Aid for Africa

2008-06-02 00:00

Japan largely in response to rival China’s dramatic new investment splurge in Africa, last week announced it would double aid to poor African countries by 2012, as part of a new drive to shed its stingy image on the continent.

Japan took its cue from China, which in December 2006 invited most African heads of states to Beijing to cobble together a Sino-Afro alliance, and, last week, in Yokohama hosted close to 40 African leaders in a three-day conference on African development.

Japan’s Prime Minister Yasuo Fukuda promised African leaders that Japan will provide around $4 billion in low-interest “soft loans” to Africa over the next five years for infrastructure projects. It will also make available $2,5 billion in financial assistance for specific developmental projects through the Japan Bank for International Co-operation.

Fukuda said Japan will aim to double investment from the country’s private sector to Africa. Before last week’s initiative, Japan’s collective development aid to Africa amounted to $1 billion a year. Japan’s net official development assistance to developing countries has plummeted in the same way that other industrial countries’ aid has in the past decade.

Furthermore, Japan is most notorious for using development aid as a way of subsidising the export of its products to recipient countries. Of course, most industrial nations also routinely artificially bump up their aid figures.

Japan’s new drive to support Africa will centre on boosting infrastructure on the continent. The idea behind a focus on infrastructure development is that it would also serve as a magnet for public and private investment from elsewhere.

One of the immediate benefits of China’s rising investment in Africa is that it has rekindled a new interest in Africa from public and private companies, as well as governments from other countries. As a result, African countries now at last can start to negotiate new, more favourable trade and aid terms with outside countries.

With the new space opened for Africa, the continent should look no further than the lessons learnt from the United States’s Marshall Plan to rebuild war-torn Europe after World War 2. This remains one of the world’s best examples of how development aid can be used to develop poor and stricken countries. The U.S. essentially used the same principles of the Marshall Plan to pump aid into East Asia during the fifties. The third example is the European Union’s contemporary successful regional development strategy, which was also based on the lessons of the region’s post-war development aid experience.

Most of the development aid to Europe and East Asia immediately after World War 2 was to rebuild infrastructure: roads, public transport, energy provision, sanitation, and telecommunications. Japan was a particularly successful beneficiary of post-war development aid. Of course, Japan, like other countries in East Asia and post-war Europe, benefited from much better terms of trade than African countries ever had. Nevertheless, the financial support to rebuild the infrastructure which Japan received had a cascading effect, attracting bucket-loads of private local and outside investment, which ultimately lifted growth levels to head-spinning figures.

Yet, according to the UN’s Conference on Trade and Development (Unctad), industrial nations’ development aid spent on infrastructure, productive sectors and agriculture in Africa has plunged in recent years. It now stands at less than 30% of the total aid African countries receive yearly. The first generation of African countries that became independent in the late fifties and early sixties did not have the benefit of assistance on the scale of either the Marshall Plan to the U.S. or the East Asian equivalent.

Compare, for example, Ghana with South Korea. When Ghana became independent in 1957, it basically had the same level of development as South Korea. However, between the fifties and the early eighties, the U.S. poured the equivalent of the aid all the African countries collectively received into South Korea alone. As a result South Korea became fully industrialised, while Ghana is still underdeveloped. Importantly, the way aid was distributed to European countries under the Marshall Plan and to East Asians during the fifties was different, not only in scale, but also in the conditions attached to it, from the aid industrial nations gave to African countries.

U.S. aid to Europe and East Asia was much more generous and European and East Asian countries independently drew up their own development needs, set their own priorities and decided themselves what policies to pursue. The idea was that the aid would complement reconstruction efforts of European and East Asian countries.

Unlike in Africa, donors did not tell European and East Asian countries what policies they should pursue. In Africa, the World Bank, International Monetary Fund and Western donors force countries receiving aid to pursue specific policies, particularly one-size-fits-all, shock-therapy-type policies. Individual European and East Asian countries set specific, long-term and measurable development targets. These were then matched by the donors. Most of the development aid to Europe and East Asia was in the form of grants. Again, in the African case, Western donors give aid erratically on a year-by-year basis, making it very difficult for recipients to plan long-term.

Conditions for aid to Europe and East Asia were very flexible. Contrast this with the onerous conditions Western donors attached to aid to Africa. In both Europe and East Asia, donors encouraged neighbouring recipients in the region, who received aid, to pool developmental efforts, strategies and co-operate where possible. In contrast, Western aid to African countries often works against regional integration, which is so crucial to Africa’s future.

Unctad’s 2006 Africa Report described the EU’s contemporary strategy to develop poor areas within the union, which is based on the Marshall Plan experience, as having “a clear focus on strengthening investment, is packaged in multi-year programmes, has strong local ownership and also contains clearly stated aims to strengthen state capacity”.

As African countries renegotiate the donor-recipient relationship, the successes of post-war Europe, fifties East Asia and contemporary EU regional development strategies must be their guide, in combination with trying to secure “better terms of trade” for African products.

• W. M. Gumede is author of Thabo Mbeki and the Battle for the Soul of the ANC.

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