Africa Needs More Investment, Not More Aid

by Drima on November 7, 2007

I’m a huge, huge fan of TED talks. They’re inspiring, extremely informative and deeply thought provoking. I finally had time to watch this excellent speech by Andrew Mwenda. I’m happy that ideas like his are finally beginning to make an impact. If you’re wondering why, then check what I’ve said before:

My ultimate dream is to help people become entrepreneurs but before I do that, I myself need to become a successful entrepreneur. I don’t believe in charity as much as I believe in entrepreneurship. Like the Chinese say “give a man a fish and he will eat for a day. Teach a man how to fish and he will eat for the rest of his life.”

I heartily agree with Mwenda’s ideas and opinions on the World Bank and IMF. Moreover, I too I’m a believer in self-initiative and a staunch opponent of the victimhood mentality many of us are entrenched in. Watch his speech:

{ 24 comments… read them below or add one }

1 Roman Kalik 11.07.07 at 1:29 pm

TED is great. I don’t have much time watching the talks, but they tend to be very thought-provoking.

I couldn’t watch the entirety of the video (no headphones here at the moment), but I downloaded it for later review.

From what I’ve listened to, I agree wholeheartedly. The image Africa (and it *is* Africa, rather than individual African countries, stupid as that may be) gets is that of a poor and downtrodden area, the equivalent of a beggar in the street. Merely throwing money around *doesn’t* help, you have to develop the local infrastructure, give people the tools with which they can build their future instead of leaving them at the mercy of some benevolent richy-rich guy abroad…

And what the article said about food donations… I couldn’t agree more. If you flood a market with cheap products (so cheap that they are impossible to beat in the case of food donations) then you kill the local food market. That’s a fairly basic concept that most NGOs consistently fail to understand, because they’re usually charity foundations with very little forward planning. It may make the people working in them feel good, but it doesn’t improve anything.

Charity doesn’t stop poverty, it merely postpones its effects for a day, and even makes someone dependent on it. One must anticipate charity by preventing poverty, and you prevent poverty by giving people the ability to climb out of it.

Charity… charity is for when you see no other alternative than postponing poverty. It’s not a solution to anything.

2 Drima 11.07.07 at 3:56 pm

Roman, Roman, Roman. Man I’m liking you more by the day. Dude, start a damn blog! :)

Never have I watched a speech so short yet so concise and straight to the point as his. He sums it all up very well. I liked the fact that he kept emphasizing the aspect of good intentions being present.

Unfortunately there are many Africans that think, the situation is a deliberate attempt by the white man to keep Africa as screwed as possible. It’s sad. However, what’s sadder to me, is when we Africans ourselves believe that all there is to our continent is malaria, civil war, HIV and poverty.

I’m very optimistic that we’ll see various countries in Africa rise during the coming decades, just like China and India.

As for Sudan’s case, the scary question marks will be known after 2011, the year Southerners get to vote for separation.

3 JMac 11.07.07 at 8:31 pm

Drima, I agree with him wholeheartedly as well. I enjoyed his speech very much, it was inspiring to hear. I’ve been wondering about how to get there, though (removing or decreasing foreign aid). What do you think (or others reading your blog)? What would be easy to implement now?

I even thought of investing in a small business cooperative in Africa, but it seems very tricky unless you are able to physically be there for long periods of time. I too, want to see countries in Africa thrive, very much so.

4 Drima 11.08.07 at 3:12 am

JMac, there are various organizations specifically set up to support and boost entrepreneurship in Africa. Many of them are actually in America, set-up by enterprising African-Americans and members of the Afrian Diaspora in America. Check this one for example:

http://myc4.com/Portal/Default.aspx

Also you may check out Benin Brown every once in a while. He’s a great blogger who covers these sort of things:

http://beninmwangi.com/blog-posts/

I’ve been inspired by what he does and learned a lot from it.

5 Roman Kalik 11.08.07 at 7:23 am

Roman, Roman, Roman. Man I’m liking you more by the day. Dude, start a damn blog! :)

Thanks man, but I just don’t have the time to multitask to such an extent. Today, it’s either maintaining a blog or maintaining my roleplaying groups. For the moment, roleplaying takes priority.

Incidentally, the damaging effects of charity in the long run can also be seen on a per individual basis, not just on the country market model. If a person can live off Welfare, his working skills don’t improve but rather degrade in the long run, which creates a very dangerous situation if the Welfare payments ever end, because he will be unable to cope.

What you need is to help people gain much-needed skills, help them find jobs or start their own business, help them have *some* control of their fate, otherwise you just have an ever-growing slice of the public that has become dependent on some kind of charity system to survive. Eventually, the sheer bulk of such a group will cause irrevocable damage to the local economy.

An economic model has to be dynamic in order to survive. Once you force it to become static, you’re just forcing it into a downwards curve that will end with a crash. And the crash costs lives, not to mention that the quality of living of the people who are living off the charity will steadily decline as the economy begins to fail, thus costing years off people’s lives as well.

6 chiba 11.08.07 at 12:53 pm

China is understand this and is investing more than 6 billions dollar in Sudan!!!!

Sudan is witnessing a lot of development in economic,its even one of the three fastest growing economy in Africa

7 Roman Kalik 11.08.07 at 2:29 pm

Um, no. China, in reality, just requires a large oil source to supply its insane growth plans. Thus China’s investments don’t actually help anyone living in the poorest parts of the country (which in fact means most of the country, from what I see).

Khartoum is prosperous, yes. That’s about it. And with China watching out for Sudan’s government in the international political arena, much of the discussion on Sudan (I.E, Darfur) is being nipped in the bud, thus contributing to the overall chaos and deterioration of the country.

Economics are important, but not *just* economics.

8 Drima 11.08.07 at 4:50 pm

To add on to what Roman said,

1- China is not investing in Sudanese entrepreneurial initiatives.

2- Most workers in Chinese oil companies are Chinese and not Sudanese. Furthermore they send a lot of the money they earn back to China.

3- It is mainly the elite in Khartoum that is benefiting. There is no trickle effect.

4- China is not investing all this money with the intention of helping eradicate poverty and supporting entrepreneurship in Sudan. Instead it’s about the flow of oil and good relations with al-Bashir and the gang.

5- There is a lot of corruption happening under the table and China is gladly contributing to it by paying bribes.

So yes China might be investing billions, but there is a lot that’s screwed up with the picture.

9 Andrew Brehm 11.09.07 at 9:48 am

chiba,

Where did you hear that China was investing in Sudan in the sense of investing to help the economy?

What did China do that you think would qualify as such an investment?

What Drima says is true, from what I know. China is merely giving money and protection to the dictatorship to be allowed to remove the oil. I hardly think that propping up the genocidal government of Sudan is helping the economy much.

10 Chiba 11.09.07 at 6:51 pm

Roman,
Andrew,
China is really helping Sudan in the basic infrastructure.
You cannot imagine how the Khartoum refinery (built by China at 1 billion dollar)changed the life of Sudanese by cutting by half the price of oil and fuel…
China is building the biggest dam in Africa with high voltage line in half of Sudan,imagine,it will end electricity blackout ,help the industry,help the hospitl,help the agricultural,its an invaluable boost for all economy,welfare of people,and dont tell me that electricity is bad because its china who built it.
And 80% of oil jobs are occupied by Sudanese staff in all oil consortium conpagny oiperaitng in *Sudan:
http://sudaninside.com/2007/10/26/sudanization-of-oil-jobs/

11 Esra'a 11.10.07 at 12:21 am

Ashraf Ghani Ahmadzai of Afghanistan made the same argument. Many disagree, however.

12 Drima 11.10.07 at 1:18 am

Esra’a, those who disagreed in the comments clearly don’t have any proper knowledge about basic principles of economics.

Chiba, thanks for that interesting website.

“China is really helping Sudan in the basic infrastructure.”

I agree. You’re certainly right.

“Khartoum refinery (built by China at 1 billion dollar)changed the life of Sudanese by cutting by half the price of oil and fuel…”

Yes fuel prices have dropped, but costs of living especially in Khartoum have increased a lot. Rent prices are going crazy.

About the dam, yes I agree. Electricity will certainly be good. If China is going to drill more oil and boost production, more electricity will be needed. Keep in mind though, that the Merowe dam is going to force tens of thousands of Nubians out of there ancestral land. Government security forces killed some of them during a protest a few months ago and now the Nubians have formed their own rebel group. I’m saying this to let you know that the dam project isn’t all rosy.

About the Sudanization of oil jobs. Yes, it began after a number of prominent Sudanese pressed the issue. They didn’t want the Chinese to have too much monopoly in running the show. Things are slowly improving. I wasn’t aware the new statistics were that high. Two years ago, things were different and I’m glad to see them improving quickly.

To sum it up, China’s infrastructure projects are for the purpose of supporting the oil industry. There are side benefits which you have brought up. There are good things happening, yes. I will never deny that. However, those good things are only benefiting a few.

The boost in Sudan’s economy still hasn’t benefited the average Sudanese. Maybe we need to wait a little longer. For now, poverty is still a huge problem and aid should be replaced with investment to help with (mirco)financing Sudanese entrepreneurial initiatives.

China is not doing that. It is driven by its hunger for oil. Western aid agencies are driven by their desire to help the poor, although their strategies could be a lot better.

13 chiba 11.10.07 at 11:14 am

“Western aid agencies are driven by their desire to help the poor, although their strategies could be a lot better.”

The funniest thing i have heard since the kidnapping of chad children

14 chiba 11.10.07 at 11:16 am

But i agree with most of you said…

15 Drima 11.10.07 at 11:47 am

Those who kidnapped the children and tried to excuse it with whatever garbage they could invent are idiots.

Good to know we agree on most points. ;)

16 The Raccoon 11.10.07 at 12:26 pm

Entrepreneurship by itself wouldn’t be enough, BTW. In order for it to succeed, a political culture in which property is sacrosanct is needed. Why bother working your ass off and becoming rich when it all can be taken away from you in a moment?

This, I believe, is a major problem with Africa. But it’s a bit of an egg/chicken issue, too…

17 Suzanne 11.10.07 at 4:29 pm

Drima,
Watch this one:

http://novatv.nl/index.cfm?ln=nl&fuseaction=artikelen.details&achtergrond_id=10015&CFID=32905447&CFTOKEN=32689294

It’s titled “arm kind”, which means “poor child”

18 Suzanne 11.10.07 at 4:35 pm

Two more things to translate in the cartoon above:

“Zo doen we dat” = “This is the way we do it”
“Hulp” = “Aid”

19 JMac 11.10.07 at 5:28 pm

“Why bother working your ass off and becoming rich when it all can be taken away from you in a moment?”

I agree with Raccoon. I firmly believe in investment in African countries, and I’m interested in supporting that. But I think there’s a disconnect on “how.” For the reason Raccoon mentioned, it could be risky business.

I was interested in what Mo Ibrahim is doing (http://www.moibrahimfoundation.org/), because it seems if you could reduce the incentives that cause corruption in government,you could then begin to build. Who knows.

(Thanks for the links to those sites BTW, very interesting.)

20 The Raccoon 11.10.07 at 9:54 pm

JMac… the idea seems solid… but by the company Mr. Ibrahim keeps, I’d say he is doomed to failure.

Kofi Annan alone is enough to make me highly suspicious of the whole thing. Anyone associating with in general and honoring in particular the worst mass-murderer currently alive is problematic in my book.

Especially an African. Wasn’t Rwanda enough? Or even Darfur? Congo?

Pfeh. Doomed. Only in Drima I trust to do anything positive for Africa :)

21 Drima 11.11.07 at 1:12 am

LOL, thanks Raccoon. :P

I’m a little skeptical of Mo Ibrahim’s efforts but at least he’s trying something so he has my support.

Now back to the concerns brought up.

Okay, so we agree that the legal system isn’t exactly wonderful in many African countries. There must be respect for private property rights.

You’re saying entrepreneurship on its own won’t solve the aforementioned problems. I disagree. I think in the context we’re discussing it in, it will work.

What will happen today if Western aid agencies cut their aid to Africa? It will be a disaster. A country like Sudan needs aid. Without it we’d have potential chaos.

Western aid agencies can steadily decrease aid and increase investment instead. While doing that, they should lay down some conditions for a framework that governments have to follow, a framework that will respect private property rights.

Governments will comply because 1) they need that aid/investment and 2) if things are implemented properly, entrepreneurial initiatives will begin popping up which will be good for the people and the country’s economy.

The agencies have the ball in their court. They should work together with the people on the ground i.e. potential African entrepreneurs and existing ones.

This is an economic approach to the problem. It doesn’t have to be a chicken and egg situation. There will be others using different approaches to tackle issues. Just remember this, as long as people are poor and illiterate, they’ll be too busy trying to make ends meet, to worry about democracy and human rights.

Focus on satisfying their most basic needs first. Then they’ll have time for other stuff.

Kinda like Maslow’s hierarchy of needs.

22 The Raccoon 11.11.07 at 7:55 am

Drima - you’re working with the basic presumption that governments wish for their country to succeed.

Alas, I know all too well that this is not the case. And the reason is simple - you’ve stated it yourself - “Focus on satisfying their most basic needs first. Then they’ll have time for other stuff.”

Other stuff like wondering why their government is so corrupt. Or like why their people are not represented. Or like why the government forces are terrorizing them…

Prosperity brings freedom to think. And free thought is a dictatorship’s worst nightmare.

So there’s no way on Earth Kofi’s little friends will allow prosperity, mate. It’s bad for their business.

23 Roman Kalik 11.11.07 at 8:41 am

Esra’a, having read your post I must say that the objections seem to be built solely on “capitalist pig-dogs are evil!” rather than any actual sensible arguments.

Thus, I’ll go with Ashraf Ghani for the moment. Infrastructure is the key, it is always the key, but those objecting to developing infrastructure on ideological grounds seem to believe that if you let capitalists develop something, the Evil Capitalist Global Plot advances.

And to that, I say: Sheesh.

24 Drima 11.11.07 at 9:27 am

Hmmm, well maybe you’re right. But that’s not the case with Africa’s countries where there are decently functioning democracies, or ones where there is pressure on the ruling regimes.

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