in Business Day, 11 August 2005
ALL across Africa, politicians and bureaucrats greeted with glee the Group of Eight commitment to debt relief and aid. Not because it would finally lift their countries out of poverty — their reasons were far more self-interested. They even started planning how they were going to spend the loot.
However, a recently leaked International Monetary Fund (IMF) report, which said some western countries might not honour the Gleneagles agreement, should send shivers down the spines of Africa’s political elite. But this would be good news for Africans, who need less, not more, intervention.
Two weeks after the deal in Gleneagles, the majority leader in Ghana’s parliament announced a new package for MPs, giving them $25000 car loans and a $60-a-day rent allowance. When a few opposition MPs protested, his answer was: “$60 a day is not an overkill; it’s Ghanaian standard.”
How, you might ask, can an MP officially earning $350 a month pay back a $25000 loan in three-and-a-half years? History may be a guide. Five years ago, 200 MPs received a $20000 car allowance but we have not been told how they paid back the money, if it was repaid at all. This is just the tip of a massive iceberg of profligacy exhibited by bloated governments across Africa.
Ghana’s ruling elite is good at toasting failure. Last year, when Ghana qualified for the highly indebted poor country initiative, a state banquet was held in praise of the dexterity of the economic management team that had brought us that far. Under the deal, 80% of our $5,2bn debt was dropped and $1,5bn in budgetary support is expected to be granted over the next decade.
Annual per capita income in Ghana remains a miserly $350 but the debt cancellation and budget support are unlikely to make a difference. Indeed, it may make matters worse by causing our politicians to become complacent: if they can rely on external sources, they need fewer taxes, so they do not need to make the economy work better.
For all this we can thank the “make poverty history” campaigners and western politicians who succumbed to their rhetoric. These people now “own” our problems — which they described as a “scar” on the conscience of the world.
But IMF representatives of Belgium, Germany, Holland, Norway, Switzerland and 30 other countries were less enthusiastic about the deal reached in Gleneagles — perhaps they fear a repetition of the profligate spending that landed us in debt in the first place.
In case aid should not provide enough money for its profligacy, the government keeps taxes high. A cumulative tax rate of 45%, lending rates of 36%, centrally regulated commercial banks with 40% of cash reserves in the central bank, and excessive public-sector borrowing drive 40% of Ghanaians to invest abroad.
While UK Prime Minister Tony Blair’s Commission for Africa spoke of the need for good governance, it was not made a condition of debt cancellation and increased aid. There was little discussion of economic freedom — essential to development and political freedom.
But Ghana is hardly alone in this scandal. In Kenya, vigils were held for the debt to be forgiven, while corruption scandals beset the country’s AIDS programme. In Ethiopia, 60% of arable land is underused because of a combination of forced migration and redistributed food aid — and the leaders brutally gun down those who protest against clear electoral deficiencies. In Uganda, political bootlickers voted overwhelmingly to give their president a third term after 20 years in the seat.
These countries are among the good pupils who qualified for more western support. It is time to rethink this dependency approach to development.
http://www.businessday.co.za/articles/article.aspx?ID=BD4A78625