Europe has made an ambitious commitment to scale-up its aid to Africa, and Africa’s challenges certainly call that greater engagement. But boosting aid to countries that are already aid dependent requires clearer aid delivery mechanisms and a degree of budgetary predictability that goes well beyond today’s political realities. Something new on the aid menu is called for, and cash transfers directly to poorer people could be just such an alternative − but only as a part of a longer-term vision of partner countries' welfare systems.
The European Union has committed itself and its member states to increased aid flows that should reach 0.56% of gross national income by 2010 and 0.7% by 2015 − with a significant focus on Africa. The combined aid commitments of OECD Development Assistance Committee member countries would mean a doubling of ODA (official development assistance) to Africa between 2004 and 2010 − if honoured. It is, after all, fair to question whether donor countries will actually stick to these commitments and, indeed, whether conditions in partner countries will permit them to do so. But a theoretical doubling of African aid by 2010 − with the possibility of even more after that − offers a huge opportunity for combating world poverty. So tackling any obstacles that could potentially inhibit the effective application of these additional resources is a major priority.
Progress in sub-Saharan Africa over the last 10-15 years, although far from linear or uniform, should certainly be given due recognition. That includes improved governance, fewer wars, respectable economic growth rates and improved social indicators, combined with a renewed and promising regionalism. That said, Africa remains the continent where efforts to attain the Millennium Development Goals face the greatest challenges. In addition to existing obstacles to development two further issues looks set to become an increasing burden over the coming decades − the socio-economic consequences of HIV and climate change.
Regarding the impact of climate change on sub-Saharan Africa there are still many unknowns, but two things are clear. First, the price will be high, and paid primarily by the most vulnerable − especially African farmers who depend on rain-fed agriculture for survival. Second, those most severely affected will be those least to blame for global warming. An increasingly heated global discussion − justified morally as well as scientifically − on the inequalities of how the burdens fall when adapting to climate change, is unavoidable. This suggests that the political price for failing to deliver on European commitments to Africa will rise as time passes.
HIV has been around for more than 20 years, but the full socio-economic price will be paid over the coming decades. In fact, it's likely that the world has only seen the start of the African death toll from HIV. Children are the key to the future but the number of orphans in Africa is exploding. There are some 43m orphans in Africa, which means that 12% of all children aged up to 17 years have lost one or both parents. About a third of them have been orphaned by AIDS, a share that's bound to increase rapidly.
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MATTERS OF OPINION
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Things can only get better, say sub-Saharan Africans
One in four sub-Saharan Africans are increasingly hopeful that their lives will improve in the next five years according to Gallup surveys in 25 African countries.
The countries surveyed are all members of Regional Economic Communities, trade blocs set up between groups of African nations to strengthen economic, political and social cooperation with the aim of creating a continent-wide economic union by 2027.
When presented with a ladder scale where rung “0” represents the worst possible life, at least a quarter of people in each of five regional groupings said they expected to stand on rungs 8, 9 or 10 within the next five years. Respondents in the West African bloc were the most optimistic of all, with almost half (47%) expressing this view compared to just 2%saying they were in this position today. Averages for the five regions showed fewer than one in 10 people rating their past or their present situation on steps 8, 9 or 10.
http://www.gallupworldpoll.com/
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n the most HIV-stricken countries of southern Africa the figures are even more alarming. Africans’ extended family structures are making tremendous efforts to care for orphans and a heavy burden often falls on grandparents. But in the worst hit communities these support structures have already been stretched beyond breaking point. There is an exceptionally strong argument in favour of supporting right now those who are taking responsibility for raising the next generation of children in the worst affected countries.
While Africa's needs are clear enough, there are challenges in scaling-up aid to effectively tackle those needs. This reflects such problems as macro-economic management, aid dependency syndromes, absorption capacity, transaction costs and − related to all of it − the risk of decreasing returns as aid levels rise. Given the current aid to GDP ratios in sub-Saharan Africa − with approximately half of countries yielding ratios of above 10% even before future increases in aid are taken into account − these challenges must be taken seriously.
Donors and their partners have agreed on a way forward that, in theory, could tackle these challenges. The agreement is contained in the so called Paris Agenda, which defines principles of ownership, alignment and harmonisation. It calls for the improved predictability of aid flows, with budget support and programme-based aid as the preferred means of delivering support. It is an agenda for improved partnerships, reduced transaction costs and increased efficiency.
It is when the Paris Agenda leaves theory and confronts reality that problems quickly emerge. Budget support suffers from low credibility, not only amongst northern taxpayers but also amongst citizens of the south. As a mechanism it assumes the predictability of financial flows, but such predictability can be spurious. After all, neither donor countries nor their partners are exempt from such problems as corruption, political crises, armed conflicts, human rights abuses, vested interests, or international power politics. On that basis, placing so many eggs in the same basket leaves the business of aid provision looking increasingly risky. Furthermore, budget support that's linked to national poverty reduction strategies also rests on the assumption that the political economy of the partner countries somehow works to the benefit of the poorest − this is an assumption that some political economists would question.
Politics on the donor side are no less complicated, with growing aid budgets being often viewed by taxpayers as excessive at a time when the anti-aid lobby is becoming more vocal. And when donors finance 50% or more of a country's national budget, they may sometimes find intervention unavoidable − donors certainly have the power to intervene. That could mean more conditions being placed on aid, not fewer − even if the rhetoric appears to sometimes suggest the opposite.
In the Autumn 2007 issue of Europe’s World, Mick Foster of the UK's Department for International Development discussed this dilemma and proposed an international aid guarantee facility that would protect aid flows from short-termism and reduce unpredictability. But such a facility would still rest on the assumption that partner countries will spend the money well, and that donors are ready to finance a mechanism that sustains financial flows even in the event of a governance crisis or mismanagement.
Such drawbacks do not mean that predictable long-term budget support should be rejected. In many cases it is still likely to be the preferred means of channelling aid, as a return to the traditional form of project bombardment from an uncoordinated donor community just isn't an option in countries with 50% ratios of aid to public expenditure. But alertness to the political realities of the situation is also essential. There are therefore strong arguments in favour of considering complementary and innovative aid modalities − mechanisms that effectively reach the poorest, do not suffer from short-termism, and yet are compatible with political realities.
One option involves cash transfers directly to the poorest. Experimental schemes have been implemented in Latin America with child allowances conditional on school attendance and vaccination. Cash aid has sometimes replaced food aid in humanitarian crisis situations, and there has been targeted social protection schemes in Zambia as well as incipient welfare schemes for the elderly in India, South Africa and Lesotho. These and other pilot schemes are being carefully evaluated and their development effects ascertained. But to summarise the findings simplistically − they seem to work!
Poor people spend money reasonably effectively on investment as well as on consumption. Food and other basic goods are bought that benefit the local economy, nutrition improves and kids attend school for longer. A carefully studied unconditional child grant scheme in South Africa − with mothers as receivers − even demonstrated the impact in centimetres because the height-for-age index amongst children improved in relation to control groups. To this one may add the historical European experience of introducing similar welfare schemes and their effect on poverty, social cohesion and the empowerment of women.
Whether cash transfer schemes are right for low-income African countries, their affordability and the administrative practicalities involved are all issues that need careful thought. But such obstacles should not be exaggerated. Scaling-up schemes would allow investment in finding radical new solutions for identifying beneficiaries and for developing the required technologies to transfer the cash. Universal schemes, rather than sophisticated attempts to target specific beneficiaries would further simplify administration.
Affordability doesn't look like such a big hurdle, either. Assume, for example, that a $50 a year universal child grant is given to all children below 10 years of age in Mozambique, Malawi and Zambia − covering roughly 10m children. These are three low-income countries with HIV prevalence rates in the order of 15%. Further assuming a relatively generous 20% administration overhead, then the total cost of the child grant scheme would be approximately $600m. That's equivalent to a fifth of the reported aid flow to these countries in 2004 and to 3.5-4% of their combined GDP. It would certainly be costly, but not completely out of reach in a scenario where African aid is doubled.
Issues such as sustainability and ownership appear to be bigger problems. For cash transfer schemes to work they must be regular, predictable and long-term. But while donors and their tax payers might be willing to make long-term commitments for such a purpose, there is likely to be rather less appetite for making commitments which would seem to be never-ending. A formula for burden-sharing would be needed that gradually increases domestic financing. But under no circumstances should these schemes be established as purely donor-driven constructions that by-pass local budgets and institutions. Partner countries must be ready to invest in their institutions and develop their own vision of how they want to organise their welfare systems as they progress as nations.
Would African partners want this? Would they see advantage in terms of reaching the needy more directly, reducing their dependency on fragile budget support relationships with interventionist-minded donors, while mobilising additional funding and speeding-up their move towards a future welfare state of their own making? Maybe. In any case, the cash transfer debate is no longer limited to those in northern development circles and has now reached the agenda of some African governments and the African Union.
It is not Europe's job to set Africa's priorities. But if asked to embark on a long-term partnership with an HIV-stricken African country that proposed a co-financing for some kind of cash transfer scheme, then Europe needs to be ready with a well thought through response that sends the right signals.