Development aid and job creation

'Why do the majority of sub Saharan countries flounder in a seemingly never-ending cycle of corruption, disease, poverty, and aid-dependency, despite the fact that their countries have received more than US $ 300 billion in development assistance since 1970?' (Dambisa Moyo).

by Alphonse Rugambarara | The question of development aid has been under discussion for several years, but donor countries and organizations have continued to try out various aid programs without being able to answer the question posed by Dambisa Moyo: 'Why do the majority of sub Saharan countries flounder in a seemingly never-ending cycle of corruption, disease, poverty, and aid-dependency, despite the fact that their countries have received more than US $ 300 billion in development assistance since 1970?'

When analyzing the finality of development aid, it becomes obvious that it has essentially benefitted the ruling elites of the developing countries, and to a lesser extent NGOs and other aid workers responsible for development projects which haven't developed a great deal (this isn't underlined often enough!)

When analyzing development aid from the perspective of job creation, and therefore of wealth creation, it becomes that the sectors which create jobs  - in Africa in general and in BURUNDI in particular -  are the state, the national companies, the formal private sector, and the informal private sector. In terms of percentages, according to ISTEBU (the Statistical Institute of Burundi), the private sector is far ahead with 75% of all job creations over a 10 year period, while the three other sectors - receiving most of the development aid - create the remaining 25% of jobs!   

Developing countries with their developed partners are stuck on aid culture which has become a vicious circle due to the shameful interests of the rulers of these countries! For Western countries, it is considered good form to include in their budgets a line for 'development or humanitarian aid' of between 0,1 and 0,7% of the national budget. At the same time African rulers, for their part, sing the praises of development aid, and the closer the aid percentage comes to 50% of their national budget, the happier they are! If this aid culture doesn't change, no development will be possible as long as those who really need it do not receive the aid or any other form of development support!  

The statistical analysis of Burundi shows that the informal sector creates the most jobs!  Therefore, this is where the genuine need can be found for support to development rather than development aid! The terminology should change to show the shift from the aid culture (which increasingly resembles begging) to a culture of investment, of development, of creation and consolidation of jobs!

Africa in general and Burundi in particular needs more direct investment than aid in its present form, which has shown its limitations. And these investments hould focalize on the sector that creates the most jobs: the informal sector! It must once and for all be understood that the State and the para-state sector cannot create more jobs: among the students who graduate every year from the various Burundian schools, only 2% are absorbed in jobs created  by the State!

It is therefore important to do something for the qualified jobless, the women heads of households, the farmers who do their best to make ends meet while looking after the health and education of their children who will face the same problems tomorrow, while the ruling class enrich themselves, not through what is produced in the country, but through the aid which is given and for which these children will one day have to pay without having ever seen its benefits!   

The predatory rulers of our countries are clearly not going to ask that aid should change its direction or objectives!  No, it is up to the rulers of the donor countries to realize that the money they have poured into Africa has not produced development, has not produced a reduction of diseases (resurgence of AIDS, Malaria, Ebola), has not really created permanent jobs!  

Some levers of action...

Access to credit: The informal sector does not have easy access to credit, the banking system in Burundi uses interest rates that are unaffordable for small projects, and practices elitist discrimination.  The micro credit networks interested in this sector are still to closely linked to the Central Bank to be able to finance important projects. There exists, however, a National Bank for Economic Development which, some years ago, collaborated with a German KfW program to finance projects either in the formal private sector, or to help people leaving the informal sector, and the rates of that bank (5%-10%) were affordable. This unfortunately has ceased!  

Organizational and managerial capacities: Since few state or other structures are interested in them, people in the informal sector do not have the necessary capacities for example to organize themselves into cooperatives, or to better manage their income generating activities, and can therefore neither save nor reinvest.  In most cases they live from one day to the next!  Support at that level could strongly boost their activities!   

Search for partners and opportunities, openings: Let's take for example agriculture. Europe subsidizes agriculture!  Could it not subsidize investors interested in Africa for viable agricultural projects?

One example in Burundi: a farm called MUTOYI, initiated in the interior of the country by Italians, today sells all Burundian agricultural products in the capital Bujumbura, and shows that it is possible to develop and create large numbers of jobs starting from the informal ! This farm (or others) can develop by looking for partners in Europe and in other East African countries!  

To cite once more Dambisa Moyo: 'Yet it is worth remembering that just thirty years ago, Malawi, Burundi, and Burkina Faso were economically ahead of China on a per capita income basis. Foreign direct investment and rapidly growing exports, NOT AID, have been the key to China's economic miracle!'

Direct budgetary aid - unless it is for infrastructures - should henceforth be banned, and changed into investments, so that ten years from now at least 40% of the informal sector will have joined the formal sector, with the same rhythm of job creation, and if this is then also accompanied by appropriate fiscal measures I am sure that development will ensue!  

 

* Alphonse Rugambarara (Dr.) is chairman of the SID Burundi Chapter. He is based in Bujumbura where he owns a private clinic and works as Oral Pathologist and Maxillo-Facial surgeon. He has served as Former Ministry of Youth Sports and Culture in 1994-1996 and he has been Member of the Parliament in 1998-2000. In 1990, he has co-founded  'ITEKA', the first human right league in Burundi and in 1992 the political party 'Panafricanist and Socialist Movement-INKINZO' which he has then left in 2004. Alphonse is also president of the football club Prince Louis FC.
 

 

Photo: United Nations Photo/Flickr