Why has so much aid failed to deliver economic transformation in Africa?

In all countries everywhere, politics and business are closely entwined, and electoral democracies can be as susceptible to corruption and distorted decision-making as autocracies. A Ghanaian politician once complained to me: “This democracy of yours that we’ve adopted: the problem is it’s so expensive”.

Political parties need money to run campaigns, to deliver t-shirts, reward foot soldiers; and where people have so little to give, that money must come from businesses, who expect some return, be it contracts or licences or protection from imports and competitors. And after the election, politicians need to deliver on their promises of better roads, new clinics, free schools, which can distort government economic decision-making.

These risks are as live in the UK or US as they are in South Africa or Sierra Leone, though in an open and accountable system, this can be relatively transparent, allowing voters to judge for themselves, at least in theory.

The second point is that where state-directed development has worked, it has done so by liberating competition in the business sector, not constraining it. China (though not cited by Mills), as well as South Korea, is a great example of this. Deng Xiao Ping began by liberalising the market for agricultural products and, more recently, Alibaba was created by Jack Ma not by the Communist Party.

China is now facing the challenge that free markets and unfree politics don’t mix so well. But the key point in Africa is that genuine job-creating and livelihood-improving development has to be led by business, not government, let alone donors.

Governments can facilitate this or obstruct it. The extraordinary thing about Nigeria is that so much business has flourished despite rather than because of the government (leaving aside those few who have profited mightily from government-protected markets).

The ultimate conclusion Mills reaches is that donors should be more discriminating and primarily support governments that are democratic and facilitate private sector growth. This, however, poses a “donors’ dilemma”: to impose such conditionality infringes the autonomy that recipient-led development demands; and being selective in which countries to support condemns millions of others to a further generation in poverty.

Many donors believe it is possible to provide aid directly to people, bypassing undemocratic governments, but this is still fraught with unintended consequences and can simply provide a safety net for authoritarians.

There is also the irony that democratic countries with vibrant private sectors are those least likely to need substantial aid: like Ghana, they want to move “Beyond Aid” and finance their own development from capital markets.

Ultimately, perhaps, it is time to move away from the debate about aid to focus on how African countries themselves can achieve the economic transformation that their people certainly – and their governments in rhetoric at least – are seeking. For this to happen, people need systems of government that work for them. But that is another book.

By Nick Westcott for African Arguments

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