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Why Foreign Aid is Hurting Africa

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?

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Why Foreign Aid is Hurting Africa

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  1. Why Foreign Aid is Hurting Africa Samantha Brian Adam Alan

  2. Kibera, Kenya • 1 million people crammed together in 1 square mile • Live in filth and absolute poverty • So………

  3. 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?

  4. 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

  5. Result • IMF cautioned donors to be careful in the amount of aid they give African countries • Report “Aid Will not Lift Growth in Africa”

  6. 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

  7. 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.

  8. 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

  9. 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

  10. A first…. • Ghana • Pro-market movement • Increased use of mobile phone • More opportunities for citizens

  11. Conclusion • Issue bonds to raise cash, rather then depend on free money • Raise capital in other markets • Creative attractive “FDI environment” • Increase trade

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