Impact of Foreign Aid on Economic Growth in Africa

Foreign aid is a modern joystick used to play a modern game called the African economy!

Have African economies been hijacked?

It is an undeniable fact that foreign aid has extensively, intensively and forwardly steered the economies in Africa’s countries. This can be seen from the rise in the numbers of school going children, the current ease in the accessibility of health services, the current efficiency of armies and the sister security organs, the increase in infrastructure such as stadiums, roads, universities and bridges. The impact goes on and on. More still, a remarkable paradigm shift has occurred in the respective GDPs of the countries that receive aid. To get a vivid picture of the extent of this impact, it is important to ask ourselves two awakening questions. Is it the observed economic growth just the GDP type, or is it the economic growth that involves a visible change in the livelihoods of a substantial portion of the population of a country? These two questions uncover the facile nature of the commonly reported impact of foreign aid. The media is awash with enticing figures that clearly show the lack of information on the core economic issue, the livelihoods. More still these two questions show that the impact of foreign aid on economic growth in Africa is torn between the ends of a see-saw, that is, highly raised on the side of GDP growth in a shameful co-existence with severely lowered dwindling livelihoods.

These revelations have in them a hidden message we need to decipher. How can a report indicate a mega GDP rise and yet the mass livelihoods are not reflective of that growth? It is from such pang-filling information that I decipher that Africa’s economy is not Africa’s. In Uganda for example, the Exim bank of China is in pursuit of numerous investment arenas. They happen to be the ones largely funding the most expensive project on an express highway. This legacy investment has reportedly boosted Uganda’s economy by availing jobs for the people and market for some of the Ugandan construction products. The unseen bait in such an investment is the terms of the contract. They happen to trap the country’s economy in a lifetime of debt! This can, without hesitation, be likened to a “hijack of an economy”. Is Uganda’s economy still there? A record of similar hijacks has happened elsewhere and is still happening in Africa, thanks to foreign aid.

Is foreign aid a necessary evil?

Despite the fact that I’ve linked foreign aid to the hijacking of economies, it seems that its negative impact in that sense is not about to stop. Foreign aid is a modern joystick used to play a modern game called the African economy! It appears as though most African countries are so dependent on aid that without it almost half of their yearly budgetary commitments cannot be fulfilled. For example, in 1992, aid accounted for 12.4% of gross national product (GNP), over 70% of gross domestic savings and investments in Sub-Saharan Africa and over 50% of all imports.  Under the age-old saying that “you cannot bite the fingers that feed you,” leaders of these countries are unable to speak out when fake and unwanted goods flood their markets. It seems aid is not meant to ensure recipients become self-reliant since if it is the case, powerful states can no longer brag about who is giving more than the other. Does this mean that there’s no way out of this addiction? Well, thankfully, there’s a way out. The way out starts with the establishment of diligent, non-corrupt, non-bureaucratic institutions aimed at only scrutinizing the contracts that come with foreign aid so that we can avoid the pitfall of blindly trading off our economies. The institutions should employ the high value contract specialists of the continent to tackle any matter concerning incoming aid. It is a case of reversing the old adage that “a beggar is no chooser” to “a chooser is no beggar”. I believe if this reversal can be attained, foreign aid can be turned from the current path of negative impact to one of a mega positive boost to Africa’s economy. 

Watch how Dambisa Moyo, a Zambian-born international economist and author of the book "Dead Aid: Why Aid is Not Working and How There is Another Way for Africa," respond to her critics, explaining the long-term impact that charitable HIV/AIDS programs will have on building sustainable economies in Africa.

(Header Image Credit: The Chinafrica Project)