Global crisis an opportunity for Africa – Top African Economist
LONDON (Reuters) – Far from being all bad news for Africa, the global financial crisis is a chance to wean the continent from aid that has only entrenched poverty, a former World Bank economist said.
Dambisa Moyo’s arguments, set out in a new book, fly in the face of warnings from some African leaders, global financial institutions and campaigners that the world’s poorest continent needs more donor money to survive the downturn.
"In a way the crisis actually provides the African governments with the situation where they cannot rely on aid budgets coming through from the West," she told Reuters in a television interview on Wednesday.
"There is a real opportunity for policymakers to focus on coming up with more innovative ways of financing economic development," said Moyo, a Zambian who until recently worked for Goldman Sachs and has just published "Dead Aid".
Moyo believes Africa not only has little to show for more than $1 trillion in well-meant development aid over the past 50 years, but is worse off because of its effects in distorting economies and encouraging bureaucracy and corruption.
As alternatives she seeks an increase in trade, particularly with Asia, more foreign direct investment, more microfinancing and more efforts to raise money through capital markets.
The global financial crisis appears to have made all those avenues much harder, however. Kenya, Uganda and Tanzania are among states that recently shelved bond issue plans. Foreign funds have been leaving African markets.
But Moyo, who lives in London, said she was not discouraged.
"If you focus on traditional markets like Europe and the United States, you come to the conclusion that markets are really damaged and it’s very hard to raise money," she said.
"But if you start to look towards China for example, which has $4 trillion or reserves, all of a sudden you could see there might be another opportunity to do a bond issue in the Chinese market for example."
Moyo pointed to the fact that after successful Eurobond issues by Ghana and Gabon in the past couple of years, at least 15 African countries now have credit ratings that would allow them to raise funds when market conditions improve.
Africa’s economies have averaged annual growth of 5.8 percent over the past decade, but that is likely to slow to 3.5 percent or less this year as investment and prices for the continent’s commodity exports shrink, the World Bank estimates.
The bank, for which Moyo used to work, has urged developed countries not to let up in commitments to Africa to ensure that fragile groups are protected. But Moyo said any increase in political risk as a result of cutting aid could be exaggerated.
"I can’t envisage that things are going to get much worse because aid is taken away," she said.
"It actually tends to pool at the top so it’s not like the average African is going to suffer. They don’t see the aid anyway. Essentially it’s going to really affect the bureaucratic processes at the top and would really impact on corruption."
Moyo is unimpressed by celebrity campaigners such as rock stars Bob Geldof and Bono calling for more aid for Africa.
"I fundamentally object to the notion that Africa needs more aid and I do think it’s time to have many more Africans speak out, especially the policymakers, because many of the policymakers actually don’t support aid," she said.