Aid for Africa: Does the Source Matter?

Posted by Krisztina Forro

In the June 27th issue of the New York Times’, foreign aid skeptic, economist Dambisa Moyo, published an article outlining China’s beneficial financial engagement in Africa. She emphasized:

Despite all the scaremongering, China’s motives for investing in Africa are actually quite pure. To satisfy China’s population and prevent a crisis of legitimacy for their rule, leaders in Beijing need to keep economic growth rates high and continue to bring hundreds of millions of people out of poverty. And to do so, China needs arable land, oil and minerals.

She went on to say that foreign direct investments aren’t beneficial only for China but for Africa as well, with China’s role is broadly welcomed, much more than the Western countries’ used to be. According to Moyo, this could be one way to diminish poverty and lead to on-going economic development in Africa.

However, several economists argue against this. Jolyon Ford, senior analyst of Oxford Africa says:

Her op-ed last week is useful in pointing out...that the China-in-Africa investment story is, indeed, not all bad news for the continent and its people... But before one can say that Beijing is overall a ‘boon for Africa’, someone like Moyo should acknowledge there are other, more complex, calculations involved in making that judgment. She could easily have made her ‘correcting the negative narrative’ point while still mentioning some structural problems that Chinese investment alone will not address, and which it may only exacerbate and distort.

African entrepreneur Herman Chinery-Hesse is wary of all foreign aid, stating,

I don’t know of any country in the world where a bunch of foreigners came and developed the country. I don’t know one: Japan? Korea? No! No country did that. I know about countries that developed on trade and innovation and business. Only Africans develop Africa.

Foreign aid is hardly the solution to Africa’s economic and social problems, but could the low-paying, Chinese-owned jobs be a long term solution? While Moyo suggests this may be so, a better solution is to help African nations build free markets with sound rule of law, private property rights and political freedom where African businesses can flourish without foreign aid. With that in place, investments – not aid – would be welcome.