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

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

16. The South African Institute of International Affairs
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The South African Institute of International Affairs