How can Africa move away from aid dependence?

By Alexis Akwagyiram
BBC News

image captionEthiopia, with its high growth rates, has an ambitious development plan

Much of Africa relies on foreign aid, despite economic growth in parts of the continent significantly outpacing the global average.

So, how is the money spent and how can countries move away from aid dependence?

Ethiopia has a split personality.

At first glance it seems to be on an unbroken upward trajectory.

Like a number of African countries, it has one of the fastest-growing economies in the world - expanding by about 10% a year since 2004.

And, in recent years, the country has attracted the attention of foreign investors.

media captionHow does the UK decide where to spend its overseas aid budget?

Ethiopia has come a long way since images of drought and famine broadcast around the world prompted the Live Aid fundraising concerts of 1985.

But the country's growth does not tell the whole story.

Ethiopia remains one of the poorest countries on the planet.

About a third of the population earn less than $1 (63p) a day and it received $504m (£324m) from the UK government in 2011/12, making it the biggest recipient of bilateral aid from the country that year.

Ethiopia's ambassador to the UK, Berhanu Kebede, said aid - primarily from the UK, the European Union and African Development Bank - was used for healthcare, primary school education and the provision of clean drinking water.

It funds the training of more than 30,000 workers to provide grassroots health care - often in hard to reach rural areas. It also helps to pay the wages of primary school teachers.

Mr Kebede said his country was "embarking on a huge development programme" in a bid to reduce its reliance on aid.

"Aid plays a significant role but, generally, it's a declining trend," he said.

"I'm not trying to undermine the role of aid, but our main aim is to move from aid to trade and investment.

"Our target is to become a middle income country by 2020 and, by 2030, to be classed as developed."

Ethiopia hopes to meet its targets by investing in higher education, agriculture and its manufacturing sector.

The ambassador said the majority of its development plans were being funded from the government's own budget, rather than aid.

Thirty universities have been built since 1994 and four years ago the government introduced a target for 70% of students to study science, technology or engineering.

"Science and technology is the basis for the transformation of the country. We have to build expertise in these areas for the economy to take off."

He also said there were plans to use technology to improve productivity in agriculture, since most Ethiopians live in rural areas.

media captionHow long-term aid is helping Ethiopia's coffee farmers

"These are strategies that are geared towards tackling poverty by getting people into work and helping them to feed themselves. Development is going very well. We need to work hard to sustain this," said Mr Kebede.

In all, nearly half - 45% - of the UK's bilateral aid programme in 2011/12 was spent in Africa.

With many Western donors re-examining their foreign aid commitments as a result of economic downturns at home, changes are afoot and new alliances are being forged.

China is increasingly exerting its influence across Africa.

The Washington-based Center for Global Development and Aid Data has revealed research findings that suggest China is financing 1,673 development projects worth $75bn (£48bn) in 50 African countries.

Political decisions

Meanwhile, the UK has announced that it will stop giving direct aid to South Africa in 2015, arguing that the progress made since the end of apartheid means it no longer needs aid currently worth £19m a year.

While the decision to stop helping Africa's biggest economy seems relatively straightforward, decisions to allocate or halt aid can sometimes be politically charged.

Last year, a number of Western governments suspended aid to Rwanda after UN experts expressed concerns about its alleged support for the M23 militia in neighbouring Democratic Republic of Congo - something the country has long denied.

But Ethiopia, which has been accused of forcing tens of thousands of people off their land so it can be leased to foreign investors, still receives assistance. Like Rwanda, it has denied the claims.

Ethiopia has also become embroiled in the affairs of a neighbouring country - Somalia. However, its involvement - sending troops into Somalia to fight al-Shabab Islamist militants in 2011 - had the backing of the US.

media captionJohn Rwangombwa from the Central Bank of Rwanda: "This is a vote of confidence in the Rwandan economy"

David Mepham, of Human Rights Watch, said the policies adopted by the UK's Department for International Development (DfID) towards Ethiopia and Rwanda appeared to be "inconsistent".

"DfID decided to withdraw all general budget support because of Rwandan support for the M23 in eastern Congo. Very serious rights abuses by the Ethiopian government have not triggered a comparable reassessment of DfID's strategy," he said.

"DfID and other donors remain unwilling to properly investigate serious rights abuses associated with the Ethiopian government's resettlement programme."

The withdrawal of aid can play a role in determining economic strategies.

Rwanda recently turned to the international financial markets to raise funds.

Last week it launched a $400m (£260m) 10-year bond sale which was heavily oversubscribed, attracting investor offers of more than $3bn (£1.9bn).

In doing so, it followed in the footsteps of several African countries - such as Ghana and Zambia - that have turned to the bond markets to raise capital.

The governor of the Central Bank of Rwanda, John Rwangombwa, told the BBC the move was part of its long-term development strategy.

'Unprecedented opportunity'

"We appreciate the support we get from our partners in terms of aid, but we think it's not sustainable as a long term development plan.

"That's why we have this ambitious development plan - to expedite our growth, expedite the size of our economy and be able to raise domestic resources to advance our development plan.

"We've had our taxes growing at a rate of 20% per year and we're sure that in the next five years we should be able to be considered as not aid dependant."

But the secret to building lasting economic development may lie somewhere else - beyond Western donors, China or even African countries themselves.

Ben Oguntala, a 39-year-old Londoner of Nigerian origin, wants to build on that flow of money entering the continent.

The trainee barrister is the driving force behind Developed Africa, a website which provides a platform through which people from Africa's diaspora can be matched with African government agencies and non-governmental organisations to invest in business opportunities across the continent.

"The potential that can be found in the African diaspora is huge. People in the diaspora have a sense of empathy and want to invest back home.

"If you take the power of remittance and apply it to investment, the diaspora could be a force to be reckoned with.

"The internet has presented us with an unprecedented opportunity to reach out to the continent."

Mr Oguntala argues that diaspora investors could contribute to the construction of buildings and roads across Africa.

He said his fledgling website has already received particular interest from expatriate Nigerians, Ghanaians, Kenyans and Zambians based in the UK and US.

"We have the capabilities, intelligence and the competence as well as the desire to achieve change in Africa."

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