African Development Bank’s upbeat report on aid effectiveness identifies regional integration and governance as key areas for improvement
Africa has bounced back faster than expected from the financial crisis and can expect a period of solid growth, according to the African Development Bank (AfDB). The bullish assessment came in the bank’s first development effectiveness review. Released during the AfDB’s annual meeting in Lisbon, Portugal, the bank’s scorecard assesses aid effectiveness at four levels: Africa’s overall development progress in areas such as growth, human development and governance; results from its operations, showing how the bank has contributed to Africa’s development; how well the bank has managed its portfolio of operations; and how well the bank runs itself.
The exercise is part of the increasing focus on aid effectiveness since the 2005 Paris declaration on the principles of effective aid. Aid effectiveness is also high on the British government’s agenda; foreign aid has been ringfenced from budget cuts, to the irritation of some ministers, whose departments do not enjoy such protection.
The review uses a colour-coded system. Green signifies where progress has been made, yellow where progress is beginning to stall or regress, and red where progress has stalled or regressed. Under overall development progress, red shows up on regional integration and trade. In terms of how well the bank runs itself, human resources also gets a red. Given the importance of regional integration as an engine of growth and as an alternative to aid, the lack of progress here will be particularly disappointing to the continent’s leaders.
“Regional integration is being pursued by a complex architecture of regional economic communities, and positive steps towards common regional targets are underway,” said the review. “But overall, progress has been disappointing.”
The review notes that only 10-12% of formal trade is among African nations – barely half the level of integration in other regions. A key problem is poor infrastructure. “Road freight moves incredibly slowly, while major ports are choked for lack of capacity … all told, Africa would need to spend an additional $40bn a year on infrastructure to address current deficits, keep pace with economic growth and achieve its development goals,” said the review.
The review indicated that governance, which gets yellow, remains Africa’s achilles heel. “The continent has made modest improvements over the past five years, particularly in economic and financial governance, but it still ranks lowest of all regions on worldwide governance indicators.”
Overall, however, the report is upbeat, concluding that Africa is becoming an attractive destination for private investment. Improvements in the business environment together with Africa’s new potential as a consumer market are identified as major factors in this.
The review comes ahead of a key conference on aid effectiveness in Busan, South Korea in November, which will further refine the aid effectiveness agenda that began in Paris. A key issue remains the tension between the desire of donors to use their own monitoring systems to gauge whether aid money is being spent effectively and the desire of recipients to use their own budgetary systems so they have “ownership” of the aid money. Britain favours giving recipient countries such ownership, but not to the extent that it could lead to fraud and corruption.
African countries recognise the need to strengthen their accountability through civil society and a free press to their own citizens. For some, that sentiment has been reinforced by the tumultuous events in Tunisia and Egypt. One way of improving accountability would be to reinforce parliamentary oversight not just of aid but the whole development process, African officials believe. Ghana, which is being held up as an example of effective use of aid, has trained development officials in its national budget system. When officials make the time to understand national systems, they are more likely to trust them, noted Mary-Anne Addo, director at Ghana’s ministry of finance and economic planning.
The key, African officials acknowledge, lies in accountability. “We must ensure that African societies are able to hold their governments to account for development results,” they declared last November in a document called the Tunis consensus (pdf), which said the real job of development aid is to do itself out of a job.