Aid to Africa

French and British Policies from the Cold War to the New Millennium

Gordon Cumming

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9780754615309
• eBook ISBN: 9781351960045
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

The end of the Cold War forced Western donors to rethink their aid relations with Africa. This book looks at two of these donors, France and Britain, and asks whether the development programmes of these former colonial powers have undergone radical changes since the end of the Old World Order. It focuses on the introduction of a controversial new 'regime' trend - political conditionality - and uses policy models to illustrate the driving forces behind this new development strategy and explain substantial differences in France and Britain's practice of political conditionality in Togo and Kenya. Overall, this volume - the first comparative study of French and British aid in the post-Cold War period - offers fresh insights into the evolution of the political assistance agenda and into deeper forces at work within the French and UK policy processes.

1 What is Aid?

Foreign aid is an ambiguous concept and its precise definition is often glossed over by analysts on the grounds that it is the impact of this resource transfer, or the motivations behind it, that are important. The continuing uncertainty over what constitutes aid is surprising given that development assistance has become ‘virtually a universal element in the relationship between developed and developing countries’ (Ohlin, 1986: 61). Ambiguity of this kind is also unhelpful as it can lead donors to seek to have as many resource flows as possible counted as development assistance. Perhaps the clearest example of this is to be found in France’s policy of including her massive ‘inward investment’ in her ‘dependent territories’ (the Départements et Territoires d’Outre-Mer) within official French aid statistics.¹ This form of creative accounting has enabled Paris to ‘mask a real decline in French aid’ (Adda and Smouts, 1989: 34) over much of the postcolonial period.²

The problems surrounding the definition of ‘aid’ have been around since the time of the Marshall Plan. Some scholars have embraced a wider definition and included all resource flows which are of developmental benefit. On these grounds, Ryrie (1995: xiv) has argued that even non-concessional lending at market rates from organisations such as the non-profit-making affiliate of the World Bank, the International Finance Corporation (IFC), should be counted as aid.³ Other academics have restricted the definition by honing in on ‘real aid’, that is, assistance which creates sustainable development (Stokke, 1996: 56) or which provides immediate welfare to the poorest (IGBA, 1982, 1984). Left wingers have viewed aid as a ‘transfer of capital’ (CEDETIM, 1980: 124-5) which is surplus to demand in developed countries, while Right wingers have seen it as a ‘dole’ or ‘gift’, which is harmful to developing countries (e.g., Bauer, 1971 and 1984).

There is, also, disagreement among official bodies. This has arisen partly because the UN sets international aid targets⁴ but leaves it to the Development Assistance Committee (DAC),⁵ the developmental arm of the Organisation for Economic Cooperation and Development (OECD), to agree on a definition of aid and to compile its own separate estimates of resource flows to developing countries.⁶ The DAC’s figures, although they fail fully to differentiate between the value of various kinds of aid,⁷ are the most widely used in international comparisons. They will as such be the source of most of the statistical data used in this book.

The DAC stipulates that resource transfers count as ‘official development assistance’ or oda where they are from a donor government to a recipient government in a developing country, with the promotion of economic development and welfare as their main objectives and with a concessional or grant-element of at least 25 per cent.⁸ The DAC has been careful to avoid claiming official status for its definition. Nevertheless, the DAC’s criteria have come to be accepted by Western donors as ‘the clearest way out of the definitional impasse’ (Burnell, 1997a: 4).

This should not be taken to imply, however, that the DAC’s definition is universally accepted. The DAC claims that aid has to be ‘official’, that is to say inter-governmental, and disbursed via bilateral or multilateral channels. This requirement does not, however, preclude the possibilty that oda might be given by a donor to a ‘government’ which it does not recognise or with which it does not have diplomatic ties (e.g., food aid from South to North Korea). Nor does it mean that the source or recipient of the assistance has to be a recognised government (e.g., the ‘would-be’ government of the Palestine people, the Palestine Liberation Organisation, funded ‘solidarity projects’ in Guinea and Guinea-Bissau, while the British government provided ‘aid’ transfers to the black population of apartheid South Africa.

The DAC also asserts that oda has to include a grant-element of 25 per cent. This percentage is, however, arbitrary as a dividing line between what is and is not aid. Likewise the DAC’s exclusion of loans of less than five years fails to recognise the fact that short-term loans, regularly renewed, may be no less concessional than longer-term lending (Pincus, 1965: 125). Finally, the DAC contends that oda has to be ‘motivated by a desire to promote development’. The implication is that donors must make an economic sacrifice and set aside self-interested motives for providing aid (Little, 1965: 80). This pre-supposes, of course, that it is possible to establish the true motives of donors, which donors themselves may not know and which are ‘inevitably mixed’ (White, 1974: 22). It also assumes, wrongly, that transfers cannot be of developmental benefit to recipients simply because they are motivated by self-interest: aid given for military or security purposes may promote political stability which in turn enhances the prospects of economic growth. Conversely, oda provided for developmental purposes may lead recipients to re-allocate domestic resources, which would otherwise have been used for development, towards the cost of military expenditure (Burnell, 1997a: 6).

An alternative approach might be to accept that motives are mixed but assume that aid must have some developmental effect. Such an approach would also have shortcomings. First, oda is not the only transfer which has developmental benefits for Third World countries. Second, some generous resource flows which presently count as aid (e.g., some large development projets and food aid programmes) do not have a positive developmental impact for reasons that lie outside the control of donors and recipients. Third, it would be a practical impossibility to calculate only those transfers which have actually promoted development: donor evaluation techniques are not sophisticated enough and evaluation departments are not sufficiently resourced for such a task. Finally, it seems a nonsense to claim that aid ‘only applies to transactions which promote development’, since the implication would be that ‘aid never fails, because if it failed it would not be “aid”’ (White, 1974: 22).

Defining Aid by What it is Not?

The DAC definition has helped to clarify thinking on what constitutes aid and how it should be measured. It may, however, be useful to shed further light on this concept by distinguishing oda from other resource flows which have benefits for Third World countries.

Is private investment aid? This resource flow is similar to aid in a number of ways. Both transfers promote development and self-reliance in developing countries. Private capital often brings new industries, employment and expertise. It may also complement official transfers directly, as in projects in which joint financing arrangements are required; or, indirectly, where oda programmes have so improved the climate for investment that much larger flows are made available than would otherwise have been possible. Conversely, some donors may provide more aid to countries which have respected past flows of private capital.

Private investment is not, however, counted as development assistance since it is ‘made with the expectation of profit and involves no sacrifice of resources by the investor’ (Pincus, 1965: 117). As such it is not given on the terms needed to fund programmes like peasant-based agricultural projects, where there is little chance of a profitable return on capital invested. Private flows are now more than four times greater than aid, but they are less likely to be invested in the poorest countries than they are to be pumped into the commercially more promising states of East Asia and Latin America.⁹ These are not the countries in greatest need of development finance.

Unlike oda, private investment does not always involve a net transfer of resources to developing countries. Hayter claims that foreign investment does not necessarily bring in new capital and refers instead to ‘foreign control of investment’, that is, the buying up of local concerns with capital raised by donor banks taking deposits from local elites (Hayter, 1985: 10).

Is trade aid? As Guhathakurta (1990: 3-4) says, ‘aid may be distinguished from trade in that trade implies buying or selling of goods at market prices, whereas aid must have an element of concessionality in it’. The same author adds that whereas ‘trade implies an exchange (although such exchanges may be unequal or one-sided in the long-run) … in an aid relationship, the relationship of the donor to the receiver is inherently unequal’. Another distinction which is drawn is the fact that earnings from trade are often spent on current consumption whereas oda is normally channelled directly into specific development projects (Benham, 1961: 48).

The distinction between trade and aid is not, however, quite so clear-cut. According to White (1974: 159), ‘Trade is a substitute for aid to the extent that it helps to make the under-developed world richer … by improving the demand for primary products and by helping to ensure more rational and lower cost industrial development’. In some ways, trade is ‘superior’ to oda in that it is sustainable, the principle of self-help is automatically built in, there is no suggestion of charity or strings attached and the sheer size of trade flows is much greater than the total of aid transfers. It is because trade is viewed as so mutually advantageous that many donors have now accepted the principle of ‘Trade and Not Aid’ and have begun to break down trade barriers, with the signing of the General Agreement on Tariffs and Trade in 1994 and the establishment of the World Trade Organisation in 1995. It is also because of these benefits, that donors have adopted a variety of measures to expand trade with developing countries. Many of these contain an ‘aid’ element and give rise to additional trade activities to which developing countries would not otherwise have access.

Donors use trade preferences both to promote exports from particular sectors of a developing country by exempting them from duties; and to protect infant industries from established producers until the former become effective on their own. White (1974: 193) regards such arrangements as ‘a form of aid which provides additional foreign exchange and which may be used to develop a more advantageous economic structure’ by reducing dependency on primary products. Trade preferences are, however, considered to involve ‘implicit transfers’ which ‘do not lend themselves easily to measurement’ (Overseas Development Council, 1972: 72-73) and which are therefore left out of official aid statistics.

Where the above concessions are not sufficient, a donor may pay above world market prices (a surprix) for specific imports from a developing country. Clearly the extra costs are borne by consumers in the donor country and, according to some analysts, ‘these differences should be included as additions to … aid’ (Pincus, 1965: 123). While France has been prepared to pay above market rates for exports from the Franc Zone (discussed later), the donor who made the most use of price subsidies was the USSR. According to Burnell (1997a: 6), the Soviet Union’s trade subsidies to European members of the Council for Mutual Economic Assistance (CMEA) and to favoured states like Cuba are estimated to have reached over $4.5 billion (US) annually in the late 1980s.

A similar approach involves the use of commodity agreements. These improve the terms of trade with developing countries by raising the price of specific commodities above their market level. Such agreements may be seen as ‘a form of aid’ which is transferred from consumers in a donor country to producers in the developing world (Clifford and Osmond, 1971: 64). Often, however, they fail to achieve price stabilisation or lead to over-production of commodities and to a slump in prices: France’s failed attempt to stabilise the price of Ivorian cocoa in the ‘Sucden Affair’ (see chapter 9, endnotes) is a case in point. They may also require the use of costly buffer stocks or quotas which discriminate in favour of certain commodities and established producing countries. They may even make it profitable for competitors to produce cheap synthetic substitutes. In the long run, most commodity agreements break down and their overall impact, were they to be included in aid statistics, would be almost impossible to measure.

Finally, there are export credits, both public and private, which finance exports from donor countries. These allow developing countries to pay for imports over an extended period and include provisions for guaranteeing exporting companies against non-payment. They offer a relatively inexpensive way of borrowing with interest rates often below those charged by banks, including the World Bank (Hayter, 1985: 11). Donors can in fact improve these terms further by offering mixed credits (discussed below).

With the exception of those which run for at least five years, export credits are not included as aid since they are ‘primarily given to promote exports and not to advance development’ (DAC, 1971: 43). Export credits, despite being guaranteed by governments, are also ‘typically on much harder terms than official lending’ and ‘often accompanied by extra mark-ups and price premia on the goods purchased, substantially raising the effective rate of interest charged’ (Overseas Development Council, 1972: 19). The excessive use of suppliers’ credits has been a common cause of debt payment difficulties (Ibid: 25) and has facilitated the sale of military weaponry to Third World countries.

Is NGO assistance aid? Official development assistance is often confused with resource flows from Non-Governmental Organisations (NGOs) and charities. The confusion arises largely because both transfers are concerned with improving living conditions in developing countries. There are, however, a number of ways in which these transfers can be distinguished. First, assistance from NGOs is usually concerned with alleviating human suffering in the aftermath of a natural or man-made disaster whereas official development assistance is aimed at promoting longer term, sustainable development. Second, NGO support is often assumed to be more flexible, cost-effective and poverty-focused than project aid from government agencies. Third, NGO funding comes largely from private donations whilst aid is raised through state taxation. Finally, NGO income is usually understood within a moral framework since, as Guhathakurta says (1990: 5), private flows to NGOs are derived ‘from the moral obligation of a private individual’ whereas ‘it is difficult to translate the idea of morality in an individual context to the aggregate context of state to state relations’.

In practice, these distinctions are not so clear cut. NGO support can no longer be equated with short term relief since NGO activities are increasingly spread out over the longer term, even merging into rehabilitation, reconstruction and development work: long-running relief operations in Somalia and Rwanda are just two examples. NGO projects, also, cannot be assumed to be more cost effective or better targeted than aid from government sources: recent empirical evidence suggests that NGOs perform little better than official agencies and that their evaluation techniques are less sophisticated.¹⁰ NGO funding is, moreover, by no means exclusively private, with much of the growth in NGO finances in recent years coming from multilateral agencies and donor governments.¹¹ Finally, it is wrong to label NGO assistance as ‘private philanthropy’ (Benham, 1961: 30) and official aid as ‘political’ (Guhathakurta, 1990: 5). Clearly, the effects of emergency relief, irrespective of its philanthropic origins, may well be ‘political’: humanitarian relief may keep an unpopular government in power or, as in the case of France’s 1994 Opération Turquoise, allow Hutu ‘war criminals’ to escape from justice. Equally, official aid cannot be understood without reference to some moral framework: it is simply hard to see how the Parliament and voting public of a donor country could allow so much of their taxable income to be used as oda if they did not feel some moral obligation towards the world’s poor.

Is debt relief aid? There was considerable debate in international forums before including some forms of debt relief as aid.¹² The idea of official debt relief first gained widespread acceptance when the UN Conference on Trade and Development (UNCTAD) endorsed it in 1978. By the late 1980s even commercial lending institutions had begun to recognise the need for bad debt provision, without of course giving up hope of getting some return through debt rescheduling. The main official mechanism has been Retrospective Terms Adjustment (RTA) whereby outstanding debts and servicing obligations are converted into grants, cancelled or renegotiated on softer terms or in local currencies. The trend in recent years among Western donors has been to offer increasingly generous debt relief under the auspices of the Paris Club of Creditor Nations. Among these relief packages have been the Toronto terms (1988), the Trinidad proposals (1990), the Enhanced Toronto terms (1991), and the Naples terms (1994) which provided relief on up to 67 per cent of eligible bilateral debt. Other support for the 40 or so Severely Indebted Low Income Countries (SILICs) has also been provided through the World Bank Special Programme for Africa or SPA (see chapter 7). Significantly too, in October 1996, agreement was reached by the IMF, World Bank and Paris Club on the write-off, on a case-by-case basis, of up to 80 per cent of the bilateral debt owed by some of the world’s poorest countries. The terms offered under this scheme for Heavily Indebted Poor Countries (HIPC) have since been enhanced to allow even faster and deeper relief for countries with a track record of economic, social and political reform (see final chapter).

Debt relief represents an effective form of oda. It concerns amounts which are very substantial, especially at a time when aid budgets are falling. It also releases foreign exchange that can be spent on development rather than debt repayment. Crucially too, it ensures that countries which are in default on their debts are not denied access to funds from the IMF, World Bank or commercial banks.

Official debt relief does, however, differ from official development assistance in a number of respects. As Browne (1990: 133) says, ‘Debt relief is not a development goal, for it tends not to involve a physical flow of resources aimed at actively promoting development’. It is instead ‘a way of reducing the strain on scarce foreign exchange reserves in developing countries’. It does this by increasing concessionality on outstanding loans, often given on commercial terms by governments or by private financial concerns. The motivation behind this lending was profit, and debt relief is sometimes viewed as recognition of the fact that indebted countries cannot pay because their borrowing, particularly during the 1970s when commercial banks and OECD governments made loans totalling some $300 billion to re...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of Figures
• List of Tables
• Acknowledgements
• Abbreviations
• Map of Contemporary Africa
• Introduction
• 1 What is Aid?
• 2 What is Aid for?
• 3 Western Aid in a Cold War Context
• 4 French and British Aid: The Cold War Record
• 5 A Changing Agenda?
• 6 French and UK Policy-Making: Actors and Institutions
• 7 The Dynamics of Aid Policy-Making
• 8 French and UK Aid Practice in Togo and Kenya
• 9 Aid Practice: Towards a Deeper Understanding
• 10 Conclusion: Rising to the Challenges of the New Millennium?
• Notes
• Annex A List of Interviewees
• Bibliography
• Index