Economy

When the government of the African island nation of Madagascar decided last year to apply for assistance under the US’s new supplementary aid programme, the Millennium Challenge Account, it chose to break with standard practice.

Instead of simply asking government ministries to suggest potential projects, the Malagasy authorities consulted civil society groups, local businesses and farmers’ associations.

They encountered two recurrent complaints from farmers and small-scale businesspeople: that it is very difficult to get either bank loans or official titles to land.

So when Madagascar submitted its proposal to the US in October 2004, it centred on the problems of rural people. Six months later, Madagascar became the first country anywhere to gain approval for funding under the US programme, to the tune of nearly US$110 million over a four-year period.

The strategy, said President Marc Ravalomanana at the April 2005 signing ceremony in Washington, DC, is Madagascar’s own.

“This is a vision which aims to strengthen the rural communities, to build industries and commerce suitable to the rural areas and then to create economic growth from the bottom up.”

He noted that 13 million of Madagascar’s 17 million people live on less than $1 a day, and that many of them live in the countryside. By strengthening rural incomes, Madagascar will be able to reduce its very high poverty rate, one of the key targets of the Millennium Development Goals (MDGs) adopted by world leaders in 2000.

The decision of the Millennium Challenge Corporation, which administers the US aid programme, to back Madagascar’s strategy reflects a broader trend among the world’s largest donor countries.

Despite some hesitancy and half-steps, the US, UK, France, Belgium and numerous others have pledged not only to give significantly more aid to Africa in the coming years, but also to increasingly aim that assistance at the MDGs and other development goals identified by African countries themselves.

It is the beginning of a “more positive relationship between Africa and the West", former South African President Nelson Mandela said during a visit to the US in May.

But much more needs to be done, he added.

“The US and other donor nations should provide substantially greater economic assistance on terms that are more flexible and responsive to the priorities set by Africans themselves.”

In January, the UN Millennium Project called for doubling aid to the world’s poorest countries, to enable them to take stronger steps towards achieving the MDGs.

Then in March, the Commission for Africa, chaired by UK Prime Minister Tony Blair, advanced a similar notion. Its report argued that for Africa to be able to make essential investments to improve economic growth and the lives of its poorest people, it will need an additional $25 billion in aid by 2010, or twice the current level.

In order to use that aid effectively, said the report, African countries must strengthen democracy, combat corruption and enhance performance, as projected under the African Union’s development framework, the New Partnership for Africa’s Development (Nepad).

Significant progress

Meanwhile, donors should do their part to “significantly improve the quality of aid and how it is delivered", while also opening their domestic markets to goods exported by Africa.

UN under-secretary general and special adviser on Africa Ibrahim Gambari welcomed the report as “a major boost to international dialogue on policy and actions in support of Africa".

He noted that when Nepad was first adopted by African leaders in 2001, it estimated that the continent would need about $64 billion a year in external resources, a figure that “was derided as unrealistic".

But if donors follow through on the recent calls to double aid, total assistance would climb to about $50 billion a year. And if the Commission for Africa’s proposal for an additional increase of $25 billion after 2010 is accepted, that would bring the total to $75 billion a year.

Then in April, the World Bank and the International Monetary Fund (IMF) threw their own significant influence behind the calls for more aid.

In a joint Global Monitoring Report, the two international financial institutions argued that official development assistance (ODA) “must at least double in the next five years to support the MDGs, particularly in low-income countries and sub-Saharan Africa".

The report added that the pace of the increase in aid should be “aligned with recipients’ absorptive capacity", that is, their ability to use the funds effectively.

It also noted that a “big push” of aid will not be the sole answer, but must be accompanied by trade reform and other policies promoting private capital flows, technology transfer, security and environmental protection.

Africa has made considerable progress in recent years, says World Bank vice-president for Africa Gobind Nankani.

This has been reflected in greater economic growth in a number of countries, “stronger ownership” of the MDGs and action by the African Union to combat rural poverty and hunger and promote peace, regional integration, infrastructure and agriculture.

But since the continent still lags far behind in achieving the MDGs, Nankani adds, Africa’s own endeavours need to be complemented by “a bold international effort".

That point was also emphasised at the annual meeting of African finance ministers in Abuja, Nigeria, in May, devoted specifically to the MDGs.

KY Amoako, executive secretary of the UN Economic Commission for Africa, which organised the meeting, stated: “We need to see significant progress from leading developed countries toward meeting their existing (aid) commitments, as well as helping to accelerate progress by concretely contributing to Africa’s MDG financing needs.”

According to Proffesor Wiseman Nkuhlu, chairperson of the Nepad Steering Committee, that African plan will itself “be judged by progress towards the MDGs".

With Africa’s partners pledging to do more, “the potential for genuine change has never been greater".

The road is not likely to be straight or smooth, however. Although the European Union has endorsed Blair’s call for doubling aid to Africa, he encountered reluctance from the US during a June visit to Washington to prepare for the summit meeting of the Group of Eight (G-8) industrialised nations in Scotland, in July.

US President George Bush did not agree to a doubling of aid to Africa, although he did pledge to provide the continent with an unspecified amount of “additional resources", as well as support for fully cancelling Africa’s debt to the World Bank and the IMF.

This is an abridged version of an article that was first published in United Nations Africa Recovery magazine (www.un.org/AR).