Breaking the Aid Cycle: Why More Loans Aren’t Africa’s Solution

The best thing that can happen to a person, is when they realize that nobody is coming to save them-They have to save themselves. Left with no choice but to survive in the jungle, that is where creativity is born. This principle holds true for Africa as well. Instead of relying on external help in the form of debts and aid, we must turn inward to discover our own resources and potential. We need to harness our creativity and ingenuity to build solutions from within, leveraging our strengths and assets for sustainable development.

“What does Africa have to offer the world?’’

The continent holds the youngest population in the world, with more than 400 million individuals aged between 15 and 35 years. It also holds a huge proportion of the world’s natural resources, both renewables and non-renewables. It is home to 30% of the world’s mineral reserves, 8% of the world’s natural gas and 12% of the world’s oil reserves.

Yet with all this potential, we remain a continent lagging behind simply because we lack structure in our government systems. Take for example two countries; Kenya and Singapore. Both colonized by Britain, both gaining independence in the same year, yet Singapore has surpassed Kenya by far. Singapore has been ranked the fourth wealthiest city in the world, and it is not nearly as endowed as Kenya. Singapore is one of the most water-stressed countries in the world hence is heavily dependent on rainfall due to the lack of natural water resources, and limited land is available for water storage facilities. Yet somehow, because of good governance and lack of corruption, Singapore is spearheading the world. Singapore was ranked the 5th least corrupt country in the world out of 180 countries with a score of 83. All this to say: Corruption is what is eating Africa.

In Kenya for instance, we have all witnessed the pain point of the GEN Z generation, coming together to protest against a tax siege in the country. With great challenges like unemployment facing people in Kenya, more taxes are the last thing they need to hear. It is hard enough to put one’s daily food on the table. Kenya National Bureau of Statistics (KNBS) released data showing that the economy shed over 80,000 jobs in the three months after the August 9 General Elections. More than half of Kenyans without jobs, or 1.54 million people, were between 20 and 29 years old, underlining the growing crisis of youth unemployment in Kenya.

For decades, the solution of many African nations like Kenya, has been to seek more aid from the U.S. government and other superpowers like China. This has resulted in owing trillions of dollars to these nations, then coming back to dig the pockets of struggling citizens, by taxing them higher in a bid to pay these debts.

For many nations like Kenya, this hurts because they cannot even see the impact of this borrowed money. ‘’Where does the money go?’’, many wonder. In Kenya, 1.2 trillion dollars has been borrowed in the last nine months. As a tax-paying citizen, you would be more willing to pay higher taxes if for the last two years you had seen major roads being built, better drainage systems where you live; a general sense of growth. But in Africa, we see nothing and simply hear, “Pay more taxes!!’’. And because we are no longer the uneducated generation that could be fooled easily, we question things. We demand accountability. The Rejection of the Kenyan Finance Bill 2024 by the GEN-Z is a clear picture of Africa’s outrage. Today, July 9th, 2024, Kenyans have taken to the streets once more, protesting and demanding to see change.

Why more Loans are not the answer

In her book ‘Dead Aid’, Dambisa Moyo talks about why aid not working for Africa and how there is a better way to do things. The book argues that what seeking traditional aid does, is it only fosters corruption and dependency instead of promoting sustainable economic growth.

In the past 50 years, more than $1 trillion in development-related aid has been transferred from rich countries to Africa. Has this assistance improved the lives of Africans? No. In fact, across the continent, the recipients of this aid are not better off as a result of it, but worse — much worse.

In Dead Aid, Dambisa Moyo describes the state of post-war development policy in Africa today and unflinchingly confronts one of the greatest myths of our time: that billions of dollars in aid sent from wealthy countries to developing African nations has helped to reduce poverty and increase growth. In fact, poverty levels continue to escalate while growth rates have steadily declined — and millions continue to suffer. That is because in between these transactions, a lot is lost through corruption.

The over-reliance on aid has trapped developing nations in vicious circles of aid dependency, corruption, market distortion and further poverty, leaving them with nothing but the ‘’need’’ for more aid.

A Bold New Road…

What if one day, one by one, all these African countries like Kenya received a call telling them that all their aid taps would be completely shut off? Would we all die? No.

The shock would cause all African countries to create new economic plans. As I said before, that is the beauty of realizing nobody is coming to save you. As aid phases out, Africa would require new financing mechanisms. These new financing mechanisms should include increased trade (particularly among African nations and with emerging markets like China, India, and Brazil), foreign direct investment, entrance into international capital markets, and increased domestic savings through remittances and microfinance. The end goal for Africa should be to phase reliance on aid down as low as possible.

African leaders need to stop running to the West for help and start finding ‘African solutions to African problems’. The concept refers to the idea that African countries should take the lead in resolving the challenges they face, rather than relying on external interventions. The phrase is used to emphasize the importance of African agency, self-determination, and ownership in addressing the continent’s various issues.

It starts with the promotion of a mindset of self-reliance. There’s no better way of expressing that self-sufficiency than creating innovative financing solutions to fund projects that could lead to sustainable economic growth in all the continent’s 54 African countries. However, these funding solutions need to consider the specific needs of different African countries. If this could be achieved, Africa would prosper and the standard of living on the continent would rise.

In recent years, Africa has proved that it has the capability to champion local solutions. Take the phenomenal success of M-PESA, a mobile-based payment service targeting the un-banked that was launched in Kenya in 2007. The service has been so successful that it expanded to Tanzania, Mozambique, the Democratic Republic of the Congo, Lesotho, Ghana, Egypt, Afghanistan, and South Africa.

Today, the main challenges that Africa faces are:

1. Creating 25 million jobs

2. Building critical skills

3. Improving access to water and sanitation

4. Strengthening healthcare systems

Yet of these four, the greatest pain point for African countries is number one: How to create jobs for the 25 million unemployed people full of potential.

In conclusion, as Africa charts its own course towards prosperity, tackling unemployment stands as our greatest challenge and opportunity. By prioritizing job creation, we not only address immediate economic needs but also ignite a ripple effect of growth across the continent. In the next newsletter, I’ll delve deeper into actionable strategies uniquely suited to Africa’s landscape, offering insights into how we can unlock our potential and build a brighter future together. Stay tuned for more on how we can turn challenges into triumphs, one job at a time.

???? Until next time! ??