Should foreign investment replace aid for Africa?

The virtue of overseas aid is back in the spotlight, as Africa's economies boom.

Should foreign investment replace aid for Africa?

Donu Kogbara believes it should. Her many experiences in Ethiopia and other African countries have convinced her that donors are inadvertently encouraging developing countries to be dependent.

African nations are riddled with corruption and incompetence, they are, therefore, the architects of most of their misfortunes. They must grow up, clean up their acts, get off their backsides and learn how to become more self reliant, dynamic and dignified

She believes Africans must think big, believe in themselves, demand high standards, take full responsibility for their destiny and aggressively embrace the "trade not aid" mantra.

More pressure, she says, should be put on the leaders to deliver progress and transparecy, the priority should be the creation of wealth, the empowerment of indigenous entrepreneurs and foreign investment pursued.

Being spoon-fed handouts by well meaning white liberals, who have a penchant for not telling us tough home truths, is the last thing we need.

I'm convinced that foreign donors are de-motivating Africans with kindness. They infantilize us with their soothing 'there, there' approach and make us feel that it's fine to whip out begging bowls. Donu Kogbara

Dereje Alemayehu disagrees, he agrees and shares the contempt and outrage with regard to Africa's leaders, but says that Aid cannot be made responsible for what it is not meant to do. Aid cannot buy democracy. Aid is not the primary support that props up corrupt regimes.

He believes that if the primary motive to attain political power is self enrichment, then you will be a thief with or without aid. Getting rid of tyrants and thieves is the responsibility of African citizens.

The solution to aid abuse is the fight for accountability and transparency to make it serve its purpose, not to cut off aid. When aid is perverted by donor countries to promote business interests or to buy the loyalty of corrupt regimes for geopolitical ends, this is not aid, it is economic and political corruption.

Aid should have only one purpose - the eradication of poverty. That is why he supports aid and is engaged in fighting its abuse.

Can we rely on foreign investors to deliver development? The amount they steal through agressive tax evasion is fourfold what comes in as aid. I can't see how ending aid would make them change their behaviour. Dereje Alemayehu.

Donu in response to this says that she too is concerned about the misuse of aid, but states that she didn't have this in mind when she spoke about foreign donors, she expressed her view that they are unintentionally making developing nations weak.

She suspects that this leads to welfare dependency, and believes that most economically challenged individuals and countries will, as a general rule, perform more impressively if they are urged to stand on their own feet. We are capable, she says, of solving our poverty problems without leading on Western philanthropists.

Dereje argues that Donu seems to suggest that a causal link exists between aid and poor political leadership. But he believes aid dependency syndrome only comes about if there is a self seeking leadership. He believes development isn't about money, but a political process propelled by nationalism. By this he means a national project that makes ending poverty a priority, an outrage at the preponderance of abject poverty in a country and a decision to tackle it with the utmost urgency it deserves. A leadership committed to this kind of nationalism, instead of using political power for self-enrichment, would necessarily use aid as a complementary resource to national efforts.

The driving motive for foreign investment is short term profit maximization to pay fat dividends to ever-greedy shareholders. Putting profits first will not serve long term equitable and sustainable development. It will promise shareholder value by making the rich richer, but it will not end poverty.

Donu responds by saying she is not totally heartless!! and doesn't object to generous amounts of emergency aid being provided by the international community whenever countries or regions are crippled by natural disasters and famines.

However in her belief, foreign investment will always be superior to foreign aid within the context of non emergency scenarios. She provides examples of aid from the EU being serious errors of judgment and not serving the purposes it was intended and believes that investment in the area would have helped more people than the aid.
She cites as an example a town in Nigeria's Niger delta which was once a semi comatose backwater, but is now a thriving hive of commercial activity thanks, she says to an Italian oil company.

Derej says attracting FDI with generous tax holidays and freedom to repatriate profits is already a priority in all African countries, but the dynamism that Donu alludes to is just not there. Foreign companies tend to extract wealth in enclaves without helping the development of host countries productive capabilities.

Colonial policy was all about 'nipping productive capacity in the bud' and multi-national dominated globalization is carrying on in the same vein. That is why diamonds cause death and poverty in Lubumbashi but riches and glory in Antwerp.

FDI has not distrubed the peaceful co-existence between lucrative foreign business and perennial stagnation, has not liften African commodity producers out of subsistence income levels. Its advances towards promoting value chain activities, creating decent jobs, transferring knowledge and technology or investing in research and development are negligible. You cannot expect miracles in this department. He goes on to say that profits go to companies' countries of origin and rampant tax evasion drains resources from Africa's social infrastructure provision.

Aid is not useful only when directed at providing help during emergencies. It also builds resilience for the next emergency, and helps plug the vital infrastructure gap that FDI will never address.


The two participants of this debate are:

Donu Kogbara a Nigerian print and broadcast journalist. She acts as a Director on the Greater Port Harcourt City Development Authority Board and is part of the African Arguments debates forum. africanarguments.org

Dereje Alemayehu is a development worker of Ethiopian origin, Christian Aid's Country Manager for East Africa and Chair of the Tax Justice Network Africa.

The views expressed in this debate are entirely his own.

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