Why Africa still needs aid

With the U.K. becoming the first G-8 country to spend 0.7 percent of its gross national income on overseas aid, the government’s recent budget was an exciting moment for the international development community.

But with extreme poverty falling all around Africa, and the continent’s mineral resources providing more revenue now than international aid, some observers are asking whether international aid is out of date.

Africa needs trade, not aid, they say. In truth, however, they still need both.

Africa has the world’s fastest growing population, expanding by more than 20 million every year, and must create jobs fast to keep its unemployment rate from rising. Some analysts highlight the Middle East, where failure to generate enough jobs for young, urbanized populations had catastrophic consequences for political and economic stability.

Trade – in its broadest sense – will create the jobs that Africa so badly needs. So Africa’s leaders must identify and nurture labor-intensive industries such as agriculture, manufacturing, and hospitality in order to create more jobs.

It can be done.

When Mali’s government built infrastructure (including refrigeration) to deliver mangos from landlocked Africa to Europe, transport times dropped from 25 days to as little as 12 days, while mango exports increased more than 1,000 percent over 15 years, the World Bank has noted. The success brought jobs and income for Malian farmers, and set an excellent example for African agriculture, which accounts for more than half of the continent’s workforce.

Similarly, according to the World Bank, when Cape Verde offered tax breaks to foreign investors, tourism revenues climbed to about $540 million in 2008, from $23 million less than a decade earlier, and the sector now accounts for 21 percent of the country’s workforce.

In Nigeria, meanwhile, the deregulation of the telecoms sector generated an estimated three million jobs, as private sector enterprise thrived in the absence of state monopoly.

I’m so convinced by the need for trade, by the way, that I launched my “8 Miles” African equity fund (named after the shortest distance between Europe and Africa) to invest in companies that provide jobs and long-term growth.

This belief in trade is entirely consistent with a profound respect for aid. I have learned that one begets the other.

The 2005 Gleneagles G-8 summit, for example, brought debt cancellation and increasing levels of aid that helped to school tens of millions of children and triggered an intellectual stampede that is propelling at least some of Africa’s rapid economic growth. Today, Africa has some of the world’s fastest growing economies and foreign investors are tripping over themselves for a slice of African profit.

Almost two dozen of Africa’s 54 nations have now reached middle income status, and more undoubtedly will do so by 2025. As noted by the World Bank’s lead economist in its Nairobi office, if sub-Saharan Africa were a single country, the World Bank would already classify it as middle-income, with an average income of more than $1,500.

But Africa, like every other continent, needs its aid.

Away from the investment analyses and high growth headlines, some 40 percent of Africa’s one billion population still live on $1.25 per day or less. And, as UNICEF notes, in 2011 some 19,000 children were still dying every day from deaths that might have been prevented with measures such as routine immunization.

“In sub-Saharan Africa, a woman faces a 1 in 39 lifetime risk of dying due to pregnancy or childbirth-related complications,” the U.N. Population Fund says. “In South-eastern Asia the risk is 1 in 290 and in developed countries, it is 1 in 3,800.”

“Bad aid” can be ineffective, it’s true. My favorite story is the construction of a giant fridge in Kenya’s remote Turkana region so that local communities could eat and sell fish from the nearby lake. Local preference for goat was one obstacle to success. Lack of electricity was the other.

But aid these days is better: less wasteful, more ambitious. Amongst many other improving stats, maternal and child mortality are coming down, backed by development aid that is focused, measured, transparent  and smart.

Innovative organizations such as the GAVI Alliance use market incentives to encourage lower prices and the production of vaccines for African children. In West Africa, 100 million people have now been immunized with a new vaccine against meningitis A, a deadly disease that had previously plagued the region for more than a century.

Some may believe that aid’s primary motivation may be moral outrage. That’s a good start, but its primary purpose has always been to serve practical interests too.

Last month, more than two dozen British CEOs reportedly signed a joint letter that applauded the U.K.’s commitment to overseas aid. They argue that developing countries become emerging markets, the engines of global growth, and aid contributes to this process, they said.

Imagine that very soon, Africa will be the world’s largest consumer market, bigger than India or China.

By then, traditional aid will focus more on emergencies and fragile states such as the Somalia and the Democratic Republic of Congo. Aid will transfer knowledge not money.

We’re already moving in that direction. In 2010, Global Witness reports, Africa’s oil, gas and mineral exports “were worth roughly seven times the value of its international aid,” representing enormous opportunity and risk for the continent. If used wisely, these resources could fund health, education, energy and infrastructure. If not, they could fuel corruption, conflict, and political instability.

Africa’s mineral wealth throws up a profoundly complex set of issues. If the continent is so rich, why are so many of its people so poor? How does a government manage its revenue from mineral resources without destabilizing the economy? How can the international community support the fight against corruption? How can everybody work together so that Africa’s precious – and finite – resources reach more people with jobs and opportunities? The Africa Progress Panel will suggest a set of policy options when it releases its latest report on May 10.

Trade, jobs, and opportunities remain critically important for Africa.

Aid is changing, but will stay essential for the poor of our world for a long time to come.

Published in: CNN

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Chaired by Kofi Annan, the former Secretary-General of the United Nations, the Africa Progress Panel (the Panel) includes distinguished individuals from the private and public sectors, who advocate on global issues of importance to Africa and the world.

For further information, please contact
Edward Harris – edward.harris@africaprogresspanel.org
(m) +41 79 87 38 322 and (w) +41 22 919 7536

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