Photo Credit: Kigaliwire via Flickr, Creative Commons License.
Winning entry in the Seattle University Africa Day Essay Contest in 2012:
Europe’s economic troubles may have investors on either side of the Atlantic fearful of the future, but the current predicament could bode well for the future of Africa. As countries across Europe slash budgets for foreign aid and investment in pursuit of fiscal austerity, African countries are presented with an unprecedented opportunity to emerge from the shadows of difficult colonial pasts. The cutbacks in aid and investment have drastic, immediate human costs, but are a political inevitability given the seriousness of Europe’s crisis. Hope, however, lies in the future and how this inevitability is managed. Shrinking budgets should force a reevaluation of failed dependency-promoting development strategies and encourage a move away from a “helping hand” approach to aid toward strategies that emphasize local investment—that finally place Africa’s destiny in its own hands.
Africa’s true ascendancy will be marked by self-sufficiency and self-determination, neither of which is encouraged when times are good in the West. As Dambisa Moyo, a former economist at Goldman Sachs argues in an editorial appearing in The Independent, “foreign aid has been the biggest single inhibitor of Africa’s growth. Among its shortcomings, aid is correlated with corruption, fosters dependency, and invariably instills bureaucracy that hinders the emergence of an essential entrepreneurial class.”
If foreign aid can be crippling to sustainable growth, foreign investment can be just as damaging. Historically, investment in Africa has tended to focus on the development of extractive industries to tap and expropriate Africa’s vast sources of mineral wealth to fuel growth in the developed world. Over and over, the colonial cycle of dependency perpetuates. Which is why Europe’s current economic predicament provides a glimmer of hope.
As European and other western countries turn inward, they open a space for Africa to stand on its own feet. According to reports from AfricanEconomicOutlook.org, one year after the 2008 crisis, the amount of foreign direct investment in Africa dropped 20% from USD 72 billion to 59 billion. While loss of investment on its own is not necessarily a good thing, there is a silver lining: domestic investment and capital in Africa has flourished. As reported in fDI Magazine, of the top 10 companies investing in the continent, the top two investors, accounting for a large portion of investment projects, were both African banks like Togo-based Ecobank Group and Kenya’s Equity Bank. Christopher Hartland-Peel, managing director of Hartland-Peel Africa Equity Research notes similar trends. He argues that growth is no longer dependent on foreign companies, but now comes from “African banks, manufacturing and services companies that are investing regionally, and becoming local multinationals.”
These are small but encouraging developments. As the world muddles through the current economic crisis, much attention will be focused on Europe and the Americas—which may be exactly what Africa needs. Years of effort and trillions of dollars in mismanaged aid and investment have not brought sustainable growth to Africa, but the current crisis may finally provide the space for African-led and African-developed growth to occur.