Foreign Aid

‘Trade is not aid’

Zambia Watchdog
June 1, 2009

After years when billions have been spent on aid in Africa, donors are now picking up on a new trend to put their money on the continent’s entrepreneurs. In June a meeting in Cape Town, of the World Economic Forum on Africa, is set to reinforce the message that “trade, not aid” represents salvation for a continent where an average 5% growth in the past five years is projected to fall to 1.5% this year amid the global economic downturn.

Now entrepreneurship is being seen as a panacea. Earlier this month, the Africa Commission, an initiative by the Danish government, launched a “guarantee facility” worth $3-billion to mobilise loans for small businesses. Until now, such entrepreneurs — typically street vendors wishing to own a shop but with needs beyond the scope of micro-credit — have been ignored by local banks.

Donald Kaberuka, a commission member and president of the African Development Bank, said the move was “the most innovative initiative launched in Africa in decades, which will create millions of productive and decent jobs”.

A bestselling book by the Zambian economist Dambisa Moyo, former Goldman Sachs strategist, called Dead Aid argues that Western assistance has fostered a dependency culture in developing countries.

It has sparked a furious response from aid groups angered by the attention given Moyo, named this month by Time magazine as one of the world’s 100 most influential people.

So what should replace aid? The new social entrepreneurs, as they are being called, must be helped not only to get on their bikes but to stay on them, warn academics, businesspeople and civil society groups.

African business people welcome the Africa Commission’s move. But the Sudanese-British entrepreneur Mo Ibrahim, who made his fortune in Africa with the Celtel cellphone company, said supporting small business was only part of the solution.

Ibrahim said: “Africa has no venture capital industry: the kind that supported the Googles and Microsofts of this world. So the guarantee facility is helpful, but what we really need are local funds to become involved. We need local investors whose motivation is profit. The Africa Commission must not become another handout industry.”

In African civil society, where Western-funded lobby groups and welfare organisations have had sharp budget cuts as a result of the downturn, there are fears that the focus on entrepreneurship is a creeping privatisation of aid. Vuyiseka Dabula, of the South African Treatment Action Campaign, said: “HIV is not in recession and we are not a business. About 80% of our funding comes from international donors and most of them have had 25% budget cuts.”

Oxfam’s head of research, Duncan Green, said promoting entrepreneurship smacked of repackaging. “Suddenly people are saying that social entrepreneurship is going to get millions of people on to solar energy and that kind of thing. It’s interesting, but it must not be seen as the new magic bullet.”

Categories: Foreign Aid

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s