Africa’s D — Development Assistance
Is development assistance helping Africa?
February 16, 2005
Official aid alone — that is, not counting NGO contributions — finances one-third of Africa’s entire investment bill.
In Burundi, the Democratic Republic of the Congo, Eritrea, Ethiopia, Guinea-Bissau, Malawi, Mauritania, Mozambique, Niger, Rwanda and Sierra Leone, official aid is larger than the countries’ actual investments in machines and buildings. In other words, aid finances consumption as well as investment.
Aid is most effective where government rule and the overall management of the economy are comparatively good. Aid becomes ineffective when it exceeds the absorptive capacity or local institutions.
But for Africa as a whole, money that wealthy Africans send to foreign "safe harbors" exceeds the total that the continent receives in foreign assistance.
So while well-meaning foreigners try to jump start investment in Africa, African elites pull even more money out of the continent — and cripple attempts to develop the continent.
Such "capital flight" has been concentrated in a few key countries: They include Nigeria, Côte d'Ivoire, Congo (ex-Zaire), Angola, Cameroon, Zambia and Sudan.
Founder and CEO, Global Business School Network Guy Pfeffermann is the Founder and CEO of the Global Business School Network. He was the Director of the Economics Department and Chief Economist for the International Finance Corporation from 1988-2003. Since 2003, he has served as the Director of the Global Business School Network of International Finance […]