Africa is pushing for more say in aid spending

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DELEGATES from all over the world will converge on Busan, South Korea, at the end of this month for the 4th High Level Forum on Aid Effectiveness. The process began in 2005, when thousands of finance ministers, top international officials, MPs and nongovernmental organisations launched the Paris Declaration on Aid Effectiveness, and these meetings have continued sporadically ever since.

However, Africa recently turned the tables by insisting that "aid effectiveness" should become "development effectiveness" and it looks like it has won the debate. This is not a matter of semantics. Africa insists Africa should lead in decisions about where, how and when aid should be applied. It also insists that "no country in the world has developed by targeting poverty", which has been the predominant tendency in foreign aid.

The change in direction came in Tunis last year, when the African Development Bank (ADB), the African Union (AU) Commission and the New Partnership for Africa’s Development (Nepad), supported by the United Nations Economic Commission of Africa (Uneca), called a conference to launch the African Platform for Development Effectiveness.

The foundation for this new stance lies in the new leadership of Nepad by the impressive Ibrahim Mayaki, a former prime minister of Niger, but also in the widely held view that there was something amiss in previous aid mechanisms. Aid often did not reach the poor; much aid was tied to donor supplies; a great deal was spent in the donor countries and never reached recipient countries, and there was considerable rivalry between donors based on political agendas. Hence the Paris declaration and the aftermath.

But Africa’s new confidence in the international arena also comes from new developments on the continent. First, there has been a substantial improvement in financial governance. Second, most commodity prices have risen a great deal on international markets, accounting for impressive growth. Third, there are new partners in China, India and Brazil, whose economies are thirsty for Africa’s resources. These economies are replacing relations between Africa and the West, although these remain important.

As Africa’s economies improve, so their middle strata become bigger consumers, so that even UK Prime Minister David Cameron argues that the UK’s aid must increase because Africa is the market of the future.

Will Africa’s push for a greater say in the aid industry win out at Busan on November 29? It is hard to say, as the preconference negotiations have been amiable but tough. Donor countries find it hard to give up their grip on aid flows, which gives them so much leverage in Africa, and it is probably easier to convince taxpayers in Europe that they are relieving poverty than helping to build dams and infrastructure.

I find the new stance of the four leading economic institutions in Africa most encouraging. Between them, the ADB, Uneca, AU and Nepad, have considerable intellectual and financial resources, even if there remains some dependence on foreign aid. The agreed agenda is now "self- sustaining growth".

In a continent of nearly 1-billion people, less than 60-million live in countries where aid is bigger than domestic resources. This is a huge improvement.

In 2008, Africa collected $400bn in taxes. It funded 82% of development needs from its own resources. Africa’s bank holdings are $669bn, the same as Russia’s. Gross domestic product (GDP) growth is 5%- 6% in several countries and 4% in 22 countries. Inflation is less than 10%. The poverty rate has declined by 10% over the past 10 years. Growth is largely driven by the private sector. With a total GDP of $1,6-trillion and consistent growth rates higher than those in Europe, Africa seems poised for take-off. Certainly the banks are expanding three times as fast as those in Europe.

In my view, the biggest challenge for Africa is harnessing its natural resources for its own benefit. While Africa has been a happy hunting ground for exploiters of minerals, oil and agricultural products, the time has come to examine closely the value chain around each commodity to find where value addition can benefit African rather than foreign interests. To this end, a working group is being set up to research value addition for all primary products and advise governments and businesses how they can intervene to grow domestic capabilities for domestic benefit. It is an exciting project.

• Turok is an African National Congress MP.

Source: http://www.businessday.co.za/articles/Content.aspx?id=158592