage approach: a partial investment until 2010, and as long as the money is proving effective, an increase to the long-term figure (p102).

The $75bn/yr eventual total, and the doubling-of-aid approach, match proposals made by other NGOs, and became the basis for the negotiations at the G8 summit for Gleneagles. Soon, I’ll look at how the Gleneagles deal measured up to the demands of the various groups campaigning in 2005. But it’s interesting that a broad consensus seems to have been reached by aid campaigners about the $75bn figure.

Of course, if paying large sums of money was as simple as knowing how much you need, I wouldn’t have such a big student loan. Is it too much? In terms of rich countries’ ability to afford it, the Commission says a firm “no.” $25bn/yr is, they point out, only 0.1% of rich countries’ income. But there are other question marks over large aid spends: does aid even work? And if so, how much can Africa safely and effectively use?

The Commission’s response to the first question is “yes - with the right conditions.” It cites as examples the growth of Mozambique in the 1990s, heavily reliant on aid; and the transformations of education in Tanzania and healthcare in Uganda. But it outlines a host of problems that have limited the effectiveness of much aid: short-term variations in contributions undermining planning; faddy waves of interest in fashionable issues, regardless of the recipient government’s priorities; excessive and burdensome requirements; restrictions that require the spending of aid on the donor’s products and services. Longer-term aid, in the form of grants, not loans, is needed. Where governments are trustworthy, it should be delivered to them, to spend in line with their plans; where they are not, it should be delivered as far as possible in line with local people’s wishes.

This amounts to a rejection of the “conditionality” that commonly comes attached to aid, requiring governments to agree to lifting price controls, privatising services, and other policies believed by rich-country economists to be effective in spurring growth. Indeed, the report calls conditions “both an infringement of sovereignty and ineffective.” Instead, it calls for donors to focus on supporting internal systems of accountability, such as transparent government accounting and a free press, so that citizens can hold governments to effective policies.

In addition, aid cannot always be diverted when a natural disaster or economic shock takes place. Instead, the Commission outlines one more item on its shopping list: a $4bn/yr additional fund to tackle such emergencies.

There are a host of arguments about the effectiveness and usefulness of aid, and the Commission doesn’t address every one; indeed, where it recognises aid’s failures, it focuses on the flaws in Western countries’ giving rather than on any waste by African governments. Given that the Commission included several African governmental figures, this is perhaps not a shock. But I’ll be looking at the debate over the potential of aid in more detail later on.

How much aid can Africa absorb? “There is a limit to the number of roads, dams, schools and clinics that can be built and serviced effectively in any one year,” the Commission admits. Its estimate for Africa’s current capacity is, unsurprisingly, $25bn/yr, rising to $50bn/yr after 2010. Several key factors are necessary to ensure these amounts are used effectively, notably the improvements in governance discussed in previous chapters, and improvements in the planning and stability of aid.

The Commission does begin to address the question I raised last time, of how long the increased aid payments are expected to be needed. Their answer? Well, not forever. Botswana, they note, provides an example of a country where growth has allowed a country to largely be weaned off aid without compromising growth.² They don’t give a date, but their projections show aid payments as a share of GDP declining fairly rapidly after 2015. The implication is that the “big push” should be no more than a 10-15 year project, assuming nothing goes badly wrong.

So where will the money actually come from? First and foremost, unsurprisingly, from rich countries’ direct aid budgets - through active commitment by rich countries to the longstanding promise to give 0.7% of their national income as aid (the US currently gives 0.22%, and Britain 0.47%, according to the latest figures³). As the money increases, it should be oriented more heavily towards the poorest countries. “Although Africa is the only low-income region that is not growing,” the report notes, “less than half of global aid goes to Africa.”

In addition, to secure the quick doubling of aid they call for, the Commission recommends the launching of an International Finance Facility- Gordon Brown’s plan to front-load aid by borrowing money from international markets, to be repaid with future aid budgets. This is a complex idea that we’ll look at more in future; the key thing is the Commission’s endorsement of this British government initiative.

The Commission endorses possible other sources, such as a tax on international air travel. The French government proposed this as an alternative to the IFF at Gleneagles, but the Commission makes it clear such efforts should be “complementary.”

Finally, the Commission turns to the other key part of the aid arithmetic - debt relief. This is in many ways as complex and large an issue as aid, but they devote a few short comments to it - probably because by 2005 agreement on major debt relief was pretty universal. Africa’s debt burden, over $185 billion (p107),

clings like a heavy parasite to the body of every man turning the soil in his field, every woman carrying a heavy pot of water from the well, and every child who cannot go to school.

The Commission notes the success of previous debt relief initiatives, but calls for more substantial relief. I’ll discuss the debt issue more in a future post, but essentially, the report pinpoints two key problems with the debt-relief scheme currently in place - the Heavily Indebted Poor Countries initiative, or HIPC. First, HIPC aims to bring debt down to levels that are “sustainable” - essentially, possible for countries to pay while still functioning. Not only were these levels calculated using flawed analysis, the Commission argues, but the focus on sustainability ignores the wider effects of debt on development. Instead, the Commission calls for relief based primarily on its potential for development - “The key criterion” it argues, “should be that the money be used to deliver development, economic growth and the reduction of poverty for countries actively promoting good governance” (p109) In practice, what this amounts to is that “for the poor countries in sub-Saharan Africa which need it, the objective must be 100% debt cancellation as soon as possible” (p108). There’s scant detail, though, on how to ensure the money saved goes on development.

The Commission does address another key concern over debt relief - the possibility of old debts being simply replaced by new, equally unpayable ones. Relief should end in 2015, they argue, so that governments don’t take out new loans expecting them to be relieved later on.

Overall, to be honest, the Commission doesn’t seem to address many of the concerns expressed in various quarters about the ability and inclination of African governments to spend aid - and the money saved by debt relief - well. But I’ll look at this in some more detail soon. Of course, the Commission is after more than money. Next time, I’ll have a look at some of the other actions and changes needed to make their proposals happen.

1. In fact, overall aid declined through the 1990’s. In 2000, the UN noted that this decline was coming just as the conditions were emerging for aid to be more effective. In the first few years of this decade, aid did increase, but for particular cases such as aid to Pakistan after 9/11 or the Asian tsunami. The underlying level of development aid remained low.
2. Of course, Botswana’s massive diamond wealth helps, as does its more than fifty years of good democratic governance, almost unique in Africa.
3. This report of the Organisation for Economic Co-operation and Development’s Development Assistance Committee for 2005 gives some handy detail on current aid flows. It does, however, count debt relief towards aid figures, so the amounts of real aid available are arguably lower.