Aid vs Investment in Africa

Perhaps the old saying “If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a life time” should be revised to include “invest in the man buying a fishing boat, and you feed and employ hundreds…”

Investment in Africa, the private kind, as well as some well placed aid, and infrastructure investments, would likely raise the majority of Africa’s standard of living. Such a thing would go a long way towards by-passing the corruption that is entrenched in governments.

http://www.american.com/archive/2007/july-0707/africans-to-bono-for-gods-sake-please-stop

It is true that from the villages of Darfur to the slums of Soweto, thousands of people on this continent die unnecessary deaths each day, but Africa is home to 900 million. Tragedy is a small part of a much larger and more complex story.

Of the 47 countries that make up sub-Saharan Africa, only five-Sudan, Chad, Uganda, the Democratic Republic of the Congo, and Somalia-are home to active conflicts. Last year, Africa saw its highest growth in GDP in two decades. Sixteen African countries have favorable sovereign credit ratings. Botswana’s is higher than Japan, yet it still struggles to attract investment.

For the thousands of foreign-educated lawyers, businessmen, and architects from the Diaspora who are leaving cushy corporate jobs to return home with their skills and their dynamism to open businesses, it’s about creating wealth, not reducing poverty. Africa is not a victim in need of saving: it’s a land of opportunity.

Kenyan economist James Shikwati, who in advance of the 2005 G8 summit in Gleneagles famously asked rich nations, “for God’s sake, please just stop” giving Africa aid, thinks even misery is an opportunity.

We can fight malaria by distributing free mosquito nets, which may cost $10-$60 each by the time you get them down often impassable dirt roads. Or, as Shikwati suggests, we can train locals how to operate a business spraying homes with an insecticide that will keep them mosquito-free for six months at about $2 a family.

We can spend billions importing medication, or you can invest in local farms that grow the Artemisinin, a Chinese herb with potent anti-malarial properties, and the factories that process it.

We can continue the endless cycle of need and dependency, or you can create jobs, develop indigenous capacity, and build a sustainable future.

Aid not only crowds out local entrepreneurship, it makes governments lazy and deprives countries of the incentive to build effective institutions. Public revenue derived from taxes makes governments directly responsible to their citizens. Free money builds white elephants and bloated bureaucracies, it being far easier to create new government jobs than implement policies to fight unemployment, especially when someone else is footing the bill.

The perverse result is that many of Africa’s best and brightest become bureaucrats or NGO workers when they should be scientists or entrepreneurs. Which is why some are wondering: why not just take the aid money and invest in local business?

“If you make Africans rich, they’ll be less poor,” said Idriss Mohammed, a financier who wants to raise a private equity fund for Sub-Saharan Africa. “Forget making poverty history. I want to make Africans rich.”

Audacious, blasphemous, foolhardy—possibly—but that philosophy is precisely how China has been able to lift millions out of poverty in only a few decades and become a magnet for foreign investment.

Still, it would be plain stupid to say aid doesn’t matter for Africa.

When aid builds infrastructure–roads, railways, power plants, electric grids–it makes it cheaper for farmers to bring their crops to market, medicine to get where it is needed without spoiling, labor to flow where the jobs are. Ninety percent of roads in Angola are unpaved, 70 percent of those in Nigeria. It might not be as sexy or photogenic as holding up the child with the swollen belly in front of a television camera, but that is the real crime.

This is why China’s seduction of Africa has been so complete. While Americans are pestering their leaders to Save Darfur–an unlikely prospect absent full-scale military intervention–the Chinese are busy building roads and hydroelectric power dams. China believes Africa is a huge economic opportunity and deals with Africa like a business partner. The Chinese see Africans the way many would like to see themselves.