Development aid not universal solution

Development aid not universal solution Cde Chinamasa

Laurent Lamothe Correspondent
AS I read about the events unfolding in Zimbabwe over the past few days, I was struck by the words of the Finance Minister, Patrick Chinamasa, requesting Western countries to unlock financing for Zimbabwe in the form of loans — these were halted about two decades ago.

Although at this point there are no quick fixes for Zimbabwe’s economy — although the road ahead for Zimbabwe is steep, all is not lost because I very firmly believe that my experience in Haiti has taught me that there are solutions — where there is a will there is a way — even in the face of complete devastation, as was the case with Haiti.

There needs to be a dynamic shift in the reliance on development aid and the attitude of African governments towards it. Much has been said about Africa, it has been described as “a sleeping giant” and a continent of “huge potential”. Much has also been said and written about the economic growth of Africa. This is dependent on various factors, among them infrastructure development, higher education and investment.

Inadequate, poor infrastructure, high transportation costs and civil strife are holding back Africa’s socio-economic development, said Dr Jendayi Frazer, a former US Assistant Secretary of State for African Affairs, board member of the MasterCard Foundation and an investor in Rwanda in a recent interview. She also revealed why African governments must become less dependent on official development aid, in order to succeed. Some of the factors slowing down advancement and upliftment in Africa are:

Lack of appropriate and quality education to promote entrepreneurship

Civil wars — a major deterrent to investors and development — holding back development

Limited technology capabilities — the difference between the underdeveloped countries in Africa and developed countries of America, Europe and Asia — is their technological capability to create and utilise science and ICTs

Poor economic structures —African nations still rely very heavily on exporting raw materials

Overdependence on foreign aid

Some of the things that have been highlighted to improve a country’s prospects for investment are: the importance of an investment —friendly environment, the advantage of ICT systems and infrastructure and support from government to smooth the way. In my view, all these points mentioned above are crucially important. However, perhaps most important of all is the ability to create new revenue streams to fund the necessary development and to break the cycle of dependence on foreign aid.

One sustainable and secure way of providing the funds for these challenges is to utilise Innovative Financing for Development (IFD) to create funding mechanisms using a country’s own resources without increasing foreign aid — placing micro-contributions on globalised activities. Some of these activities are financial transactions, mobile telecommunications, airline tickets etc. There are many others.

My company, LSL World Initiative, a specialist in IFD, can assist countries which could benefit from this expertise. The development points mentioned above are not an impossibility if one considers that the monies come from abroad — there is little impact on the local users and service providers and a great number of untapped resources can be mobilised in this way.

Micro-contributions on enormous volumes of transactions, aggregated, make a mega difference.

LSL has a solid track record of partnering with governments to set up and operate national strategic development initiatives tailored to the local context and in line with each country’s national development priorities. The micro-contributions are levied in key globalised sectors —offering the best opportunities in terms of volumes and growth potential to create sustainable, dependable new revenue streams.

Some examples of what can be done are UNITAID, Haiti, and Jamaica.

One of the first IFD initiatives was the international solidarity levy on air tickets (or airline ticket tax). Most of the revenues from this are channelled into UNITAID, an agency specifically created to distribute the revenues raised to projects and programmes for the treatment and care of those affected by HIV/AIDS, tuberculosis and malaria — all prevalent in emerging countries.

Jamaica is stimulating entrepreneurship and boosting small business development by financing universal access to the information superhighway through its Universal Service Fund.

Haiti created a comprehensive free education programme — sending 1,4 million needy Haitian children to school free of charge and increasing elementary school attendance.

Foreign donations make up a large percentage of the budget of some countries and this should not be the case. African governments must change their focus from receiving foreign aid to creating new revenue streams to fund socio-economic development.

I can state, unequivocally, that IFD can be a dynamic game-changer for sustainable development in any country. While much has been said about what is lacking in African and emerging countries, not much has really been said about how to close the gap. If governments demonstrate the political will for change, IFD can empower them to provide for themselves. It is time for the African continent to live up to its potential — the fire must be lit and the sleeping giant awakened.

Laurent Lamothe is the former Prime Minister of Haiti and founder of LSL World Initiative which has a solid track record of partnering with governments to set up and operate national strategic development initiatives.

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