RETHINKING DEVELOPMENT FINANCING, AID AGENDA

A week ago we welcomed, with great reverence and gratitude, a total of 302 400 doses of the Johnson and Johnson vaccine, a consignment just adequate to vaccinate a third of the total population of Eswatini and, well, an even greater percentage of the adult population, the most at risk genre of the population.

This gift was accompanied by a handsome sum of E27 million to assist with the rollout. Surely it seems that the generosity of the American people knows no bounds, this, however, brings to mind a very troubling thought. Where is the E200 million that was budgeted specifically for a COVID-19 vaccine? What will happen to that E200 million now that the aid is pouring in? What really is the impact of aid on our economy? And who really benefits from all this aid? Allow me to offer my insights into the whole aid story and the aid model and try to disentangle who really benefits from all this generosity?

Impact of aid on accountability

It is a well-documented fact that the influx of aid into developing countries has had negative impacts on accountability. Instead of being accountable to the masses leaders in the developing south tend to hide behind services given through the aid and this tends to divert attention from the real issues. As soon as the 302 400 doses find a way into people’s arms, the narrative will turn to we have vaccinated 33 per cent of the population and add that to the vaccines to be received from the COVAX facility government will have a good story to tell. What this story won’t tell is how much of the vaccine was purchased with our tax Emalangeni. We will soon lose sight of the E200 million and the question that begs an answer is what will happen to those millions?

Negative impacts of aid on local response systems

The excess aid results in inadequate development of local response systems and builds a culture of reliance on external support. A case in point is Eswatini’s fight against malaria. In 2014/15 we were the poster child on malaria eradication, a global success story. However, as soon as the aid and the technical support left our soil we started seeing resurgence in malaria infections. A clear indicator that the transfer of skills and strengthening of the local response was never attained regardless of the billions of Dollars spent in the fight against malaria. We can do better in building a strong and resilient social sector, but aid acts as an impediment. Do not get me wrong, aid that is just sufficient to catalyse growth and local response is good but too much aid is bad for us. It ends up building a culture of rent seeking behaviour and results in a sub optimal resource allocation.

Impacts of aid on prudent macroeconomic policy

Rent seeking is an economic concept that occurs when an entity seeks to gain wealth without any reciprocal contribution of productivity and the outcome is that of retarded growth. Studies have shown that it is only 20c on the Dollar that eventually gets to benefit the poor, the rest is absorbed by the well to do in society or rather the elite, and the statistic is a precursor to the problem of rent seeking. This is a problem of elite capture; the recipients of the 80 per cent really need to keep this machinery going regardless of its impact on sustained growth. The influx of aid tends to crowd out sustainable investments in the economy attained through market mechanisms. However, if you take a look around the country, the NGO sector has grown so big and is actually beginning to stifle the private sector; failure of the NGO sector would have catastrophic impacts on the employment levels in the country. Ask yourself this question, what is the product of this labor force employed in the NGO sector? It is clear that contribution in the economy only occurs through the consumption side and none on the supply side. The incentive for rent seeking behaviour is also made apparent by the wage differential between the NGO sector and the private sector; the NGO sector pays a higher wage compared to the private sector. These are signs of an ailing economy; a sustained model for economic growth is one that is generally led by an optimal market economy, not by a burgeoning NGO sector.

Towards better model for development

An alternative approach to attain the 302 400 doses of the vaccine could have been to simply put it on the market and allow government to purchase it, all that was required was equitable access to markets and halt vaccine hoarding by the global north. The truth is there is no free lunch, when foreign governments spend money on aid that is an execution of the foreign country’s macroeconomic policy and foreign policy hence in the end it is the foreign country that wins and not the domestic country receiving the aid. It’s time we focused efforts on building a resilient economy and reduce dependence on aid.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: