What Africa Needs – Part One: TRADE NOT AID

After taking some time figure out what I wanted my first post to be about, I came to the conclusion that I want to address what I feel are some issues holding the continent back. I also wanted to use this opportunity to give my opinion on what I think some solutions are. The goal is to spark something within someone (or myself) that will eventually result in some of these issues being further addressed and hopefully resolved. Another goal is to vent my frustrations. Ha! With that said, I present to you, Part 1 of a 5 part series entitled “What Africa Needs”.

 
Part ONE: Trade Not Aid:

“Trade Not Aid” is a popular phrase used by proponents of the idea
that instead of giving ‘free money’ to Africa to fight poverty and
hunger, donors should support job and business creation through
foreign direct investment. Dont get me wrong, not all aid is bad. I am
not referring to emergency aid given in situations like a natural
disaster. Nor am I referring to donations given to help a child go to
school or clothe an orphan. My sister actually runs a non profit,
Change A Life Africa (www.changealifeafrica.org) that is focused on
providing disadvantaged children with a quality education. I have seen
the difference such organizations can make and I applaud and support
them.

The type  of aid I am referring to is government to government aid. I
feel it is time we realize that this type of assistance is not only
the least effective in terms of poverty reduction but it is also
destructive. It is stunting the growth of a middle class that is
needed to spur economic growth. Zambian-born economist and author of
the best seller, “Dead Aid,” Damiso Moyo states that “Over the past
60 years at least $1 trillion of development-related aid has been
transferred from rich countries to Africa. Yet, real per-capita income
today is lower than it was in the 1970s, and more than 50% of the
population live on less than a dollar a day, a figure that has nearly
doubled in two decades.”  If this economic development model is
CLEARLY not working, why is it still being used? Why is it being used
in Africa only? China moved 300 million people out of poverty in 30
yrs. India has approximately 300 million people in its middle class.
They did not achieve this by relying on aid to the extent that African
does today and has for the past half century plus.

A serious issue is that African governments are now relying on this
aid  as a source of income like a welfare recipient waiting on their
monthly check, instead of looking for alternative means of revenue
generation. Some say that aid promotes government corruption because
the funds are just moved to private accounts abroad. I am certain that
this happens a lot of the time,however, that is not the only issue.
Even where there is no corruption involved, you have a situation where
African governments are relying on western countries to provide the
people with goods and services that they should be providing e.g
education, healthcare, infrastructure etc. Who will respect a leader
that does not care for his own people? That is a huge reason why
African ‘leaders’ get zero respect in the global community. They are
looked at as beggars. You are sitting on priceless natural resources
that can be traded, yet you beg for money from countries that are in
actuality, broke themselves. But I digress…

Another issue is that aid does not create a meaningful amount of jobs
or opportunities to start and grow a business in Africa. Aid also
comes in the form of goods donated. Why not invest in local producers
of these goods or invest in a manufacturing plant to produce the goods
that are being shipped to Africa? This is a sure way to spur job
creation and invest in a local business instead of flooding the market
of charity goods that will put local producers out of business.There
is no way to reduce poverty if there are no jobs or means for
individuals to pursue entrepreneurial endeavors as a means to increase
their income and start to create wealth for themselves. Therefore, if
there is no middle class to drive the economy you are left with a
situation similar to that in Nigeria where there are extremely wealthy
people and extremely poor people with a few middle class citizens
sprinkled in the middle. I’m sure you can see how this would also lead
to an increase in crime, whether its fraud or good old fashioned armed
robbery.

The good news is, in recent years due to the slowed economic growth in
Western countries, the amount given in aid is now slowly reducing.
Now, more than ever, the focus has turned Africa, not just as a poor
desperate continent in need of help, but as a place where Western and
Eastern countries need to do business in order to survive. This in
addition to business friendly policies in African countries  has led
to economic growth in Sub-Saharan Africa. This performance boost is
attributed to rising investment in among other things, natural
resources and infrastructure. China, for example has invested almost
$30 billion in Africa since 2012. According to the consulting group,
McKinsey&Co, “natural resources, and the related government spending
they financed, generated just 32 percent of Africa’s GDP growth from
2000 through 2008. The remaining two-thirds came from other sectors,
including wholesale and retail, transportation, telecommunications,
and manufacturing. This growth acceleration has started to improve
conditions for Africa’s people by reducing the poverty rate. But
several measures of health and education have not improved as fast. To
lift living standards more broadly, the continent must sustain or
increase its recent pace of economic growth.”

This to me is proof that we do not need handouts. What we do need is
to be taken seriously as players in the global trade market. We have
the resources, we have the talent and we have the potential. What we
need to do now is phase out aid and continue to increase the amount of
trade deals and investments that help move the continent in the right
direction.