Mthuli Ncube, chief economist and vice-president of the African Development Bank, was in Paris last week for the Global Forum on Development. Hosted by the Organisation for Economic Co-operation and Development (OECD), the event largely focused on Africa, with former Nigerian president Olusegun Obasanjo being a keynote speaker.
By A. D. McKenzie, Paris
With the level of Western aid to the world’s poorest countries declining amid the global financial crisis, economists are calling for innovative means of development that range from proper taxation of multinationals to laws that ensure gender equality.
“The game changers are inclusive growth, regional integration and gender equity – making sure women have property and inheritance rights,” said Professor Mthuli Ncube in an interview.
He also advocated for more transparent relationships between investors and Africa.
“The whole issue of negotiating fairer royalty fees is crucial because we’ve seen commodity prices going up, but revenues for African governments are not increasing,” he said. “Africa has huge natural resources, and the investors in these natural resources are mainly from outside. We have to examine how these investments can benefit the African people through job creation, protecting the environment, developing African entrepreneurs and using the revenues from resources to diversify African economies.”
Donors tightening budgets
The Global Forum followed the release of the annual OECD report, which showed that development aid fell by 4 percent in real terms in 2012.
The OECD said that the “continuing financial crisis and eurozone turmoil has led several governments to tighten their budgets, which has had a direct impact on aid to poor countries.”
It said that there has also been “a noticeable shift in aid away from the poorest countries and towards middle-income countries”, but that a moderate recovery in aid levels is expected in 2013, based on donors’ projected spending plans.
“As we approach the 2015 deadline for achieving the Millennium Development Goals (MDGs), I hope that the trend in aid away from the poorest countries will be reversed. This is essential if aid is to play its part in helping achieve the Goals,” said Angel Gurría, the OECD secretary-general.
But aid from rich countries is not necessarily the answer, say many economists. Franklyn Lisk, a professor in the politics and international studies department at the University of Warwick, said that the issue of assistance had to be examined in the context of “development and justice”.
“In Africa, we have this paradoxical situation where the richest continent in terms of natural resources is the poorest in terms of human development and physical development. This is due partly to the fact that African governments have not been able to realize anywhere near the true returns they should get from their natural resources,” he said.
“I would like to see what I call tax justice because many foreign companies in extractive industries in Africa and other developing countries get away with paying little or no taxes, through manipulation and connivance with corrupt regimes,” he added.
Lisk and other economists estimate that if African countries were able to realize the “true value of taxation”, the revenue would account for six times the volume of total aid.
“There would not be any need for aid if African countries get their true share in terms of revenues and royalties,” Lisk said. “We have to go beyond economic growth and beyond issues of sustainability to look at those dimensions of development such as social issues, tax justice, gender equality – issues that are not sufficiently taken into account.
In 2012, members of the OECD’s Development Assistance Committee (DAC) provided 125.7 billion dollars in net official development assistance, representing 0.29 percent of their combined gross national income.
To achieve the MDGs, the United Nations has set a figure of 0.7 percent of gross national income as an aim.
Gurría said he was heartened that nine countries still managed to increase their aid, despite the crisis (Australia, Iceland, Austria, Korea, Luxembourg, Canada, Norway, Switzerland and Luxembourg). New DAC chairman Erik Solheim said that his committee would continue encouraging its members to live up to their commitments.
ONE said aid was necessary because many African countries won’t achieve the eight MDGs by 2015 without assistance, especially those related to providing primary education and safe drinking water.
“Donors are now focusing on emerging countries, at the expense of sub-Saharan Africa and at the expense of the least advanced countries,” said ONE France’s director Guillaume Grosso. “They need to realize that when you invest aid smartly, you get results.”