Growth of Aid to Africa

Net ODA to Africa amounted to USD 38.7 billion in 2007, representing 37 per cent of total aid. This corresponds to a fall of 18 per cent in real terms, mostly due to the end of exceptional debt relief operations. In 2007, debt relief grants returned to their levels prior to 2005. Excluding debt relief grants, ODA to Africa rose by 12 per cent in real terms. Net ODA to sub-Saharan Africa was USD 34.2 billion, of which USD 21.5 billion was bilateral aid from DAC donors20. The largest recipient of net bilateral ODA in 2007 in Africa was Tanzania which received (USD 1.8 billion), followed by Cameroon and Sudan (USD 1.7 billion each). Donors continued to focus on countries which have historically benefited from large aid flows: Egypt and Morocco in North Africa; and Tanzania, Ethiopia, Sudan, Nigeria, Cameroon, Mozambique, Uganda, Kenya, and DRC in sub-Saharan Africa, these 9 countries accounting for more than 53 per cent of total ODA to SSA in 2007.

The Gleneagles G8 summit estimated also that, should donors meet their commitments, total ODA to Africa would “increase (…)by USD 25 billion a year by 2010, more than doubling aid to Africa compared to 2004.” Final figures on ODA to Africa in 2004 were not known at the time of Gleneagles. The final total was in fact USD 29.5 billion. International organisations are interpreting the Gleneagles estimate as implying an increase in ODA of USD 25 billion at 2004 prices and exchange rates, so that for the promise to be fulfilled, ODA to Africa would need to be at least $54.5 billion in 2010, at 2004 prices and exchange rates23. To achieve this target, donors would need to boost their aid to Africa between 2007 and 2010 by over 17 per cent annually (See 2009 DAC OECD Report’s Annex A, Chart 5).

Based on their performance in 2007, several G8 countries would need sharp increases in their aid to meet their commitments. US ODA was USD 5.86 billion in 2007, and is projected to reach USD 6.54 and USD 7.53 billion in 2008 and 2009, respectively.

Non-DAC donors, have increased their ODA to the continent. On the basis of the available information, it appears that China has played a variety of roles in Africa: trading partner, donor, financier and investor, contractor and builder. The data also show that trade, investment, and other commercial activities combined have outpaced official development assistance (ODA) and become dominant in financial terms.

Chinese aid flows were equal to about 20 per cent of the value of trade with China in the early 1990s. That ratio declined to 3-4 per cent in 2004-05, even though China has stepped up its ODA to Africa since the first China-Africa Co-operation Forum was held in 2000. Indeed, in dollar terms, annual ODA flows from China to Africa increased from about USD310 million in 1989–92 to an estimated USD1-1.5 billion in 2004–05. However, there are major difficulties in estimating Chinese aid disbursements because of a lack of official time series and problems in valuing Chinese technical assistance and in-kind aid according to the IMF’s quarterly magazine. Moreover, the IMF reported that incomplete data make it hard to compare the terms on which China provided debt relief on terms comparable to the terms of the Heavily Indebted Poor Countries Initiative (HIPC).

The 2009 DAC report also shows a small increase in total humanitarian aid. The recent food crises, which have caused riots and troubles in several Sub-Saharan African countries, provoked a slight increase in humanitarian emergency aid for the sub-region. This increase comes from DAC and non-DAC member countries, as well as from World Food Program, other UN agencies, and nongovernmental organisations (NGOs). However, the general picture shows that much humanitarian aid globally continued to be concentrated on Iraq and Afghanistan, as a consequence of US increased ODA to Afghanistan by 5 per cent, to USD 1.5 billion, and USD 3.7 billion for Iraq. Humanitarian aid, like debt relief from bilateral donors, decreased for Africa, while other sources of ODA rose. (See Figure 7)
In 2008, as in 2007, the largest African aid recipients included several among the 28 which have achieved their HIPC28 completion point or are in the process of doing so. As of March 2009, 20 African countries had reached their completion points and 8 more had reached the decision point under the enhanced HIPC Initiative; 5 others are potentially eligible. The challenge of the HIPC initiative, and of the Multilateral Debt Relief Initiative (MDRI), is to ensure that the resources that are freed from debt repayment are channelled to expenditures on health, education and other social services.

The concern expressed in AEO 2007/08 over debt sustainability is still relevant. The immediate problem, however, is the drying up of trade credits with the contraction of the secondary market in commercial paper, prompting the IMF and the World Bank to enter the market as a supplier of trade finance. This problem has been exacerbated by the global financial crisis that started in late 2008. To be sure, many African countries have continued to contract credits with emerging donors who are not members of the DAC and are not obliged to implement the Paris Declaration and other tools for better management and aid effectiveness. China has continued to lend important amounts of money to several Sub-Saharan African countries, but due to the incomplete data on China’s aid and credits to Africa, it is difficult to estimate such flows. Thus, even after debt relief under the HIPC and MDRI initiatives is fully implemented, maintaining a sustainable level of debt service, while seeking additional financing needed to make progress towards the MDGs, will still be a challenge31.

To address the concern among developing countries in Africa and elsewhere that the current crisis may result in reductions in aid budgets instead of the further increases that have been pledged32, the OECD’s Secretary-General, Angel Gurría, and the Chair of the DAC, Eckhard Deutscher, have issued a statement calling upon the world’s major donor countries to stand by their development pledges in order to prevent the “… financial crisis from generating an aid crisis”, which would have a serious impact on developing countries, especially in Sub-Saharan Africa, already struggling with the global food crisis and rising oil prices. Their “Aid Pledge” urges DAC members to “… reaffirm their aid commitments and refrain from any budgetary action that is inconsistent with such commitments.”

As a positive sign, preliminary figures for 2008 released by the DAC at the end of March 2009 indicate that net bilateral ODA from DAC donors to Africa and Sub-Saharan Africa totalled USD 26 billion, of which USD 22.5 billion went to Sub-Saharan Africa. This corresponds to real growth rates of 10.6 and 10 per cent for Africa and for Sub-Saharan region, excluding debt relief grants. If debt relief operations are included, the estimated growth rates were of 1.2 and 0.4 per cent respectively.