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MDGs: why foreign direct investment, and not foreign aid, will do more for Africa

MizzRebelution

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POVERTY IS THE TRUE MEASUREMENT of a states’ success. If poverty is prominent and every other person counted is associated and/or affected by poverty, clearly the state needs to improve. A lot argue whether or not foreign aid reduces poverty in Africa. “Africa lags behind all other regions in progress to date. About half of Sub-Saharan Africa’s 750 million-plus people still live on less than one dollar a day, a figure that has been static since 1990, whereas in South Asia it dropped from 39% in 1990 it 30% in 2001 and is dropping further…” Clearly, the foreign assistant funds are being mismanaged in Africa.

THE STATE CANNOT BE ESTABLISHED and cannot prosper if there is no progress: development, political and economic growth. Foreign aid is a supplement of dependency that prevents the state from growing collectively. Countries develop and grow due to trade, innovation and business. There isn’t a country in the world that has prospered being solely dependent on aid as a source of development. Because aid has been so prevalent in associating itself with Africa, it has hindered and convoluted alternative solutions such as global trade and foreign direct investment.

WHAT HAS ALSO BEEN COMPROMISED IS the perspective of the African continent. It is pity that most people have when looking from the outside in, inspiring our desire to donate so much. Some people do not perceive Africans as adequate business partners because of this aid culture that has been created. The perception of Africa has been tainted by continuous open-ended deals to supply Africa with foreign aid assistance.

A MEMO FROM A PROMINENT GLOBAL investment bank reads: “Historically, Sub-Saharan Africa has been considered more of a target for aid rather than investment. With most Sub-Saharan Africans still living in poverty on less than $2 per day, many people have questioned the effectiveness of trillions of aid dollars doled out over the last 50 years in achieving economic growth, arguing for more investment and less aid. Years of widespread corruption, political unrest, and news footage filled with images of famine, war, and civil insurrections paint a challenging picture for investors. But Sub-Saharan Africa is multi-faceted, and these portrayals by the press mask an emerging investment opportunity getting more attention from institutional investors who see it as the biggest frontier market opportunity, even when compared with Asia, Latin America and the Middle East.”

Development should be the main objective in these countries and attention should be taken off aid as the solution to all problems. China is investing in Africa and all around the world and seizing opportunity that the western world and Europe has been ignoring.

AID IS NECESSARY IN CERTAIN SITUATIONS, especially humanitarian/emergency aid in response to a disaster. However, Africa is bombarded and overwhelmed with foreign aid. However, systematic aid is not compulsory for most countries and has had little to no effect on directly influencing socio-economic development. This type of aid should be curved and closely analyzed in regards to the direct and indirect effects there are on the surrounding communities. Corruption, agriculture, exports and imports are all related to aid and development. Alternative solutions to aid dependency for socio-economic growth and development can all be found in agriculture, trade and corruption prevention. As we get further into the millennium with so many things rapidly changing in the emerging global market, foreign aid and investment is slowly transforming and undergoing reform.

FINALLY, AFRICA IS BEING INCLUDED MORE and more in the international conversation about globalization. Aid is not a bad thing, and it is very helpful in many situations, however, it appears the structure of foreign aid for Africa is mismanaged and has a lot of critically high risk involved the entire process from determining how much aid is going to be given, who receives the funds, how the funds are delegated, and finally spent. Because there are so many different variables involved in each of those processes, the risks that are involved are so high and dire, that foreign aid reform is necessary.

FOREIGN AID SHOULD NOT BE DISCONTINUED IN AFRICA because a difference, however small, has been made because of foreign aid. It appears the developmental system in Africa is severely compromised. A cycle has been created with foreign aid in Africa, which prevents and hinders significant growth for the states collectively. Foreign aid, foreign direct investment and trade are all convoluted. All of these things, like democracy, foreign aid, FDI and trade have to work cohesively together in order to achieve significant results. How can Africa wean itself off aid when all of the alternatives such as FDI and trade are just as complex as aid is? Everything needs to be taken into consideration and audited in some way. Many of the risks in foreign aid have been identified therefore it should not be considered as the number one go-to solution to all of Africa’s problem. In the globalized economy, there new financial tools are emerging, new relationships forming between countries. The opportunities in Africa are there and desperately waiting to be taken advantage of.

Adapted from: Foreign Aid in Africa: A Short Term Solution to Long-Term Issues Trade Inequality, Corruption, Aid Dependency & Factors that Hinder Socio-Economic Development in Africa. www.mizzrebelution.wordpress.com

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