Colonial Economics: The Abuse of Aid in Africa

By Laura da Silva

Foreign aid has long been an attempt to bridge inequality between developed and developing countries. As this inequality has widened, Africa in particular has found herself more reliant on foreign aid to support various human rights crises. However, foreign aid to Africa has not matched the continent’s development needs. This aid has also come with many costs, including crippling debt, and the imposition of conditions that may not always favour Africa’s long-term development interests. Moreover, many humanitarian charities operating in Africa have morphed into giant for-profit aid organisations, which have begun to prioritise short-term profits over impactful assistance. With the amount of private corporations turning to charity in Africa as a business opportunity increasing, it is important to question the real motives behind these organisations providing ‘aid’ to African countries.

Charitable Aid

There has long been a presence of western charitable organisations in Africa, as a legacy of colonialism. But today, the presence and financial value of foreign charities is overwhelming. Currently, there are over 500 African charities based in the UK, and US Aid claims to have spent about $809 million in Ethiopia alone in 2019. With so much foreign involvement, it is important to interrogate the effectiveness of these foreign charities and organisations in actually benefiting African lives.

The majority of these charities operate by applying foreign strategies without much adaptation to suit African contexts. The problem with this ‘structure’ is that solutions to problems are formulated from a strictly western perspective, and are not always compatible with African communities whose perspectives and values are different. The result of this flawed strategy is inventions such as ‘The Play Pump’. The idea was to increase access to drinking water by modelling water pumps based on western merry-go-rounds from children’s playgrounds, which the designers thought would also uplift the local children. However, it quickly became a demeaning and unnecessarily strenuous chore that local women had to perform to access drinking water. When there is a lack of effort into researching and understanding the local communities and their unique dynamics, money is wasted and aid is often ineffective.

This paternalistic approach to charity is far too common, and sadly something that this previously colonised continent is all too familiar with. These aid organisations are notorious for ignoring the fundamental needs of local communities who wish to support themselves and their families through dignified, fair-paying work. (After all, if you can import British students to build houses for free in their holidays, why would you pay local unskilled workers a living wage?)

Furthermore, within these structures, it is important to investigate how effective these charities are in utilising donations to affect those in need. Alarmingly, there is a huge lack of transparency in the operation of many international charity organisations. It is easy to find vague statements released by US Aid or Save the Children, claiming some large value of impactful aid. However, on further inspection, there is little information on what these values actually include, or how their involvement really impacts African lives. Moreover, there are often negative side-effects of western aid which have simply been hushed to prevent bad press.

When talking about impactful aid it is also important to consider the philosophy of Effective Altruism. Even if an organisation is achieving their outreach goal without generating harmful externalities, it is possible that the same resources could have made a greater impact by either being utilised in a more researched project, or by addressing a more pressing issue. For example, although supporting charities working to distribute textbooks may seem impactful, supporting the distribution of sanitary pads in rural areas is more effective in addressing education concerns in Africa. Even better, supporting the distribution of mosquito nets in Nigeria would impact more lives in a more meaningful way at a fraction of the cost. Thus, it is important to consider the potential effectiveness of charities in addressing truly pressing problems in Africa.

It is an irrefutable fact that one of Africa’s largest problems, and the catalyst for many others, is widespread poverty. Herein lies the problem with smaller charitable organisations. Although these charities are important to provide relief to those who urgently need help, often the structure of their aid does little to build the capacity of local communities. Instead this charity model focuses solely on affecting short term solutions as permanent strategies, which only perpetuates a cycle of dependency. “What causes dependency is when aid is used, intentionally or not, as a long-term strategy that consequently inhibits development, progress, or reform.” In these situations, where local communities are overwhelmed or simply under-resourced, foreign charities have the opportunity to address the crisis at hand whilst building the capability of the communities to handle future problems. This could be done through skill-development, market creation, or entrepreneurial incentives (to list a few), which would create a more robust and long-term solution to the crisis whilst increasing employment and self-reliance in local communities. Unfortunately this is not the strategy of many foreign charities in Africa, as this for-profit industry thrives on creating aid dependency. The longer foreign charities can operate in these communities, the greater their profits. Thus, delivering aid to African communities using a strategy that is truly best for both the immediate and longer term needs of the region often takes a back seat to profit maximisation.

Although, arguably, these charities do make a difference in addressing immediate issues such as access to healthcare, education and clean drinking water, it is the larger issues such as poverty, government instability, and political oppression that they are simply unequipped to address. So when it is these structural issues that create obstacles in accessing basic human rights in Africa, it is easy to see that these charitable organisations are only treating symptoms of a much deeper wound. As long as these larger structural issues remain, Africa will continue to be overwhelmed with humanitarian crises, and dependent on the western organisations they attract.

Financial aid

It is a common misconception that Africa benefits from the steady flow of billions of dollars of charitable donations from the rest of the world. This is, after all, the story broadcasted by the global north. However, what is seldom mentioned, let alone problematised, is the billions of dollars that flow out of the poorest economies into the richest each year in the form of unjust debt payments, corruption, and resource extraction. In fact, more wealth leaves Africa than actually enters it, by a deficit of more than $40 billion.

Debt Interest

Western countries, and multilateral organisations have realised that by charging extortionary interest rates on loans to African countries they can make a pretty profit off the countries they claim to be helping. In 2019, the World Bank charged The Gambia a lending interest rate of 28%, Malawi a rate of 32.3%, and Madagascar a staggering lending interest rate of 49%. Although it is fair to expect a risk premium on money lent to riskier borrowers, interest rates over 20% higher than those charged to any European country seem extortionary, and drive these countries further into debt, only making it harder for them to pay off these loans.

African governments received $32bn in loans in 2015, but due to these hefty interest rates paid more than half of that, $18bn, back to western countries in debt interest alone. That is a tidy profit margin of around 56% made off of suffering economies. It is not hard to realise who is benefitting the most from these deals.

Dr Jason Hickel, an economic anthropologist at the London School of Economics, has said that, “one of the many problems with the aid narrative is it leads the public to believe that rich countries are helping developing countries, but that narrative skews the often extractive relationship that exists between rich and poor countries”.

Corruption

Additionally, these financial payments often fail to make it into the hands of those in need. Both private and government corruption mean that the deals struck are only community aid in name. When in 2010 the International Finance Corporation, a member of the World Bank Group, announced a multi-million dollar investment into a diamond mine at Mwadui, Tanzania, it was praised as a deal in “recognition of the important socio-economic benefits that [it] brings to its local community”. However, it soon came to light that the financiers did not intend to uplift the local community and increase access to healthcare, but rather made the loan in exchange for an almost $20 million equity stake in the mining company. Local communities say that the benefits promised by the companies and government over the past decades have never been delivered. This is just one of many situations where corruption has prevented those in need from receiving the help they desperately require and deserve.

Resource Extraction

It is well known that Africa has considerable mineral riches: “South Africa’s potential mineral wealth is estimated to be around $2.5tn, while the mineral reserves of the Democratic Republic of the Congo are thought to be worth $24tn.” However, it is foreign owned private corporations who still seem to be in control of this wealth. In fact, Anglo American, a private company based in the UK, is the largest mining company in Africa based on revenue. In 2019 alone, they cashed in $29.87 billion worth of South African resources, putting them miles ahead of the second largest mining company Sibanye Stillwater who generated only $4.21 billion in 2019. Analysis by a coalition of UK and African equality and development campaigners including Global Justice Now claims the rest of the world is profiting more than most African citizens from the continent’s wealth.

Conclusion

Although there is no denying that Africa’s leaders need help addressing humanitarian issues, there is a clear line between aid and abuse. Many for-profit charities operating in Africa have ignored the need for increased development and job-creation in local communities. Instead they have fostered a system of dependency in order to increase profits at the expense of those in need. This shows that these charities are either negligent in the implementation of aid programmes, or are simply unwilling to prioritise the needs of marginalised African communities. Many western aid organisations are the wolf in sheep’s clothing when it comes to their involvement in Africa. It is too often the case, that ‘charitable aid’ is used as a guise to increase foreign involvement in African affairs, and profit from the financial resources belonging to the African people. For far too long, charitable organisations, foreign governments, and multilateral organisations have peddled the idea that Africa desperately needs western intervention to aid development. However, after uncovering the looting, extortion and inept ‘charity’ inflicted on Africa, it is clear that the best strategy to aid African development is to rid the continent of foreign meddling.

The views expressed in this article are the author’s own and may not reflect the opinions of The St Andrews Economist.

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