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Why good governance matters more in Africa than aid
Franklin Cudjoe, Heritage's Foundry
September 30, 2010

Heads of state from across the developing world arrived in New York last two weeks for the annual United Nations meetings. Heading up the agenda this year was a summit examining the U.N. Millennium Development Goals (MDGs). These leaders - generally clad in expensive suits and heading enormous entourages - again shamelessly moaned and complained over the lack of adequate progress on the MDGs as if they and their governments were helpless bystanders in whether or not the MDGs are met.

There is nothing egregious about the eight MDG targets. Halving poverty, increasing education, and reducing maternal and child mortality are desirable outcomes. The only problem is that in the poorest countries the goals will not be met because they are based on a failed development model of relying on external aid rather than internal policy change to facilitate economic development and growth. And internal policy change is resisted fiercely by the very leaders expressing anguish over the lack of progress because they and their families, friends and allies benefit richly from the current system, which focuses on securing foreign aid from Western nations to be spent on thousands of carefully schemed but wasteful interventions undertaken locally, in apparent pursuit of the MDGs.

Such complex interventions, with little transparency and accountability on donor spending, means few credible audits have been conducted on the billions of aid money spent over the years. Such expenditures should have resulted in development improvements, but have only served to entrench the very governments and policies that impede development.

African leaders in particular have been doing the math on how much they need to perpetuate their loot . . . um, I mean finance the MDGs. As the argument goes, "They ask why can-t the rich Western countries provide $70 billion annually to meet the MDGs? It-s only a fraction of their annual GDP. They can easily spare it, but it would mean so much in the developing world." Western aid advocates do their part by painting gory pictures of famine and disease in Africa to justify the demand.

Yet, some way, somehow, African leaders have been able to squeeze close to $150 billion per year from their poor, developing countries to enrich themselves. This figure didn-t diminish even with the global financial crisis or following former Nigerian President Obasanjo-s admission of this habitual theft by African leaders and mock lamentation of corruption at the G-8 summit in Gleneagles five years ago.

In other words, African leaders have made a habit of stealing 25 percent of the continent-s GDP and squirreling it away for their benefit rather than the citizens of their countries. As if that is not enough, wasteful spending, legal plunder, prohibitive business environments, and entrenched cronyism can be found even in the Africa-s most acclaimed democratic success stories such as Ghana.

Ghana-s democratic foundation is built on the politics of Grand National development plans which are presented to win voter support. These plans are largely sustained by aid, which demands little or no accountability. Voters continually fall for promises, by both political parties over the past two elections, that if elected they will guide Ghana toward middle income status. These promises are slippery with target dates first of 2015 and then 2020 and, doubtless, 2025 soon.

Ghana has seen an increase in aid during the tenure of these political parties. But the result has been depressing. Ghana slipped five places from (the 87th position to 92nd) on the World Bank-s Doing Business 2010 Index and dropped in global competiveness from 110th position in 2009 to 114th out of 139 countries in the 2010-2011 rankings by the World Economic Forum Global Competitiveness Index (GCI).

A government-s development agenda informs its macroeconomic policies, its private sector development strategy, its posture to taxation and tariffs, and its orientation to financial regulation and oversight, and public debt management among other issues. These matters are crucial to serious investors considering Ghana - or, for that matter, Africa - as a destination for significant investment. These critical policies, however, become secondary considerations to governments focused on keeping aid money pouring in.

For instance, in 2005, 80% of Ghana-s debt was canceled. This was intended to give the country a fresh start and more independence to focus financial resources on development priorities rather than debt service. It allowed Ghana to borrow $750 million from the international financial markets in 2007. But in 2008, all of that was squandered. Determined to chase votes, the government approved a spending deficit equivalent to 20% of the country-s GDP. This was a world record - even more than Greece-s 10% deficit. In the end, the government was voted out of office, but left a legacy of debt and lower economic growth from an impressive 7.3% growth in 2008 to a disappointing projection of 3.5% for 2010.

And remember, Ghana is a model performer in Africa. Imagine what the less exemplary countries are doing.
At the MDG summit, German Chancellor Angela Merkel called for a balance between aid and good governance as a necessary condition for attaining the MDGs. Unfortunately, African governments generally prefer an imbalance with more aid and less accountability. Donor nations need to understand this reality and get away from platitudes like the MDGs and aid targets and insist that African governments enact policies that will unleash the entrepreneurial spirits of Africans to create wealth and support national governments through taxation. Aid may help governments that have already begun to tread this path, but providing ever-more aid in hopes that they will only perpetuates the status quo.

*Franklin Cudjoe is head of Ghanaian think tank, IMANI, a non-profit, non-government organization dedicated to fostering public awareness of important policy issues concerning business, government and civil society. He is also editor of AfricanLiberty.org The Foreign Policy Magazine named IMANI, the fifth most influential think tank in Africa in 2010. Franklin was named Young Global Leader 2010 by the World Economic Forum. This article was originally published by the Heritage Foundation's Foundry.

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