Financial Freedom Nigeria


Foreign Direct Investments in Africa or AID – The Conflict

Foreign Direct Investments

By Martins Itua

The first and most important question is whether indeed Africa is better or worse off with foreign aid. The second most important question is why rich countries prefer to treat African countries like their invalid cousins in need of help. What do African countries really need? Foreign Direct Investments or AID?

It is impossible to believe or imagine that about $50 billion international aid comes to Africa each year and there are calls for that amount to be doubled. One will probably need a pair of binoculars to see what impact or positive difference this colossal amount has made in Africa. It seems more true to say that these monies end up in the pockets of leaders of the receiving countries and the aid workers. Because of access to ‘free’ money from developed countries, many African countries are not encouraged to be innovative or think of creative ways to solve their problems. We have found ourselves in a self-imposed quagmire and cycle of poverty, corruption and lack of economic growth. Yes, aid to Africa has made Africa lazy, poorer and in debt. The person who receives aid wrongly assumes that the aid giver does not need it. Of course that is not true. There is always an agenda behind every aid that is given which is never openly spelt out or even discussed. African countries will never develop or overcome the shackles of poverty and under-development as long as we allow so-called rich countries to throw money at us. We cannot be said to be truly free if we live off hand-outs from rich countries. What is more baffling is that no one is thinking of the long term negative implications of this form of neo-colonialism.ouhou;hln7

Clearly, aid is bad for Africa and somehow, we must grow the balls and have the sincerity of purpose to say no to aid but instead insist on trade, capacity building and knowledge transfer. Of course, aid appears easier but it will perpetually keep Africa in poverty and want. Evidently, this does not concern African leaders as they are only preoccupied with short-term gains and what is in it for them. The International Monetary Fund (IMF) alluded to this in a report titled “Aid will not lift growth in Africa” published in 2005. In the report, IMF warned that governments, donors, campaigners and pop stars need to be far more modest in their claims that increased aid will solve Africa’s problems. It is not a coincidence that there is huge poverty and negative social indicators in the African countries that benefit the most from aid. In the last sixty years, over $1 trillion of aid has come to Africa from rich countries. Despite this, real per-capital income is lower today compared to say thirty years ago and nearly half of the African population live on less than $1 a day.

The point must be made that there is an inverse relationship between aid and trade or foreign direct investment. Simply, aid makes the receiving countries totally unattractive for serious investments. It is like the relationship between light and darkness. The preponderance of aid in a country extinguishes opportunities for foreign investments. Instead of begging or seeking aid, what we should be doing is seeking ways to promote trade and investment in Africa. Traditionally, when the world’s richest nations gather, the only thing that is mentioned about Africa is how to help them. This narrative ought to deliberately change to how we can do business with them. But let’s not kid ourselves because this is not going to just happen without some work and sacrifice. The first and probably the most difficult is the building and strengthening of institutions of government and civil society. Second, the respective countries need to build an environment that is conducive for business by putting in place policies and programmes that will encourage people to come and invest in Africa. Doing business in Africa today is expensive and cumbersome for anyone willing to come and invest in the continent. We must deliberately build a system that makes it easy by reducing the unnecessary bottlenecks people go through to be able to start business in our countries.

Yes, there is a conflict between aid and trade because clearly they do not and cannot co-exist. Ultimately, the choice is ours and is simple. We can remain where we are today, do nothing and continue to live off the hand-outs given us by rich countries. We can refuse to build institutions to encourage investments and discourage corruption. We can adamantly insist on not encouraging enterprise and entrepreneurship through policy somersaults and reversals. We can continue to divert funds intended to provide social services into private pockets. If we like, we can neglect our infrastructure, schools and hospitals so that the rich will continue to send their kids to foreign universities and hospitals in developed countries. Our government officials can continue to fly first and business classes when most of our children go to bed hungry on a daily basis and are out of school. Our government officials can continue to buy and fly private jets and helicopters because our roads are in deplorable conditions.

Or we can make the more difficult decision to build a society where there is fairness and where our common wealth is not shared by a select few. We can build an economy where people are willing to invest and a country where every child is assured of three meals a day and they can go to school in peace and quiet. We can build a society where we can live in mutual respect and where we are happy to live and raise our children. Other countries will be willing to trade with us if we make this decision. The world’s biggest names and brands will happily come here and establish businesses. Major automobile manufacturers will readily build their plants here knowing that their businesses are safe. But we must first make that tough choice.

Making that tough decision will not be easy because it means that we must learn to stand on our own. It means that our politicians must stop their wasteful lives and focus on lifting people out of poverty by creating opportunities. What it means is that African leaders will have to stop wearing the most expensive watches and designer shoes and suits traveling to developed countries to beg for aid. Everyone else wears their products and dresses modestly but we fly private jets wearing Prada shoes and bags and Rolex watches and truly believe that they will take us seriously. They laugh at us in derision and consider us the most unserious and profligate people on planet earth. Our future will be more assured if we develop our capacities and systems and create opportunities for investments. Instead of discussing aid, let us present clear business opportunities in manufacturing, power, agriculture, construction, health and social services, etc. They are more likely to develop trade deals and create partnerships that will make Africa a better place for us, our children and future generations.



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