Foreign aid is still the largest external source investment for most economies. At the recent UN convention on least developed countries in 2011, there were calls from several quarters to increase this type of investment . Has foreign aid encouraged (under)development in Africa? With over a half century since the aid model of foreign investment was introduced in a largely post-colonial Africa, the continent has nothing to show for it economically . An estimated $1 trillion has been injected into the African economy in the period, but the ultimate result has been that the economic situation of African nation is getting worse by the day (The Hoover Institution, 2009). In the 1970s when the foreign aid model gained its prominence as an external source of investment, only 10% of the African continent lived in poverty. Today, over 70% of Africans live in dire economic conditions. Based on this premise alone, there is no doubt that foreign aid has not been a successful model in spurring economic development in the African continent (The Hoover Institution, 2009).
The foreign aid model is not fundamentally flawed as it seems to be in Africa. Dozen success stories involving the model’s application in other parts of the world confirm the feasibility of the foreign aid development framework . This is exemplified in Europe, where the same model was implemented in the post-World War II era under the Marshal Plan program to rebuild the war torn continent with much success. This is because, unlike African countries, the European nations understood the fact that foreign aid is just a catalyst of development and not a long-term and sustainable solution to economic development. European countries resorted to other models including but not limited to economic integration, foreign direct investment (FDI), and capital market investment among others (The Hoover Institution, 2009). To its credit, the European continent now boasts some of the strongest economies such as the Germany, France, Scandinavian nations that were just shells of nations 50 years ago, and the European Union (EU), a model economic bloc. The situation is similar to Asian countries such as India, Malaysia, and South Korea, where the same version of the aid program was implemented in finite and specific programs that ultimately spurred economic development (The Hoover Institution, 2009). Why has the same not worked in Africa?
In addition, other forms of external investment have continued to decrease with an increase in foreign aid. This situation has increased the African continent’s dependency on foreign aid and the advancement of the notion that Africans cannot be a solution to their own problem. The foreign aid problem has also created an ideal political environment for tyrannical regimes to thrive because most of these governments have foreign aid as a failsafe. The West favors this model of spurring economic development over better methods such as FDI and incentivising regional economic integration because foreign aid is the cheapest way out. China has tried the FDI way in Africa in a move that has seen the continents economic grow more in the past decade compared to stagnation that has been characteristic of the Western foreign aid era. Unlike foreign aid, FDI is purely an economic model that is not laced with humanitarian, sympathetic, and political undertones that do not take into account the continent’s future in terms of job creation and business opportunities. To conclude, for economic development in Africa to be realized, the continent needs to be weaned off foreign aid to allow alternative models of growth such as FDI, savings, taxation, capital market investment, regional economic integration, and strategic partnerships in the East to replace this unworkable and intellectually flawed model in the African context.
References
The Hoover Institution (Director). (2009). Africa with Dambisa Moyo [Motion Picture].
Andrews, N. (2009). Foreign aid and development in Africa: What the literature says and what the reality is. Journal of African Studies and Development, 1(1), 8-15.
Wamboye, E., & Adekola, A. (2013). Foreign aid, legal origin, economic growth and Africa’s Least Developed Countries. Menomonie, Wisconsin: University of Wisconsin Press.
