ON DAMBISA MOYO’S NOT SO CRAZY IDEA
By Chippla Vandu.
Friday, November 19, 2010.
Dambisa Moyo, a Zambian-born economist and author of the widely acclaimed book 'Dead Aid: Why Aid is Not Working and How There is Another Way for Africa' was interviewed a few years ago by Forbes in its Thought Leaders series.
Dead Aid makes for a refreshing read for a number of reasons. First of all, it is represents the voice of a young, highly educated and confident lady (whose resume boasts stints at Goldman Sachs and the World Bank) on a workable way forward for the African continent. Secondly, it puts forward strong and coherent arguments as to why African governments should listen less to people like Bono (of the U2 rock band) and more to well trained and knowledgeable economists on how to build their economies. In Dambisa Moyo's words, no European government would take lessons from Michael Jackson (now of blessed memory) on how to structure their economies.
Ms. Moyo is of the view that aid, rather than enhancing development, stifles it. She also thinks it breeds corruption, undermines democracy (though she is of the view that Western-style democracy shouldn't be a priority in Africa today--a view somewhat shared by this blogger) and makes the receiving governments less accountable to those they govern. Aid, in this case, could be bilateral aid (between two countries) or World Bank multilateral aid/loans. NGO and charity aid are of different matter altogether and are not criticized in Dead Aid.
When a significant part of a government's income is based on foreign aid or long-term low interest multilateral loans, such a government cannot be truly accountable to its citizens. After all, come what may, there would always be some cash in the coffers of government--to the benefit of the ruling class. Dead aid makes strong arguments for the issuance of sovereign bonds (local or international) as proper ways through which African governments should source for funds.
In other words, African governments, like the rest of the world, should strive to make use of capital markets to fund development. In so doing, these governments would open up avenues for the private sectors in their economies to also source for funds. And then comes development.
A great problem in much of Africa today isn't the shortage of business or innovative ideas. Rather, it is the absence of capital, i.e. credit. Lack of credit stifles growth and aid only makes it worse. A number of African countries have made use of the international capital market to issue bonds recently--Ghana and Gabon, for instance in 2007. Attempts by some African countries to raise funds in the markets three decades earlier turned nasty as most ended up defaulted on their debts. Though the cost of borrowing remains relatively high for most African nations, it keeps coming down as time progresses.
Almost twenty sub-Saharan African countries are credit rated and most have ratings high enough to tap the international bond market. If African countries are to survive, new financing models must be sought. These are models that gradually rid them off dependency and make them more of equal partners on the global stage with those nations that provide them aid.
Cutting back on aid should mean striving to build up trade with important emerging economies (China, for instance), attracting Foreign Direct Investment, issuing bonds in the capital markets and putting remittances (monies received from citizens resident abroad) and domestic savings to good use. These, in Dead Aid's opinion, are the way forward. An analogy, in my opinion, would be of a child, who, from birth is entirely reliant on parents or guardians. Such reliance is a metaphor for aid, just as the child is a metaphor for most African nations at independence. As the child grows, he/she becomes more independent and less reliant on parental finances. And, as an adult, the 'child' becomes totally weaned off parental finances and is able to find his/her place in the world.
One could only hope that African governments are listening to the likes of Ms. Moyo. John Kufuor, former president of Ghana, recently stated that people like Dambisa Moyo do not speak for Africa, based on a report in the Dutch online newspaper NRC Handelsblad International. In other words, Africa still needs aid. But a good thing is that, even Mr. Kufuor
“...agrees with [the] Rwandan president Paul Kagame, who believes the ultimate goal of development aid should be to make itself redundant.”
Unfortunately, the NRC Handelsblad report is fraught with an error when it states:
“...[Ms.] Moyo says aid to Africa should be cut entirely because it only leads to inertia and corruption.”
What Dambisa Moyo advocates is a gradual moving away from aid dependency in as short a time span as possible. And that makes a whole lot of sense, especially if Africa is ever to develop and compete on the global stage.
Chippla Vandu is a Nigerian scientist and researcher based in Holland. He blogs as Chippla.