By: Mary-Jean Nleya
While economic growth strategies are at the forefront of many national and international policy decisions, there are many debates as to what approaches work and which ones do not. I came across Dambisa Moyo’s Dead Aid, where she argues against the efficacy of the aid model as an attempt to solve Sub-Saharan Africa’s social and economic problems. She contends that this model has fueled corruption and has stifled sustainable economic growth on the continent. She suggests that to ensure sustainable economic growth, a different approach should be incorporated into the African growth strategy: access to the capital markets, increased trade, and micro-finance. She particularly commends China’s involvement in the continent as a positive intervention.
Whereas on the other hand, the aid model is advocated for by many, who argue that aid – if designed properly – may help ensure economic growth.
I had not decided for myself which side of the debate I lean more towards. However, by observing various efforts and their results, I have found that the ‘no-aid’ debate is more persuasive.
The challenges – the “institutional voids” (a term coined by Professors Khanna and Palepu) – that face Sub-Saharan Africa (as well as other emerging economies) serve as the basis from which the incredible business potential available on the continent springs. It can be said, though not expressed in Dead Aid, that China is perhaps filling in the institutional voids in Sub-Saharan Africa, either in infrastructure development or in Energy, for a quid pro quo.
Whilst China’s involvement has, arguably, been filling institutional voids, some of the involvement has been to the detriment of some sectors on the continent. One such example is in Botswana. There had been a major setback to Botswana’s power sector. The engineering and construction of the power plant (Morupule B project) was awarded to a Chinese company. However, in 2013 major problems – during the commissioning phase of the project – began to cause power cuts throughout the country, until the Chinese company was replaced for the maintenance and operation of the project. The project and the resultant problems cost Botswana millions of Pula (Botswana’s currency). (For more information, see here . )
Whether Botswana’s power issue is attributable to the Botswana government’s oversight or the Chinese company is debatable.
However, entrepreneurial solutions are imperative to solving social and economic problems on the continent, and that is to be done by filling the “institutional voids”. Notwithstanding, aid (emergency and humanitarian aid) is appropriate in certain circumstances, such as after natural disasters and as assistance for disease outbreaks.
Ultimately, aid cannot do for Africa what the Marshall Plan did for Western Europe. Advancing and growing African countries’ collective and respective economies require an entrepreneurial approach. However, the various African governments should be alert and ensure the “institutional voids” sought to be filled are indeed filled with due regard to professional and high quality standards, to avoid the power problems that Botswana experience(d).