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Monthly Archives: October 2016
The Oil Curse
This idea of an ‘oil curse’ is seen in North and West Africa as well as in the Middle East. I have read about it in both courses and have seen very similar outcomes. First off, the discovery of oil actually happened quite recently in most of those countries (1950’s to 1970’s). So, there has not been enough time for these countries to react and develop accordingly. Being a resource/commodity economy means the market and thus your domestic economy is volatile. Because of this volatility many countries tend to nationalize their oil production, which means putting under control of the country and its leaders. This act inherently breeds corruption because countries have massive oil revenues and few or no checks and balances and the money’s distribution.
Michael Watts insists that the massive violence and corruption in oil states is not due to the commodity itself, but the centralization of the resource revenue. Furthermore Watts thinks the nationalization of a resource breeds the violence and conflict. To this, I agree to an extent, but maintain that without the resource countries would not have the type of violence they do. For example, violence would not be centered around the Niger Delta if there was no oil being produced there. The Niger Delta is sedimentary basin surrounded by few other available resources, yet migration has flocked there.
To think the nationalization of oil has led to the violence and conflict is a new point of view. From most articles I have read, the nationalization is always seen as an aspect of the overarching issues of an oil economy, not its own mechanism. However, Watts makes great points when discussing how Niger states are struggling to maintain their power because of the conflict arising from oil. Nigeria today has the largest economy in Africa, in large thanks to oil and the conflicts in the Middle East. It is important to remember that the United States and other nations came to Africa for oil because of the instability they saw in the Middle East and Venezuela. Therefore, Nigeria needs to maintain its stability if it wants to continue to capitalize on oil production.
While oil prices have plummeted, Nigeria has slumped into a recession. Similar to other oil curse nations, Nigeria relies on oil for 70% of its government revenue. Because of its lack of diversification, Nigeria cannot advance when oil prices and revenues are low. In MENA states, the decrease of oil prices usually means the decrease of government spending/welfare and distribution. Yet, the kings and royalty maintain their lavish lifestyles with the amount of oil revenue that came in. Many countries that have nationalized oil companies do not release public financial statements, so nobody knows what they are truly making or doing with their profits. The real push should be for diversification of the economy by putting oil revenue into infrastructure development. Meanwhile, citizens should be pushing for more transparency so the government can be held accountable for oil production and subsequent redistribution.
Interesting article regarding the current situation in Somalia. There is a NY Times article as well but I was unable to attach it to this post. I recommend looking up that article as well for those interested.
Even with the Nigeria being the most economically successful African country within the entire continent of Africa, it still receives a substantial amount of foreign aid from more developed countries. These countries include the United States and Great Britain, as Nigeria is the tenth highest recipient of United States foreign aid with $693.85 million dollars and the Great Britain committing to spending over $1 billion dollars in foreign aid in Nigeria. The United State’s goals through foreign aid in Nigeria are to reduce extreme poverty and improve the quality of life for Nigeria’s vulnerable communities at the federal, state, and local levels; reduce corruption strengthen the private sector as a source of job creation; improve the quality of social service delivery; and prevent the spread of HIV/AIDS. However, the majority of the aid from the United States in Nigeria is to protect Nigerian citizens from the Boko Haram. This is a similar goal of Great Britain as well as hundreds of millions of British pounds are being given to Nigeria to fight off the Boko Haram. However, due to a poor governmental infrastructure in Nigeria, the hundreds of millions of dollars being provided by the U.S. and Great Britain are not being allocated properly as the Boko Haram is still thriving and making insurgencies in Nigeria.
A large reason that foreign aid has not made a significant impact in Nigeria is due to the fact that there are substantial amounts of corruption in Nigeria’s government system. Due to such corruption, the money being provided by the U.S. and Great Britain to help solve some of Nigeria’s major issues is not being used the way that these two developed countries had hoped. Instead, the money is either being pocketed by government officials or being used for the wrong reasons. A prime example of this is that a large portion of the millions of British pounds that Great Britain is pouring into Nigeria for combating the Boko Haram is instead being exploited by Nigeria’s president Muhammadu Buhari to hunt down opposition politicians that were previously in power. Meanwhile, while Buhari fails to address the problem that is the Boko Haram, which is currently considered the deadliest terrorist group in the world, continues to take innocent lives within Nigeria’s northern regions where the militant group’s stronghold is located. According to a U.S. official, “There is no doubt the growing strength of Boko Haram is because President Buhari is far more interested in settling scores with his political opponents that concentrating his energy on defeating terrorists.”
An interesting point that Moyo made in her piece that started to make me think about Nigeria’s economic situation and their foreign aid situation she asks the question: “What if,” she asks, “one by one, African countries each received a phone call … telling them that in exactly five years the aid taps would be shut off- permanently?” In the case of Nigeria, due to their large amount of oil and petroleum reserves, I think that the most affluent country in Africa would do just fine if foreign aid was cut off to the country. If a country’s government can manage to pay its legislators the highest salaries in the world, with a basic wage of £122,000, and 80 per cent of the country’s substantial oil revenues go to the government, Nigeria should be able to do just fine without foreign aid. In my opinion, this interesting, yet radical question points out the real problem in Nigeria, which is not the Boko Haram, but corruption within its own government. The huge flow of oil wealth allows for the government to not have to rely on taxpayers for its income, so it does not have to answer to the people, which fosters rampant corruption and economic disparity since there is no investment in the infrastructure as the country’s leaders cream off its wealth. How does a country that has by far the highest GDP in the entire continent of Africa still have over 70% of its population living below the poverty line? The answer is pure greed.
Moyo, Dambisa. Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa. New York: Farrar, Straus and Giroux, 2009. Print.
Currently, Somalia receives a great deal of foreign aid from not only the African Union but also western countries as well. The United States has been at the forefront of this effort to stabilize and improve Somalia’s economy. A major reason for the United States investment and support is because Somalia is home to one of the most dangerous terrorist organizations in Al- Shabaab. The United States increase in foreign aid directly correlates with the growing relationship between the Government of Somalia and Western powers; the continued partnership and counter terrorism efforts have also made it much easier for the United States to provide further financial assistance.
In addition to the United States, the government of Somalia receives significant foreign aid from the United Kingdom, Sweden, Japan and Turkey along with many other countries. The majority of foreign aid that is given to Somalia and the major reason for the international community’s economic involvement is due to a humanitarian response. Somalia just recently is coming out of a devastating internal war that caused the collapse of the central government resulting in Somalia becoming a failed state for a short period of time before being given an interim government. Despite all of this internal strife, Somalia’s economy could be worse off. The economy is primarily dependent on livestock and fisheries and the real cause of the economy’s fragile state is due to the lack of security, resources, and poor infrastructure. This is difficult to improve with the strong presence of violent extremism that exists. All of this causes Somalia’s economy to be fairly informal and inconsistent. Besides agriculture, Somalia depends on construction and telecommunication to assist in the stabilization of its economy.
Due to its history, Somalia is in need of foreign aid because it is not able to raise enough domestic revenue. It is important to note, the degree of military aid that is also given to Somalia as this accounts for the majority of the financial assistance that is given by the international community. The United States along with other states are most interested in providing stability through the sense of human security and support. Somalia will not be able to substantially improve its economy and become less dependent on foreign aid until the central government is able to prove its internal stability and the safety/health of its citizens. This philosophy is echoed by international organizations such as the World Bank, the United Nations, and USAID where financial aid is first and foremost used for humanitarian purposes and not economic development.
Although in the readings we have noted the issue with Africa becoming aid dependent, in the case of Somalia foreign aid is absolutely necessary. This is because of Somalia’s history of violence/instability and the vulnerability of its government to violent extremism. Somalia needs financial assistance to stabilize its economy and avoid being a failed state. This foreign aid will most likely continue even as the humanitarian issues begin to become less prevalent. Somalia will need assistance to build its infrastructure and other parts of its domestic economy before becoming more economically dependent. For these reasons, Somalia welcomes foreign aid and is not as threatened by the possible long-term consequences.
Aid to Rwanda is inextricably intertwined with geopolitics and Rwanda’s bleak history. In July of 1994, the Rwandan genocide and the nation’s civil war ended with a military victory for the Rwandan Patriotic Front(RPF). Before the civil war, France was indisputably the largest donor to the Hutu dominated Rwandan government, contributing $160 million dollars in development aid during the Habyarimana regime; furthermore they offered significant military support to FAR. This aid was intended in part to safeguard France’s influence in Rwanda, and hedge against perceived ‘anglophone’ incursion into Rwanda. Consequently, France has been criticized for playing a role in the Rwandan genocide, and has not been able to regain its prior influence in the new regime.
Since the RPF has come to power, the United States has become the largest donor to Rwanda, which is reflective of the importance of United States – Rwandan bilateral relations. In 2014, Rwanda received 177 million dollars in foreign aid, of which 126 million came from USAID. For perspective, Rwanda’s GNI in 2014 was 7.9 billion. This significant Aid has come to symbolize the strong relationship between American and Rwandan leadership, particularly of that between Bill Clinton and Kagame, the former referring to the latter as one of Africa’s ‘new leaders.’
Aid is compromised by Rwanda’s role in committing atrocities in the Eastern DRC. Most recently, in 2012, the United States government suspended military aid to Rwanda, amid speculation that the regime was supporting the M23 rebellion which had overrun much of Kivus including the major city of Goma.
Schraeder, P.J. (2000). Cold War to Cold Peace: Explaining U.S.-French Competition in Francophone Africa. Political Science Quarterly. 115 (3), 395-419.
Melvern, L (2000). A people betrayed: the role of the West in Rwanda’s genocide. London: Zed Books. 24-115.
Kevin Sack and Sheri Fick, ‘Rwanda Aid Shows Reach and Limits of Clinton Foundation,’ New York Times, October 18, 2015.
Reuters, U.S cutting Military Aid to Rwanda, July 2012.
This past summer, the IMF approved a three-year plan proposed by the Extended Credit Facility (a multilateral international organization) for the equivalent of $115.8 USD in aid to the Central African Republic, in light of the “the unique opportunity to consolidate peace… and foster growth” that the country’s 2016 relatively successful democratic election provides. This aid arrangement is on top of the already hefty amounts of bilateral, multilateral, and NGO-sponsored aid dollars flowing into the CAR each year, including over $250 million combined from various US agencies (USAID Foreign Disaster Assistance and Office of Food for Piece, US Dept. of State, USG, and more). But just this week, the UN News Centre and other media outlets are reporting continued direct attacks on humanitarian aid workers, violence perpetuated by the still-raging conflict of the militant Muslim Seleka against the sitting government and, by association, the Christian population of the country.
In response to the violence, the IRC’s country director stated, “The risks our staff face each day in delivering aid are now beyond any acceptable level.” Similar statements have come out of other agencies and national bodies that provide financial and human resource aid to the CAR, especially because the violence from Seleka is compounded by suspected corruption scandals in the highest ranks of the government. From a look at the aggregate information on aid to the CAR and the uptick in violence, all signs point to a future decrease in traditional aid in the near future. Proponents of traditional monetary aid will surely decry any minimization of the dollar amount flowing towards the admittedly poverty-stricken and strife-ridden CAR. Yet what Todd Moss describes as the status quo of essentially “handing out charity” is long due for a reevaluation, particularly in the Central African Republic.
As Dambisa Moyo argues, the practice of unchecked, annual aid in the name of humanitarian assistance—while perhaps ethically sound—promotes the continuation of conflict in the long run. The Central African Republic is bountiful in its diamond resource, but most of the country’s population doesn’t stand a chance of benefiting from that financial pool. As such, the only other enticing and obvious opportunity for a more comfortable life lies in governmental positions. Public knowledge of aid in the range of hundreds of millions (and often billions) USD channeled through government, paired with a nation-wide (and partially-continent wide) tacit acceptance of national leaders siphoning off some of those funds for personal use, is a dangerous combination. The Seleka and anti-Balaka conflict can best be analyzed as a power struggle for the leadership of the country, perhaps even more than a religious conflict. The funds that incentivize struggle for national power are the same funds coming from aid plans aimed at alleviating the consequences of the struggle for national power. At the center of the cycle of violence, which in turn creates poverty and stalls development, is traditional humanitarian aid itself.
It is not a mistake that most major aid-giving nations, multilateral organizations, and NGOs are showing reluctance to continue their traditional aid gifts to the Central African Republic. On the country: their mistake was to continue this brand of huge loans and grants to the CAR’s government, and their failure to pursue more innovative forms of development support for the last half-century. This trend of cyclical violence is a barrier to development across the African continent. If, as Moyo argues and the CAR case proves, aid is a part of the cause of violence on the continent, a roll back in aid and a serious attempt at innovative ways to use financial resources to directly promote development without engaging directly with governmental power structures is long overdue.
 The International Monetary Fund, https://www.imf.org/en/News/Articles/2016/07/21/20/54/PR16352-Central-African-Republic-IMF-Executive-Board-Approves-Three-Year-Arrangement-Under-the-ECF
 USAID, Central African Republican, https://www.usaid.gov/crisis/central-african-republic.
– UN News Center, http://www.un.org/apps/news/story.asp?NewsID=55136#.WAjd8CMrKto.
 Central African Republic, Freedom House, https://freedomhouse.org/report/freedom-world/2015/central-african-republic,
 Moyo, Dambisa, “The Myth of Aid”, Dead Aid: Why Aid is Not Working and How There Is a Better Way for Africa (Farrar, Straus, and Giroux), pg. 8.
Kenya receives bilateral aid through multilateral organizations such as USAID and DFID. The USAID claims that Kenya is “the largest, most diversified economy in East Africa, [thus] Kenya is a crucial economic partner for the U.S. in the region.” In addition, a case study of Kenya showed that there is a positive relationship between foreign aid and development in Kenya. However, there are conflicting reports from other sources which claim that some of the aid in Kenya cannot be accounted for due to corruption. This post questions whether Kenya is praised for being relatively developed compared to her neighbors which encourages mediocrity or whether the government of Kenya should be held accountable for the billions of dollars and Euros drilled into the economy. Evidently,the Kenyan government is adhering to the bare minimum required by the conditions of the donors and therefore, it does not fully utilize the potential of Kenya to emerge from the shackles of poverty and corruption.
As explained by the last blog, Kenya has a close relationship with the US due to counter-terrorism efforts aimed at curbing the growth of Al-Shabaab. But according to the USAID data, peace and security only get about 5.2.M which is actually the lowest amount of aid given to a sector. Therefore, inasmuch as US aid to Kenya is talked about in the form of security, the actual money is located in other sectors such as health ($356.7M), humanitarian assistance ($103.4M), and economic development($49.1.M). In total, the USAID spends about $557.2M in Kenya. According to the remarks made on the USAID website, especially with regard to Obama’s visit to Kenya, one can clearly see that the USAID sees a positive correlation between its work and the development shown in Kenya. Furthermore, the DFID reports that Kenya’s average growth for the last 5 years (2009-2013) has been 5.6%, which despite being above average for Sub-Saharan African countries, still lags behind her East African neighbors such as “Uganda (5.8%), Tanzania (6.7%) and Rwanda (6.4%).” This is the growth that USAID is excited about. Of course it is better than a stagnant country or a receding one, but is this what the Kenyan government should aim for? An average growth?
Kenya does not receive the largest ODA from the British government, but its one of the highest recipients of British aid considering that Britain was her former colonizer, thus supporting Moss’ point, which is, “donors tend to give much more aid to countries with which they have had a past relationship.” (123). Kenya gets almost £80 million every year from the British government, which is less than what she gets from the American government. In the 2013-2014 fiscal year, the Kenyan auditor general Mr Edward Ouko, stated that “of the Sh1.3 trillion (£6.3 billion) budget, only 1.2 per cent was spent legally and effectively.” He added that “approximately Sh600bn (£3.76bn) ‘had issues’ and could not be properly accounted for, while they were unable to tell whether a further Sh390bn (£2.4bn) had been spent legally.” The unaccounted money, which is more than the accounted money, is the one that fuels corruption in Kenya. It creates extra pockets for money to circulate in the economy thus making corruption, particularly bribing inevitable.
Foreign aid should be minimized and should also be channeled to specific problems in the different sectors and not to vaguely functioning sectors. Therefore, currently aid is a bit helpful but most African governments could do better if they were forced to be accountable and responsible without excessive aid.
- DFID Kenya, Operation-Plan 2011-2016 (December 2014)
- ROLE OF FOREIGN AID IN DEVELOPING COUNTRIES: A CASE STUDY OF KENYA (1990-2010)
Published on Institute Of Diplomacy and International Studies (http://idis.uonbi.ac.ke)
- Moss, The International Aid System.
Foreign aid in Tanzania has produced a number of effects, some positive and some negative, on the economic and political development of Tanzania. The unintended consequences of the deeply dysfunctional aid system that Moss and Moyo write of, can be seen in the aid relationships it has with foreign countries; however, the foreign aid experience of Tanzania can be seen as an exception to this relationship of dependency and negativity.
The political system of Tanzania is largely democratic, which has allowed its civil society to expand and prosper peacefully, making the country attractive to donors. Foreign aid to Tanzania centers around supporting NGOs and human rights, as well as legal reform and media advocacy. In recent years, aid has shifted to being provided in the form of General Budget Support (GBS), which places the development agenda in the hands of the government without restrictions and therefore increasing the likelihood that it will be utilized for other means. Unaudited budget unintentionally supports the practice of vote buying, corruption, and maintaining the political status quo. Although Tanzania is relatively uncorrupt, in terms of governance, it does not mean that having undirected aid is not problematic nor that it would not be used to support the ruling parties political platform and maintenance of power. However, the Tanzanian government is largely accountable for its actions and supports policies aimed at reducing corruption, focusing on their commitment to economic development.
The USAID selected Tanzania as one of the four countries for the “Partnership for Growth” effort, aimed to accelerate and sustain economic growth in countries that have made significant progress in policy and development. The foreign aid plan for the 2017 fiscal year amounts to $573.33 million, with the vast majority of it directed towards improving the health sector, followed by economic development.
Despite Moss and Moyo’s arguments that aid is primarily detrimental to the growth and development of countries in Africa, aid has largely been beneficial for the economic development and improvement of civil society. However, a large part of the success of foreign aid is due to the Tanzanian government’s efficient management of its public finances, which has allowed aid to help improve economic development. (Rotarou). The government has created tools to help manage its budget and to ensure effective bureaucratic spending, all aimed to minimize inefficient allocation of resources and to increase accountability to eliminate corruption. Tanzania is perhaps an exception to the detrimental effects of aid that the authors discuss; however, the government itself is largely responsible for ensuring that foreign aid does not promote corrupt economic practices. Moss presents Botswana as an exception to the argument that recipient governments mismanage foreign aid to secure political or private gain (137), and Tanzania is similarly an exception. However, Tanzania does still have a dependency on foreign aid, and relies on it to help boost its health, education, and agricultural sectors to reduce the rampant poverty that does still exist, particularly in rural areas.
Although there are certainly negative and unintended consequences that come with the provision of foreign aid to countries that remain economically and politically weak, it is problematic to generalize all countries as corrupt, or mismanaging finances for private gain and entrenching the current political status quo. Tanzania’s experiences with foreign aid contrast with those of many other African countries, due to its stable political situation and steady economic development, which allows it to have increased opportunities for investment and trading, in addition to its continued receipt of aid from donors.
Foreign Aid and Economic Development: Tanzania’s Experience with ODA (Elena Rotarou and Kazuhiro Ueta). http://wd5ka5yq6f.search.serialssolutions.com/?genre=article&atitle=Foreign+Aid+and+Economic+Development%3A+Tanzania%27s+Experience+with+ODA&sid=jstor%3Ajstor&eissn=13496778&spage=157&issn=13496786&volume=78&title=The+Kyoto+Economic+Review&epage=189&issue=2+%28165%29&pages=157-189&date=2009-12-01
Moss, Todd. “Chapter 8. The International Aid System.”
Moyo, Dambisa. “1. The Myth of Aid” (pages 3 – 11); “4. The Silent Killer of Growth”.
As the top two contributors of foreign aid to Gabon, the United States and France have continued to allocate foreign aid to the central African country under the guise of economic and civil development, but in reality it has mostly contributed to sustaining/financially enriching the Bongo family and helping them remain in power illegitimately in exchange of a few favors.
France and Gabon signed contracts under Françafrique that ensured that France’s interests such as access to Gabonese oil, manganese, other minerals will be met. France also has a crucial military base in Gabon. In exchange for these favors, France offers economic, political, and military aid to Gabon (to Gabonese presidents). In spite of the millions that France sends to Gabon every year, there has not been substantial economic or political improvements in the country. In the country, corruption has increased and the President Bongo and his family are building up their wealth with the majority of their investments and properties in France.
Dambisa Moyo is correct in Dead Aid when he states that aid goes to foreign countries which in turn increases corruption. The foreign aid that Gabon receives from France is a perfect illustration of the foreign aid that Gabon receives from France and the United States. Gabon is notorious for its autocratic government and for having been ruled by the longest standing African head of state until his death. Nevertheless, the United States has continued to offer foreign aid in the form of military training and other capital.
The United States justified its aid to Gabon by highlighting Gabon’s efforts in maintaining peace in the Central African region as well as for its efforts to maintain maritime wildlife and other environmental engagements. In 2012, the United States gave about five million dollars in aid to Gabon for Security Assistance, Development Aid, and Health Aid, and other. The largest portion of the aid that the United States gives to Gabon ($4,442,350) is not invested in security efforts, not in the health department, nor for development. It goes towards “other” spending. It is peculiar that the United States will continue to give aid to Gabon when the majority of the aid does not even go towards what it was planned for and given the corrupt background of the dictators of the county. One can only deduce that the majority of the aid that is listed under “others” goes to the private funds of president Bongo and his family.
The United States and France have continued to give aid to president Bongo even though his fortune is growing without substantial development in the country. President Ali Bongo has more than thirty-nine properties in France. He has also inherited his father’s (president of Gabon from 1967-2009) assets which amount to seventy bank accounts in Paris and Nice. The foreign aid that the U.S. and Gabon give to France is beneficial to the elite, starting with the presidential family, but does not trickle down to citizens.