The Church in Africa: 60% of all foreign aid stays within donor countries

Installment 4 of 15 – Andreas Widmer’s remarks at SECAM, Accra Ghana July 29. 2010

Why is it that all this aid money had so little effect? Why hasn’t more progress been made?

The reasons are many and complex, but a few simple points stick out to me:

The World Bank has estimated that 60% of all foreign aid stays within donor countries, and is used to pay for consultants to purchase nationally produced goods and for transportation costs.

And as in any industry, the basic truth applies: if poverty is your business, more poverty means more business…

And the other 40% of foreign aid that stays here in Africa to help build the local economy is far outweighed by corruption and the anti-competitive impositions put on African business:

Farm subsidies in the EU, the US and Canada, and the US steel tariffs total over $300bn per year, are larger than the combined national income of sub-Saharan Africa, and dwarf the $50bn given in aid a year.

Europe subsidizes its agriculture to the tune of some $35-40 billion per year, even while it demands other nations to liberalize their markets to foreign competition.

Dairy subsidy in the EU is $2.50 per cow per day…(Japanese cows live even better, they receive an average of $7.50 per day)

While aid amounts to around $70 to 100 billion per year, the poor countries pay some $200 billion to the rich each year.

Sub-Saharan African countries, where aid constitutes over 10% of GNP, remain the poorest in the world. Countries with some success in combating poverty, such as India and China, depend little on aid (less than 1 percent of GNP in both countries).

Sub Saharan Africa’s share of world trade declined from 6% in 1980 to only 2% in 2002

Is that because there are plenty of starving children, but no entrepreneurs in Africa?

Is it because Africans are worse at business than we are?

Is it because they don’t want investments?