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Africa’s Foreign Aid Issue

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A Hollywood star gives an African community a batch of mosquito nets for free, and the community is protected against mosquito bites. But what happens to the local business man who sells these same nets and can no longer make money to support his family?

A US charity sends out huge supplies of American-grown food each year to help African communities in a bid to help the poor put food on the table, but what happens to the African farmers whose now American-import-flooded-market leaves them with no one left to sell to?

Over the past 60 years at least £700 billion ($1 trillion) of development-related aid has been transferred from wealthier countries to Africa, but despite this fact, Africa’s economy has only worsened and poverty increased. Shockingly, between 1970 and 1998, when aid flows to Africa were at their peak, poverty in Africa rose from 11% to a staggering 66%.

Equally as worrying, much of the aid donated by foreign countries is intercepted by corrupt governments or by rogue Africans wishing to seize control of the donated goods business. As recently as 2002, the African Union, an organization of African nations, estimated that corruption was costing the continent £100 billion a year. Worse still, ‘pitiful’ international donors appear relatively content to keep supplying aid, despite often knowing there is a high chance it will not serve the purpose it is set out to achieve.

This argument is only supported by the real-life examples that have increasingly plagued Africa since aid began circulating from Western countries to Africa over 70 years ago. According to corruption watchdog agency, Transparency International, Mobutu Sese Seko, Zaire’s (Democratic Republic of the Congo) president from 1965 to 1997, is reputed to have stolen at least £3.5 billion from his country and his people. Malawi’s former President Bakili Muluzi is yet another one of many that has been guilty of embezzling aid money, in this case the amount being worth £8 million.

As Zambian-born economist Dambisa Moyo discusses in her book, Dead Aid, that supplying aid to Africa has become a staple topic in the foreign-policies of today’s Western nations, and in the speeches and minds of a generation of movie and pop stars. Moyo discusses how the world seems to hold an unspoken, untrusting view of Africa, ‘The largely unspoken and insidious view that the problem with Africa is Africans – that culturally, mentally and physically Africans are innately different. That, somehow, deeply embedded in their psyche is an inability to embrace development and improve their own lot in life without guidance and help.’

Many also believe that due to the constant influx of foreign aid making its way into African lands, people have not been allowed to create their own businesses, make their own mistakes, and ultimately find out what works in their particular community and what does not.

The aims of an African charity organisation are clear: reduce poverty, improve the economy, school systems and health of African countries, and to see an end to the relentless wars and corrupt governments that infect Africa’s astonishing landscape. But despite an occasional aid-related success in an African nation, things predominantly appear to be deteriorating in the land of 1000 faces, and it seems questions need to be asked about the efficiency of the aid industry.

But what could be done that would effectively compensate the departure of foreign aid, in a land that has come to rely so dangerously on it? Many believe the answer is Microfinance. Microfinance is the idea of operating small community-run banks in low-income African communities, giving these communities the opportunity to obtain small loans, typically under £65, with considerably low-interest rates. This would create an incentive for poorer Africans to buy their own tools, or to obtain the equipment to make their own tools and potentially instigate their own business. This would effectively generate considerably more small businesses in Africa; creating more jobs and allowing poorer Africans to have a regular, good-sized income, instead of relying on inconsistent handouts or dangerous jobs.

Money loaning though is by no means a new thing in Africa, with potential lenders being prominent across the content. The main problems that exist are the extortionate and inconsistent interest rates that people are often forced into paying. In an analysis of 28 studies of informal money lending rates in 14 countries in Asia, Latin America and Africa, it was concluded that 76% of money-lender rates exceed 10% per month, including 22% that exceeded 100% per month, resulting in huge problems for Africans planning on establishing a business.

Many argue though, whether the idea of introducing opportunities for Africans to increase their money woes is a palpable one in terms of the future of Africa, especially in the current economic climate. Economist Dambisa Moyo, welcomes the idea, and believes money from foreign aid should be funnelled into microfinance.

The idea of microfinance was created by Nobel Peace Prize winner and Bangladeshi economist Professor Muhammad Yunus, originally with huge acclaim, but critics now argue that the idea of micro-financing is in danger of being oversold. Also, because the loans are often repaid by villagers banding together in loan clubs, this has led to accusations that some of the poor can come under peer pressure to repay the money they owe when times are difficult.

Ultimately, Moyo believes the true solution for the poorer regions of Africa lies within investing in bonds and the sale of African produce on a global market, mentioning that working more closely with China would be a push in the right direction.

The question of whether foreign aid has restricted Africa’s ability to grow remains a tricky one. While it is true that foreign aid plays an important role in providing a life-line to desperate communities, it is clear that such aid can hamstring Africa’s development by denying Africans the ability to take their destiny into their own hands, and eventually build their own path to prosperity.

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