The myth about aid: How Africa is losing out as donors reap big-time

Dressed in a pair of faded jeans and an untucked purple shirt, the young Kenyan man walks to the front of the room and stands next to the podium.

He casually rests his left elbow on the edge of the wooden stand in the easy manner of one used to addressing crowds.

Two stand-up banners bearing the name “Austin College” form a backdrop. Notably, he is the only African in the room full of American students.

The MC, also a young man, stands to the far right, a cordless microphone in hand. His eyes sweep over the audience comprising white and Latino youths before turning to the Kenyan in front.

EAGER ANTICIPATION

“Now, I was just wondering; is there anything that we, as individual students, can do to help Kenya?” he asks.

“Umm…,” award-winning photojournalist Boniface Mwangi begins. “Kenya is very far away.” Then he stops and laughs nervously.

“I think you’re more effective helping where you are, than you would be in another country.”

The look on most of the faces in the room slowly changes from eager anticipation to one of surprise, and on some faces, mild offence.

The above scene is from a documentary about Africa, and how the West perceives the continent with regard to aid.

Mwangi, 31, is a well known socio-political activist, thanks to the many protests he has staged outside Kenya’s Parliament building bemoaning corruption among the local political elite.

FLY ALL THE WAY

But today, he is championing a different cause. He is not just representing Kenya, but Africa, and as always, he is taking the “enemy” head-on.

Mwangi is here to help debunk the popular belief that Africa is a cause, a calling for Western nations, a guilt-reliever for those who need to flex their altruistic muscles.

“Africa does not need a saviour. America, on the other hand, desperately needs a saviour,” Mwangi says during a later interview.

“In America, you have homeless people, public schools without teachers. The statistics of black men in prison are shocking. Why do you want to fly all the way to Africa to fight poverty yet you pass poverty on your way to the airport?”

As Kenyans continue debating moves by the Jubilee government to turn East and shun the West, the reality is that we depend heavily on foreign nations.

FOREIGN AID POLICY

Indeed, in the last three years, China has been increasing its focus on Kenya, and Africa, as its new favourite aid destinations.

On July 10, the Chinese government released a new report on its revised foreign aid policy, in which Africa featured prominently. 

It showed that in the last six decades, China had given $41.36 billion (Sh3.6trn) in foreign aid.

Notably, 35 per cent of this ($14.42bn - Sh115.3bn) was given between 2010 and 2012. This shows a rapid increase in Chinese aid to Africa.

In 2009, Africa received 45.7 per cent of China’s total aid. By 2012, this had increased to more than 50 per cent.

Compared to other developing blocs, such as Latin America and the Caribbean, which received only 8.4 per cent of Chinese aid in the same period, this is bound to raise eye-brows.

And perhaps with good reason because according to a new research, Africa is actually losing more money to its “helpers” than it is getting from them. Worse still, the donors are gaining more than the intended beneficiaries.

TAX EVASION

The study, titled Honest Accounts: The True Story of Africa’s Billion Dollar Losses, reveals that Africa is losing much more to donor nations than it is receiving in the form of aid.

Released by a group of UK- and Africa-based NGOs, the report says that Africa receives $134 billion (Sh11.7tn) yearly, mainly in the form of loans, foreign investments and aid.

However, the donor countries take out more than $192 billion (Sh16.7tn) through debt repayments, tax evasion and repatriation of profits, among other channels.
This means that Africa loses $58 billion (Sh5tn) to its benefactors” every year.

Of course, such statistics are bound to raise hackles in various quarters if presented without details that might significantly alter these figures.

“The reality is more complex,” says Martin Drewry, director of Health Poverty Action, one of the NGOs behind the study.

INVASION BY THE WEST

“We do not assume all inflows are benefiting Africa, or that all outflows are to its detriment; but the truth is that rich nations take much more from Africa than they give in aid — including through tax dodging, debt repayments, brain drain, and the unfair costs of climate change — all of which rich nations benefit from.”

The researchers found out that Africa receives about $30 billion (Sh2.6tn) in the form of development aid annually. However, more than six times this amount ($192bn-Sh 16.7tn) is repatriated, mainly by the countries that give the aid. 

“Whilst we are led to believe that ‘aid’ from the UK and other rich countries to the continent is a mark of our generosity, our research shows that this is a deception. Wealthy countries, including the UK, benefit from many of Africa’s losses,” says the report.

So, what should Africa do? Should African countries rise up against foreign aid and exploitation of its resources? Is it time to rise up against invasion by the West, and, more recently, the East?”

“Not really,” says Dr Samuel Nyandemo, senior lecturer at the University of Nairobi’s School of Economics.

“There are always economic motives for foreign aid. The reality is that most African countries lack sufficient capital and technological capabilities to sustain their economies. So they seek help from the more economically able countries in the form of grants and loans.

GHANA'S DEBTS

“But these always come with terms and conditions. No one wants to put their money into something that will not bring good returns. The whole idea of foreign philanthropy is a myth that, unfortunately, the average Kenyan and African has bought and swallowed without giving much thought.”

However, the myth, has not not just bought been bought and swallowed by African. Most British and American citizens believe their countries are “helping the poor” and “being generous” when they give aid.

Many Americans would rather believe this than grapple with why their country can loan money to Third World countries when it owes the world’s greatest debt.

One of the channels through which money leaves the continent is debt repayment. But despite the cancellation of some debts in recent years, the the World Bank’s World Development Indicators database show that Africa makes debt repayments of $21 billion (Sh1.8tn) every year.

This covers both the public and private sectors. Three-quarters of Ghana’s debts, for example, are owed to other governments and multilateral institutions, primarily the World Bank, the African Development Bank and the IMF.

Then there is the repatriation of profits by multinational companies. “Since the 1980s,” the report says.

“International financial institutions dominated by the US and EU countries have forced African countries, through structural adjustment programmes, to become increasingly export-oriented and open their markets to foreign trade and investment.”

ILLEGAL LOGGING

The result is that foreign investments have become the rage in the continent.

Direct investments by foreign corporations have increased, either through companies setting up factories in the continent in order to access cheap raw materials and labour, or shifting the ownership of companies that were initially locally owned to foreign investors.

Whichever the case, $46.3 billion (Sh4tn) in profits is repatriated each year.

Illegal activities also play a huge part: About $17 billion (Sh1.5tn) is lost annually as a result of illegal logging and a further $1.3 billion (Sh113 trn) as a result of illegal, unreported and unregulated fishing along the West African coast alone.

A more nuanced but often unrecognised channel is brain drain. This is especially serious because it ensures the continent’s intellectual to progress independently is crippled.  

The emigration rate of skilled professionals from Africa is almost double the global rate. “In five African counties,” the report says, “over half of health workers have migrated to Organisation for Economic Co-operation and Development (OECD) countries.”

INTELLECTUAL PROPERTY COSTS

The emigration of health workers alone costs the continent at least $2 billion (Sh174bn) per year. To fill the resulting skills gap, we spend $4 billion (Sh348 bn) to hire European experts.

Notably, that the study did not even include the costs incurred as a result of bio-piracy and other intellectual property related costs.

What is clear from the foregoing is that there is no such thing as altruism when it comes to foreign aid to Africa. Yet many people are convinced that Africa is a poor continent that thrives on handouts. Indeed, even the British Prime Minister, David Cameron, seems to believe it.

Speaking on aid in June last year, he said: “It (British aid to other countries) says something about this country. It says something about our standing in the world and our sense of duty in helping others. In short – it says something about the kind of people we are. And that makes me proud to be British.”

According to the Honest Accounts report, “Companies (and donor nations) promote their “corporate responsibility” while routing profits through tax havens; wealthy philanthropists donate money whilst their companies dodge tax; and short-term fundraising tactics mean NGOs ourselves can be guilty of pushing the idea that poverty can be solved if we give a few pounds, whilst ignoring the systematic theft going on under our noses.”

CALCULATED MOVE

The entire notion of “helping the poor” should be removed from any narrative about foreign aid because it is a fallacy.

To most people, the picture that comes to mind when they think of foreign aid is something close to the handouts you give a beggar sitting on the pavement outside your office building.

But the reality is that aid in the form of grants and loans to Africa is just a calculated move on the economic chessboard. It has little to do with having a “generous” heart. The profits made prove this.

However, that does not mean that Africa does not need these “donations”. Rejecting all forms of aid would be an unnecessary overreaction. The reality is much more complex.

But the change begins with having the correct view of Africa’s relationship with the donor countries that also invest in the continent.

POLITICAL TOOL

It also calls for greater responsibility and transparency on the part of donor nations whether they are dealing with the recipients of the aid or their own citizens.

What we need, Drewry suggests, is “an end to the plundering of African resources by multinational companies; an end to ‘aid’ as loans and greater transparency and accountability in all other loan agreements; and ambitious and far-reaching climate change targets.”

The myths surrounding aid must also be debunked and the reality made public. First, there is not enough aid. Second, aid is not just the transfer of money.

Third, aid often comes with conditions; it is not pure altruism. Finally, aid is a political tool and often reflects the donors’ particular ideologies – such as creating a conducive environment for foreign investments in recipient countries.

We need to move beyond focusing on aid levels and communicate the bigger truth. We need to expose the real relationship between the rich and poor. We need to hold leaders, both local and foreign (they are the ones who usually sign these aid agreements), to account.