Niall Ferguson once stated that it seems problematic that so much of the public debate about Africa’s economic problems should be conducted by non-Africans. “From the economists such as Paul Collier and Jeffrey Sachs to rock stars such as Bono and Bob Geldof, the African disucssion has been colonized as surely as the African continent was a century ago.” Popular culture dictates that foreign aid will more often than not go directly to those in need, encourage, through chairtable contribution or via a foreign government-backed grant, entrepeneurship and eventual prosperity. The critical truth is that over the past thirty years of this spirit of giving, the most aid-dependent countries have exhibited an annual growth rate of minus 0.2 per cent. Truth be told, concessional grants, loans, and sometimes even charitable donations through NGOs doom the peoples of developing nations to the perpetual cycle of discouaged free-enterprise and increasing corruption that is witnessed today.

An example? Zaire’s President Mobutu See Seko is estimated to have stolen up to $5 billion. No sooner had he implored a reduction in interest payments on the debt did he lease a Concorde to fly his daughter to her wedding on the Ivory Coast. One estimate states that at least $10 billion, half of Africa’s 2003 foreign aid receipts, leave the continent every year.

There is a school of thought that argues that recipient countries view loans, which require future repayment, in a much different way than grants. The prospect of repayment indicates that loans induce governments to use funds wisely, and maintain current levels of revenue collection. If left unabated through a concessional grant, governments sometimes view the donation as free resources, and corruption begins or continues to thrive.

Ms. Dambisa Moyo, author of the book “Dead Aid” prescribes four alternative sources of funding for African economies, none of which have the same deleterious side effects as aid. African governments should follow emerging Asian markets in accessing the international bond markets and taking advantage of the falling yields paid by soverign borrowers over the last ten years. Secondly and conrtoversially, Ms. Mayo prescribes further investment in infrastructure from the Chinese government. The fruits that the trees grown from Chinese governmental aid will bear may stifle free-enterprise in years to come, but her approaches reflect notions of ‘shock therapy’. Thirdly, they should continue to press for genuine free trade in agricultural products, meaning that the US and EU must dismantle the various subsidies they pay to their farmers, enabling African countries to increase their own earnings from primary product exports. Finally, African nations should grant their inhabitants of shanty towns secure legal title to their homes, so that these can be used as collateral. 

This isn’t to say that we necessarily need less Bono and more Moyo. Many of the charitable foundations such as Unicef and Live Aid, yes, spearheaded in some cases by celebrities, have been extremey beneficial in say, providing millions with mosquito nets to reduce malaria in certain regions. However, one must also think of the African mosquito-net builder, who, albeit by good-intentioned donations, is now out of business. Free enterprise is what should be supported, and one site to look at which furthers this notion is Kiva.org.

Kiva’s mission is to connect people through lending for the sake of alleviating poverty. Kiva is the world’s first person-to-person micro-lending website, empowering individuals to lend directly to unique entrepreneurs in the developing world. The people you see on Kiva’s site are real individuals in need of funding – not marketing material. When you browse entrepreneurs’ profiles on the site, choose someone to lend to, and then make a loan, you are helping a real person make great strides towards economic independence and improve life for themselves, their family, and their community. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates and track repayments. Then, when you get your loan money back, you can relend to someone else in need. Kiva partners with existing expert microfinance institutions, providing a data-rich, transparent lending platform, and I highly recommend you check it out and contribute if you can. 

This opinion piece does not wish to stifle charitable donation. The mission here was to shed some light on where certain government-created concessional loans are actually going in Africa, how historically these were always and continue to be used for leverage purposes, and that there are alternatives that don’t impede on creative entrepreneurship and a cycle of dependency that has stopped a chronically depressed continent from becoming a miracle of economic growth.