Central to the idea of African renewal or renaissance is the continent’s ability to reduce and ultimately end its excessive dependence on others to finance even its most basic programmes. Ubiquitous poverty, a heavy disease burden, rampant corruption, weak intra-African trade, slow integration and other factors hamper Africa’s ability to achieve this. Yet, increasingly remittances and competition between new and old donors provide opportunities for Africa to grow its self-reliance.
Recent reports suggest that some R2 trillion worth of remittances are expected to reach developing countries in 2012. This development is to be applauded as it means that gradually poor countries will become less dependent on foreign aid.
In 2008, remittances from migrants constituted two percent of GDP of developing countries and three percent in case of low-income countries. The inflows declined in 2009 as a result of the effects of the global economic crisis, but picked up again in 2010. This means for the second year in a row and in the midst of a deepening global economic crisis, remittances are on the increase.
Migrant communities, including the African diaspora in the West and in Asia, have improved their understanding of the strategic value of cash transfers they make to support their families back home. A recent study by the Africa Institute of South Africa that I participated in suggested that expatriates have also become more involved in sophisticated investment activities in their home countries, including the buying of trading companies, the funding of major public infrastructure and the establishment of commercial networks involved in promoting trade and investment relations between countries of origin and host countries.
In this sense, the brain drain which comes about because of the decision of professionals and other skilled people to leave Africa in search of greener pastures in richer countries, mainly in the West, is fast being turned into a gain for Africa in very concrete ways. Migrants are becoming agents of economic self-reliance, the study suggested, and a source of economic interdependence between the donor countries and Africa.
For this reason, the decline in aid to countries like Ethiopia has provided an opportunity for the large Ethiopian diaspora to drive nationally owned policy agenda such as the building of the much -vaunted Renaissance Hydro-electric Dam. In Zimbabwe, in spite of targeted sanctions and long periods of economic meltdown, the country’s economy did not collapse, partly because of sizeable cash inflows from the diaspora.
Foreign aid is a crucial source of much-needed resources for low-income countries in spite of real concerns about its tendency to perpetuate Africa’s external dependence and despite challenges arising from the fact that aid is often tied to foreign policy interests of donor countries. Much has been done in the past decade to improve the efficiency and transparency of donor investments, to improve national ownership and to enhance aid utilisation by recipient countries.
But foreign aid has declined, especially since the beginning of the global crisis, and is not expected to pick up again for a little while. The challenge is not only a matter of resources available, but in some cases and in regard to future trends a bigger problem is the rise of right-wing neoliberal economic dogma. This dogma sees aid as wasted money better spent in shoring up floundering markets. They frown at it as a form of state capitalism in preference, at least in rhetoric, of freer markets. Ignore for a moment that their response to the economic crisis is actually stronger state capitalism than the promised big society, small states slogans.
Now, it emerges that after cutting aid budgets by R77 billion in 2010-11, the new cuts for 2012 will amount to a further R80 billion. There will most likely be cuts in 2013 as well. This makes a mockery of promises made by the Organisation for Economic Co-operation and Development (OECD) countries at the Aid Effectiveness Conference in Busan, South Korea, two weeks ago, especially in respect of efficient aid delivery, a form of deceit by countries effectively killing aid programmes on which tens of millions of the poor depend.
There has not been a significant rise in replacement aid from the emerging countries either.
What makes this particularly problematic is the underlying politics of development aid. First, donor countries have not fulfilled aid pledges made voluntarily, including those made to Africa by the G8 countries. Secondly, aid is only a tiny portion of public spending in these countries and yet it is being cut because it is an easy target during hard times. Thirdly, there are more people in the world than total populations of North America and Europe combined, and these millions will not understand why billions of dollars are being diverted from poverty-eradication programmes to rescue greedy bankers who bungled in the first place.
For Africa, the rise in philanthropy and commercial activity by its drained brain may begin the process of reducing its dependence on external aid, a necessary condition towards self-reliance and a key pillar for African renaissance. Regional development finance institutions like the Development Bank of Southern Africa and the African Development Bank should take advantage of this to raise funds for driving regional integration. African banks should make the transfer of remittances even easier.
South Africa as a member of the rising league of development partners from the south and in the context of BRICS has to push for the rethinking of the idea of aid in general. This should include finding better ways of linking aid to real long-term developmental outcomes such as industrialization, agricultural rejuvenation, domesticisation of institutions and active citizenship. Its own agency, due to be launched soon, has to see itself as more just provide a provider of development assistance, but as an agent for change in aid politics generally. To be able to do this effectively, though, it will need to form part of a strong international development strategy or vision.