ODA needs to be linked to the development needs of partner countries
Interview with Paul Okumu, Head of the Secretariat of the Africa Platform (AP). AP is a Pan African Platform working with societies, governments, and businesses to rebuild the social contract and re-establish the society as the source of state legitimacy and the final authority to whom all development actors, businesses, and development partners-are accountable. Paul Okumu is also a member of the Steering Committee of the Global Gateway Civil Society and Local Authorities Advisory Platform.
In recent years, the European Union has been changing its approach to development cooperation, moving from traditional development aid to international partnerships that supposedly benefit both the EU and partner countries. What are the consequences for African partners of the EU scaling up this approach? Are African partners convinced that the EU’s offer is indeed a better offer compared to other global players?
The change in approach is ironically positive, but not for the reasons you would think. This change will not help our continent. However, with the EU making it clear what it wants and not hiding its intentions – by no longer pretending that they are providing grants instead of investments – the conversation with African partners will become more honest.
At the end of the day, there is not much difference between what the EU offers, and what China offers. The difference was in semantics and honesty. The change in the EU’s approach will force an honest conversation on what qualifies as aid, investment, or blended finance. Why should it be blended finance for EU corporations in Africa, but not for African companies? European companies have been using blended finance to kick local companies out of their own markets. The shift towards a more right-wing Europe is also due to the fact that EU citizens think their tax money is going to Africa, without having any real effect. In reality, this money has been going to EU corporations instead of benefitting the African people.
European multinational corporations (MNCs) are taking over African countries, and investment to these MNCs is being marketed as aid, despite not being aid in the original sense of the term. China is exploiting the breach of trust between Africa and Europe. China is upfront about its intentions, and openly offers loans, without pretending that these loans are aid. This allows true negotiations to happen with African partners, which we Africans find to be a relief. With China, we can openly negotiate interest rates without pretending it is aid.
In changing its approach, we would like to see a “moral” EU, which practices what it preaches. Trying to conceal its interests behind aid and other forms of assistance is only perpetuating the problems. The Global Gateway, for example, is going to leave Africa with a EUR 627B debt that it never planned for and never wanted. It has killed economies across Africa, leading to the very migration that the EU claims it wants to stop.
The main objective of Official Development Assistance (ODA) is to support the economic development and welfare of low- and middle-income countries, it is connected to objectives linked to human development, access to healthcare, and basic education. How do you think the EU can improve its ODA and support the growth of partner countries? How can ODA be more transformative?
First of all, ODA needs to be linked to the development needs of partner countries. The biggest challenge raised by nearly all countries over the years is that donor countries provide ODA for things they want done, and how they want them done, not what the so-called partner countries want. ODA is always linked to a specific agenda that the donor country wants to achieve. For instance, the EU directs a lot of its ODA into supporting governance and democracies, but they support only a form of democracy and governance that makes African countries become more like Europe so that it can expand its market for products. Another share of EU ODA is given to create the environment that makes it easier for European corporations to operate in Africa, especially in the agricultural and resource rich countries of the DRC and Ethiopia. This idea of providing ODA that only meets the interests of donors is not only self-serving but adds little value to countries that receive it.
ODA faces three fundamental challenges:
First, contrary to some belief, most ODA never reaches the so-called partner countries. If you look at the detailed calculations by the OECD/DAC (made up of countries that provide ODA) you will be surprised that most of money marked as ODA ends up benefiting the multinationals and the governments that provide it. This is done through a creative mechanism known as ‘tied aid’, which has two components. First, the money earmarked as ODA is used to underwrite risks associated with European corporate investments in Africa. This is money literally given to European corporations to have an advantage in procurement and contracts over local players. And yet, this is classified as ODA. The second, is money that is given as loans. The OECD has come up with a complex set of calculations where the EU can get money from its own central bank at 0.4% interest, lend it to Nigeria at 5% interest, and classify it as aid. That is what many European countries did during COVID-19 pandemic. Germany, for example, literally printed money and gave it out as loans. The first step is to stop lying over what constitutes ODA and be honest with citizens on both sides.
Secondly, the bulk of ODA is linked to specific changes and demands that end up harming the countries that receive it. For example, Ghana’s economy nearly collapsed because the ODA given was tied to a mandatory opening up of its industries and minerals and overall economy to multinationals and European products. ODA to Kenya and Nigeria in 2023/2024 was conditional on removing subsidies on fuels, which has a knock-on effect on the entire economy, an effect whose financial implications wipes out the entire value of any ODA given to these countries. Countries providing ODA will tell you that they are attaching these conditions so that partner countries can raise money to pay back any loans that they owe. However, this creates a vicious cycle. Why would a European country insist on a partner country removing a social support programme that ends up increasing the very poverty the EU claims it is trying to alleviate? This negates the whole purpose of ODA, in that it actually ends up weakening partner countries’ economies.
Finally, the bulk of ODA is given to a very small group of countries. It will surprise many that over the past 15 years, ODA has traditionally gone to the same usual countries. For a long time, it was Afghanistan, Turkey, and Ethiopia as well as Egypt. According to the OECD figures for 2023, most of the ODA went to just six countries: Ukraine, Syria, India, Ethiopia, Bangladesh. The reason behind this is that these are the countries with the largest number of European corporations, or where the EU has clear military and/or economic interest.
The European Union has started to develop its proposal for its next multiannual budget (MFF post-2027) and its future external financing instruments, which will frame its partnership with third countries. What would you like to see coming out of these proposals?
We should use the development of these proposals to have an honest discussion. For that, there are a few points I would like to raise:
Open clarity, away from the OECD, on what development cooperation actually is in financial terms: the OECD definition of what constitutes “aid” is problematic. It is important to be transparent about ODA and its purpose. If it is a grant, let it be a grant, and let us make it clear it is a grant. Otherwise, we can talk about investments on equal terms, but let us not pretend it is aid.
Better terms for financing: more predictable financing, and clear, consistent financing. The EU is notorious for recycling money. We need the right financing, at the right time, consistent, and on favourable terms. This is also linked to the development financial architecture, and who sets the interest rates. Credit agencies, based in the Global North, have immense power to put African partners in very difficult positions when they downgrade them, making access to development finance very, very, expensive.
If we decide to work with the private sector, we should get rid of the term “blended finance”: we should not call it investment either, if it is actually a subsidy to European companies. We should create a level playing field for all actors on the market. This cannot happen if developed countries subsidise their own companies in developing countries.
An opportunity for independence in domestic resource mobilisation: right now, OECD countries, especially EU Member States and the US, make it very difficult for African governments to collect taxes from MNCs, which are often based in the Global North. In one meeting, I recall an ambassador saying that if only his government could collect the taxes that they were owed by MNCs, they would not need development aid.
The principle of policy coherence must be at the heart of external financing structures: We want to know how much money Germany is giving, where it is going, and how/if it complements EU funding. This allows synergies to be created with limited resources. A lot of money gets lost because of policy incoherence. Team Europe should be increasing it. The challenge is that members of Team Europe have different priorities internally.
Interconnectedness: the EU should be financing the Sustainable Development Goals (SDGs) by supporting national development strategies. In recent years, the EU has put a lot of money into education in Africa. But here is the catch: they are putting it into Technical and Vocational Education and Training (TeVT), not in basic or higher education. This is not a coincidence: the EU has assessed the average age of migrants, and it is providing technical skills that will keep them in their countries of origin.
More transparency is needed, especially at recipient level. I would also underline transparency on how the EU supports CSOs. A lot of money goes into “black boxes” of civil society, which only donors know about, and local governments are unaware. We did a study in 2016 that showed that 97% of grants given to NGOs in the South went to International NGOs. Only 2,7% ended up with NGOs in the South. More transparency is also needed on financing from the European Investment Bank (EIB) and Development Financial Institutions, which should be working closely with partner countries and ensure financing is actually benefiting partners. We need transparent development cooperation, to the last euro.
Originally published by Global Health Advocates: https://www.ghadvocates.eu/oda-linked-development-needs-partner-countries/