Why Foreign Aid is Hurting Africa

Samantha Brian Adam Alan

Kibera, Kenya

• 1 million people crammed together in 1 square mile

• Live in filth and absolute poverty

• So………

Where is the money?

• United Nations agency a short distance from Kibera?

• Africa receives $50 billion in aid per year

• Past 60 years---over $1 trillion in aid

• So why isn’t Kibera and Africa prospering?

Where is the money?

• Debt repayments about $20 billion per year

• Where do they get this $20 billion from?– Take it out of expense accounts for education

and healthcare

• Some debt is cancelled, but they only received more aid

Result

• IMF cautioned donors to be careful in the amount of aid they give African countries

• Report “Aid Will not Lift Growth in Africa”

Where is the money?

• So where is all the aid going to?– Corruption– Supporting bureaucratic governments and

organizations

• African Union estimates corruption costs Africa $150 billion per year

• Zaire: – Creditors can’t get money back– Yet, IMF gave Zaire a massive loan– Past President stole over $5 billion

• Malawi:– President embezzled $12 million

• Zambia:– President stole from health, education, and

infrastructure and pocketed it himself.

Bad for Economy

• “Free” money means inefficiency and keeps government in power

• Taxes?

• No way to raising finances yourself

• FDI? A lot of red tape and lag time

• Puts African citizens out of jobs– Example Mosquito nets

Bad for Economy

• Food aid vs. African farmers

• What they should do?– Aid money African farmer Feed people

• Money into a country increases home prices good expensive to export

• What they should do?– Issue bonds

A first….

• Ghana

• Pro-market movement

• Increased use of mobile phone

• More opportunities for citizens

Conclusion

• Issue bonds to raise cash, rather then depend on free money

• Raise capital in other markets

• Creative attractive “FDI environment”

• Increase trade