Opportunities and Limitations of Nepad and Foreign Aid

1. Nepad and Foreign Aid: Opportunities and Limitations 16-17 October 2006, Misty Hills, Muldersdrift Ross Herbert The South African Institute of International Affairs

2. Key Questions • What changes in global aid regime should Africa seek? • What should Africa seek from China? • What do we know about the opportunities and challenges of aid? • How can we make aid more effective? The South African Institute of International Affairs

3. $50 billion in new aid pledged by 2010 The South African Institute of International Affairs

4. Aid as Mixed Blessing • Nepad has scored significant successes with higher aid, debt relief • … but aid has serious downsides • Accept short-term necessity but need fundamental change in aid practice The South African Institute of International Affairs

5. Big Push Assumptions • Big Push advocates acknowledge present aid regime/practices cannot absorb the new funds without dramatic changes • Good governance can be engineered • Implies either massive increase in aid agency staff supervision or greater budget support • Dutch disease: big aid won’t warp exchange rates & damage competitiveness • Nepad’s aid/investment assumption • Growth is function of investment input • Figure out desired growth & backtrack to $64 billion needed per year The South African Institute of International Affairs

6. 1985 dollars 18500 Income if aid - investment theory worked as predicted 14500 10500 6500 Per-capita income 2500 500 1961 1977 1993 1969 1985 Aid Theory vs Reality in Zambia The South African Institute of International Affairs

7. Measuring Aid Effectiveness • World Bank: $1 Billion lifted 284,000 people above $1/day in 1998 compared to 105,000 in 1990 • That means in 1990 $9,523 spent to give one person something less than $365 • Now it costs only $3,521 The South African Institute of International Affairs

8. Why is aid ineffective? • Cold War • Short-term aid postings, staff incentives • Aid mostly about boosting image of giver • Bias for action & things, against experimentation • Measure success by inputs, not results • No transparency in aid agencies, no proper reporting • Aid breaks democratic accountability • Aid delays decisions, saps initiative The South African Institute of International Affairs

9. Nepad and Aid Opportunities • Calls for more quantity and quality • Nepad sector plans attempt to direct aid according to more rational plan • Pushed for mutual monitoring system • Strong platform to lobby for change The South African Institute of International Affairs

10. Nepad Organisation • How does Nepad fit into bilateral aid talks? • Are we being bold enough with Nepad? • Regionalism as paradigm • Works for conflict resolution, infrastructure, educational centres of excellence • Less effective for other issues • Additive/conventional vs transformative • Reliance on RECs • How to allocate Nepad staff time? • Advocate, think tank or facilitator? The South African Institute of International Affairs

11. Influencing Developed World • Western perceptions of Nepad/APRM • Supportive of concept • Don’t want to overwhelm • But question speed, complexity • What signals interpreted as real change? • Grand bargain: not struck once, but needs to be fed with signals of innovation • Candor, openness and public debate • Tangible projects • Engage meaningfully in aid effectiveness with detailed research, substantive proposals The South African Institute of International Affairs

12. Influencing Developed World • Prepare the ground • Policy ideas move from research to political position via centres of influence • Need to build understanding of Africa in centres of influence • Move beyond presidencies • Aid policy largely set in legislatures • Need to understand objections, coalitions • Move beyond aid quantity to aid quality • Develop measures of effectiveness • Develop model management system The South African Institute of International Affairs

13. Influence & Service in Africa • Faces view that Nepad must bring $$ • Nepad needs both influence & valued services • Problems states want to solve but need help • Problems states need to be nudged to solve • Forms of influence: • Need escalate some issues to presidents • Stimulate public debate about policy options • Creative public outreach to stimulate thinking on reform, developmental theory • Changing beliefs about what works • APRM • Forms of service: • Quality of thinking/innovation offered • Replace foreign technical assistance with assistance routed through Nepad think tank • Facilitate access to new aid pools The South African Institute of International Affairs

14. What Should Africa Ask For? • Support for systemic APRM reforms • Long-term 10+ year project funds • Industrial development • Boost use and development of African experts • Long-term measures of aid effectiveness • Use loans for L-T projects that directly boost African revenues • Structure aid to pull in investment • Mozal, call-centre models • Structure aid to promote growth The South African Institute of International Affairs

15. African Growth Goals • Strengthen commercial infrastructure • Invest in rural economies • Invest in skills and research • Invest in trade support, market access research • Invest in marketing organisations • Increase lending and savings • Raise domestic revenue • Promote justice and rule of law • Remove obstacles to business • Fight corruption, build effective institutions The South African Institute of International Affairs

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