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Africans: “We need trade not aid”

By Timothy Cox
January 6th, 2010 at 11:12 am | 4 Comments | Posted in International Development

dambisaAfrica remains the world’s poorest continent with the world’s worst employment opportunities. The International Labour Organisation estimates that up to 99 per cent of African employment is informal–outside of the fiscal system.

The situation is dire and imposes increasing  costs on taxpayers in donor states. In 2008 Labour spent £6.3 billion on Overseas Development Assistance and the Conservatives have pledged to increase this by almost £4 billion.

In times of economic hardship £10 billion spending pledges need to stand up to scrutiny. But this one does not. Four decades of development “assistance” and trillions of dollars in aid have done little to improve the situation in Africa. In fact, Africans are poorer now than they were forty years ago. Over 60 per cent survive on less than $1.25 a day, and one in four African children under the age of 5 are malnourished. Surely, by now it should be evident that this system of aid is not working? Money continues to be wasted on top down aid projects that, at best, do little to appease the underlying causes of the poverty. At worst they actually aggravate the situation by undermining local businesses and legitimising corrupt regimes.

There are a few dissenting voices. Outnumbered by well heeled NGO lobbyists, some economists are daring to incur the wrath of the Department for International Development’s (extensive) advocacy department and are speaking out. Articles like this recent editorial in the Kenyan Daily Nation reflect what many Africans are thinking; that freedom to trade is the surest route out of poverty. To borrow a phrase from another African tired of witnessing the futility of pumping good money after bad, Dambisa Moyo, “there is no doubt–we do want to help.” But help does not come in the form of DfID handouts; it comes from allowing Africans to do what has enriched the rest of the world–trade.

[For fuller accounts see ‘The White Man’s Burden‘ by William Easterly and ‘Dead Aid‘ by Dambisa Moyo – Ed.]

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Aid “for Trade” is pointless amid corruption

By Timothy Cox
January 5th, 2010 at 12:35 pm | 2 Comments | Posted in Economics, International Development

africacorruptionWhile funds continue to be pumped into Africa through Aid for Trade programmes (to the tune of $9.5 billion in 2007), African governments continue to stifle their own businesses by imposing restrictions upon the movement of goods through the region.

A recent article in the Vanguard News (Lagos) details how debilitating delays to traffic are caused by Nigerian government officials extorting money, in the form of taxes and fines, from traders. It’s a common story, has even become a stereotype of much of the continent, yet sadly remains true. This heavy handed government action renders Nigerian businesses uncompetitive–delaying their goods and increasing their costs compared to foreign competitors.

Historically, the response of the government in Nigeria has been to increase import duties to “protect” their domestic industries. This results in higher prices for the average Nigerian as they have to pay more for their goods and services. The sad irony is that the reason many Nigerian businesses aren’t competitive in the first place is because of these detrimental government interventions in their business activities. Thus the vicious cycle continues–businesses crippled by their own governments plead for further protection against competition from abroad.

African governments need to stop looking to aid agencies for hand-outs and start allowing domestic companies to do their good honest business.

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Frenchman bang on over African liberalisation

By Timothy Cox
December 3rd, 2009 at 5:04 pm | Comments Off on Frenchman bang on over African liberalisation | Posted in Economics

truckWhile the Doha round of trade agreements sinks even deeper into a quagmire of bureaucratic hurdles and empty promises, Emmanuel Martin hits the nail right on the head in an article for Kenyan ‘paper Business Daily.

He correctly states that Africans have the opportunity to free themselves from trading constraints in spite of the stalled World Trade Organization (WTO)  talks.

The WTO’s goal of reducing the import tariffs faced by developing nation exporters may be admirable, but the sad reality is that a disproportionate amount of the barriers to trade are actually imposed by African governments on other Africans.

When a World Bank study looked at trade barriers in 75 countries, they found that the countries ranked as “below average” in terms of free trade could boost trade by $377 billion–just by liberalising “half way to average”.

Imagine the effect on trade and alleviating poverty if they fully liberalised.

And yet within Africa trade is stifled by extortionate admin fees for construction permits and registering business, debilitating delays at border crossings and corrupt officials skimming money.  In combination, this makes the costs of doing business in Africa the highest in the world.

Indeed, according to the World Bank Doing Business report, even the warzones of Iraq and Afghanistan offer a comparative haven for business compared with many African nations. It should therefore come as little surprise that the continent has the lowest levels of intra-regional trade in the world: under 10 per cent of exports are destined for other African nations.

Until these issues are addressed there is little hope for Africa’s millions of potential entrepreneurs, even if the Doha talks do come to an expedient conclusion–which, by the way, they won’t.

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