Financial Crisis: Will Donors Deliver on Aid Commitments or Buckle?

governance aid donors
Wednesday, 22 July, 2009 - 15:23

The global financial crisis makes it essential that we focus on the need for donors to meet their targets; ensure that available resources are optimised, that the priorities for expenditure are right; and that we look at ways of saving money and at neglected sources of financing. As is the practice in many African cultures, if your fire burns out, you fetch some from the neighbours

It is that time of the year again when reports about how well donors have performed in meeting their aid commitments are released. This year is unique because of the devastating effects of the global financial crisis. What is on everyone’s mind is: will donors sustain their commitments or will they buckle under the heavy weight of the global financial crisis?

African Monitor along with others has issued its 2008/9 report -Development Support Monitor. There is general agreement that donors made more progress in 2008 in terms of increasing aid to Sub-Saharan Africa than in 2006/7. While in 2007 the G8 countries were significantly off track, the encouraging performance in 2008 demonstrates that if performance is maintained at the same level, most countries will meet the targets set for 2010, 2011 and 2013. However there are some, notably Italy and France who will not. Italy has so far delivered about three percent of the US$8 billion it pledged in additional funding. Worse still, Italy may actually be planning cuts, not increased aid in the coming years.

As we push the Group of Eight (G8) most industrialised countries to make good their promises, we must prepare for the worst even as we hope for the best. The global financial crisis forces us to focus on the need for donors to meet their targets as well as ensuring that available resources are optimised; that the priorities for expenditure are right; and that we look at ways of saving money and at neglected sources of financing. As is the practice in many African cultures, if your fire burns out, you fetch some from the neighbours.

Consequently, African Monitor has noted the emergence of new donors; namely China, India and Brazil. In this league are neighbours who are much closer to home - South Africa, Nigeria, Libya and other oil-rich countries are providing aid. In fact, South Africa, Libya and Nigeria are providing increasingly significant resources to their neighbours, particularly through their regional economic communities such as the Southern Africa Development Community (SADC) and Economic Community of West African States (ECOWAS). However, like the aid that comes from China, Brazil and India, this ‘fire-giving’ to neighbours is not well captured in international aid records.

Yet according to a 2006 South African National Treasury study, overall transfers and assistance to African countries including the SADC was at R15.2 billion in 2004, up from R9.5 billion in 2002. By 2007 this had increased to R19 billion (nearly US$3 billion). At a time when G8 countries such as Italy and France are getting cold feet and contemplating cutting aid to Africa, this neighbourly assistance needs to be acknowledged.

In addition to fire-giving by neighbours, there is much that developed countries can do to assist developing countries. Firstly, they can fast track the process of debt relief under the Highly Indebted Poor Country Initiative (HIPC) Initiative. Launched more than 10 years ago, it is unacceptable that 13 countries still have not yet reached completion point. This means that they continue to lose out on bilateral debt relief and the most recent initiative known as Multi-Lateral Debt Relief (MDRI) which is contingent upon reaching completion point under the HIPC initiative. Even more worrying is the fact that these are the countries, such as DRC, Liberia, Central African Republic, to name a few, that need assistance the most. Since we know that debt relief is really a bookkeeping exercise, we call for a review of the process to facilitate faster progress of these countries towards completion point.

Secondly, for the first time, at US$40 billion, remittances from the African diaspora have exceeded both aid flows at US$ 38 billion as well as direct foreign investment at US$31.36 billion. Donors can ensure that those in the African diaspora are protected from attacks and discrimination. If arrangements are made to facilitate these remittances and encourage them to be channeled to productive investments, this will be a big boost to social and economic development of many African countries.

Thirdly, trade should be further liberalised in favour of the products of poor countries so that there can be compensation for any loss of aid. In other words, aid for trade and just and fair trading regimes would cushion poor countries against the most adverse effects of the global financial crisis. At this year’s World Economic Forum (WEF) on Africa the key messages that emanated from the discussions were that Africa is open for business and there are opportunities for high return investment and further economic growth. But this means that both donors and the continent should ensure that Africa benefits from the opportunity presented by the global financial crisis and use it to reshape its policies and practices in order to feature more prominently in the inevitable resultant new world order and new global financial architecture.

Fourthly, the available resources should be invested in the most productive sectors to gain the highest return. In most African countries, it now evident that this is in smallholder sgriculture, specifically investments in staple food crops such as maize, cassava, sorghum, millet rice and grain legumes. Evidence shows that a one percent gain in agricultural GDP yields a six percent expenditure gain for the poorest population. If the limited resources were focused on this kind of agriculture, which is dominated by women, chronic hunger would be reduced from the current high levels of nearly 300 million people; poverty would be cut from the 51 percent of Africans who live on less than 1.25 USD a day and political stability would be improved since it is estimated that more than 33 African countries are in danger of being destabilised by food price inflation.

We also know that rich countries without adequate arable land and water are rushing to Africa in search of land for producing food for their people. In 2008, Qatar concluded a deal with Kenya for leasing 40 000ha of land for fruit and vegetable cultivation; Saudi Arabia has acquired 10 000 ha in Sudan for wheat and vegetables; United Arab Emirates has leased 30 000ha also in the Sudan for corn, wheat, potatoes and beans. Other countries involved in land deals with foreign countries and companies are Tanzania, Zambia, Ethiopia, Malawi and Mali, to mention a few. These deals are worth billions of US dollars. Three-hundred million of people in Africa may be suffering from chronic hunger, but other countries see food in Africa. This means that Africa could use this period of great financial uncertainty to position itself to become the bread basket for these very countries by properly targeting agriculture and putting in place proper safeguards to ensure that Africans are the primary beneficiaries of their own resources.

Everybody is calling for something radical to be done to revitalise agriculture on the continent. Some are calling for a revolution in agriculture, others for an agricultural renaissance and yet others for a decade for agriculture. But political commitments have already been made by both African governments and their donor partners to boost growth in agriculture to six percent pa by investing at least 10 percent of the national budgets in agriculture. The science and technologies have been developed by African scientists and entrepreneurs; good practices are in place in countries such as Malawi and Burkina Faso to show that where political will is made operational miracles happen. What is now needed is to stop the talking and get on with it so as to move Africa from being a basket case to being the bread basket- the writing is on the wall - it is do or die.

- Archbishop Njongo Ndungane is the Founder and President of African Monitor. Find out more about their work at www.africanmonitor.org.

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