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Africa’s D — Development Assistance

Is development assistance helping Africa?

February 16, 2005

Is development assistance helping Africa?

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.