Why Good Governance Matters More in Africa Than Aid

Why Good Governance Matters More in Africa Than Aid

Heads of state from across the developing world have arrived in New York for

the annual United Nations meetings. Heading up the agenda this year is a

summit examining the U.N. Millennium Development Goals (MDGs). These leaders

– generally clad in expensive suits and heading enormous entourages – again

shamelessly moaned and complained over the lack of adequate progress on the

MDGs as if they and their governments were helpless bystanders in whether or

not the MDGs are met.

There is nothing egregious about the eight MDG targets. Halving poverty,

increasing education, and reducing maternal and child mortality are

desirable outcomes. The only problem is that in the poorest countries the

goals will not be met because they are based on a failed development model

of relying on external aid rather than internal policy change to facilitate

economic development and growth. And internal policy change is resisted

fiercely by the very leaders expressing anguish over the lack of progress

because they and their families, friends and allies benefit richly from the

current system, which focuses on securing foreign aid from Western nations

to be spent on thousands of carefully schemed but wasteful interventions

undertaken locally, in apparent pursuit of the MDGs.

Such complex interventions, with little transparency and accountability on

donor spending, means few credible audits have been conducted on the

billions of aid money spent over the years. Such expenditures should have

resulted in development improvements, but have only served to entrench the

very governments and policies that impede development.

African leaders in particular have been doing the math on how much they need

to perpetuate their loot… um, I mean finance the MDGs.  As the argument

goes, “They ask why can’t the rich Western countries provide $70 billion

annually to meet the MDGs? It’s only a fraction of their annual GDP. They

can easily spare it, but it would mean so much in the developing world.”

Western aid advocates do their part by painting gory pictures of famine and

disease in Africa to justify the demand.

Yet, some way, somehow, African leaders have been able to squeeze close to

$150 billion per year from their poor, developing countries to enrich

themselves. This figure didn’t diminish even with the global financial

crisis or following former Nigerian President Obasanjo’s admission of this

habitual theft by African leaders and mock lamentation of corruption at the

G-8 summit in Gleneagles five years ago.

In other words, African leaders have made a habit of stealing 25 percent of

the continent’s GDP and squirreling it away for their benefit rather than

the citizens of their countries. As if that is not enough, wasteful

spending, legal plunder, prohibitive business environments, and entrenched

cronyism can be found even in the Africa’s most acclaimed democratic success

stories such as Ghana.

Ghana’s democratic foundation is built on the politics of Grand National

development plans which are presented to win voter support. These plans are

largely sustained by aid, which demands little or no accountability. Voters

continually fall for promises, by both political parties over the past two

elections, that if elected they will guide Ghana toward middle income

status. These promises are slippery with target dates first of 2015 and then

2020 and, doubtless, 2025 soon.

Ghana has seen an increase in aid during the tenure of these political

parties. But the result has been depressing. Ghana slipped five places from

(the 87th position to 92nd) on the World Bank’s Doing Business 2010 Index

and dropped in global competiveness from 110th position in 2009 to 114th out

of 139 countries in the 2010-2011 rankings by the World Economic Forum

Global Competitiveness Index (GCI).

A government’s development agenda informs its macroeconomic policies, its

private sector development strategy, its posture to taxation and tariffs,

and its orientation to financial regulation and oversight, and public debt

management among other issues. These matters are crucial to serious

investors considering Ghana – or, for that matter, Africa – as a destination

for significant investment. These critical policies, however, become

secondary considerations to governments focused on keeping aid money pouring

in.

For instance, in 2005, 80% of Ghana’s debt was canceled. This was intended

to give the country a fresh start and more independence to focus financial

resources on development priorities rather than debt service. It allowed

Ghana to borrow $750 million from the international financial markets in

2007. But in 2008, all of that was squandered. Determined to chase votes,

the government approved a spending deficit equivalent to more than 20% of

the country’s GDP. This was a world record – even more than Greece’s 10%

deficit. In the end, the government was voted out of office, but left a

legacy of debt and lower economic growth from an impressive 7.3% growth in

2008 to a disappointing projection of 3.5% for 2010.

And remember, Ghana is a model performer in Africa. Imagine what the less

exemplary countries are doing.

At the MDG summit, German Chancellor Angela Merkel called for a balance

between aid and good governance as a necessary condition for attaining the

MDGs. Unfortunately, African governments generally prefer an imbalance with

more aid and less accountability. Donor nations need to understand this

reality and get away from platitudes like the MDGs and aid targets and

insist that African governments enact policies that will unleash the

entrepreneurial spirits of Africans to create wealth and support national

governments through taxation. Aid may help governments that have already

begun to tread this path, but providing ever-more aid in hopes that they

will only perpetuates the status quo.

Franklin Cudjoe is Executive Director of IMANI, a Ghanaian think tank

adjudged the 5th most influential in Africa by the Foreign Policy Magazine

and Editor of AfricanLiberty.org.

The views expressed by guest bloggers on the Foundry do not necessarily

reflect the views of the Heritage Foundation.

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Opinion: Can Obama reform the aid business?

US leader proposes far-reaching changes in providing aid to poor countries.

Pakistani women displaced by floods gather at a relief camp to wait for U.S.

food aid. (Farooq Naeem/AFP/Getty Images)

BOSTON — The most important part of U.S. President Barack Obama’s bold

enunciation of a new global development policy at the U.N. last week was his

promise to measure the effectiveness of aid by outputs, not inputs.

Aid experts have long emphasized results, not the amount of aid dollars

spent — in other words the mileage of roads built, or the quantity of

vaccines delivered — as the true determinants of foreign assistance

effectiveness.

Obama did not say exactly how outputs — reductions in maternal mortality

rates, improved education, reductions in corruption — were going to be

calibrated. But he said firmly, in a first for world leadership, that aid

alone is not development. Only moving a nation from poverty to prosperity,

through a combination of aid, trade, diplomacy and other variables,

constitutes real development.

This novel approach is one that critics of foreign aid to poor countries

have sought for decades. Fifty years of foreign aid has produced very little

development, especially in Africa.

If Obama’s lead is followed by Scandinavian, Japanese, British and other

European aid donors, effective global development may at last come into its

own.

Obama asked for transformational change that would eradicate poverty and

create opportunity. He promised to reward entrepreneurship in the recipient

countries, and to help countries that create conditions that welcome foreign

investors rather than send them fleeing. But how? If Washington were to give

aid only to countries, especially in Africa, with truly open macroeconomies

that are friendly to investors, it would have few partners.

The badly led and badly governed countries are the very poor ones. Only

well-governed places like Botswana and Mauritius, and now Ghana, have really

improved the lives of their peoples.

When coupled with Obama’s other major (but seemingly obvious) innovation —

to partner with the poor nations to deliver the kinds of aid that they want

— donor assistance to the least developed of the world’s countries may

actually produce results despite the paucity of countries that meet his new

requirements.

Obama promised that Washington would work most closely with countries that

“want to build their own capacity to provide for their people.” If that

means that Washington will now aid only those nations with honest, minimally

corrupt, governments who put all of their own people (not just favored

ethnic groups) ahead of themselves and their families, the aid business will

be revolutionized.

But what then happens to American assistance to heavy-handed regimes like

Egypt, or to needy countries like Ethiopia and Rwanda with questionable

elections? Can Washington really afford to ignore strategic priorities and

support only beneficent nations?

Washington first has to implement the president’s message, and that will be

tough. He is keeping USAID under the Department of State, with its director

reporting to Secretary of State Hillary Clinton. That is a mistake.

Subordinating our new global development strategy to diplomatic preferences

which may not fit the war against poverty is backward.

http://www.globalpost.com/dispatch/worldview/100927/opinion-can-obama-reform

-the-aid-business