“Why is America so rich and we are so poor?” The question came from a schoolboy in Ghana. It caught me by surprise. I hesitated before answering.
I didn’t have the knowledge to give him a solid answer. I was not an economist. I knew nothing about Ghana’s business enabling environment or its financial markets system. I didn’t know about the causes of poverty in Ghana, and was totally unaware of what the international donor community was doing about it. My knowledge of politics, colonialism and history was limited, although I was aware that Ghana had become independent from Great Britain on March 6, 1957.
Every schoolboy in Ghana knew that. Even me. The boy who asked the question was my classmate at Prempeh College in Kumasi. It was 1975. We were both 11 years old, and we wore the same uniform: khaki shorts and a short-sleeved green shirt. Neither of us understood that donor aid was already streaming into Africa to alleviate poverty, an effort that would later come under heavy fire.
In hindsight, it’s easy to criticize traditional poverty-fighting assistance. One of the sharpest critics is Dr. Dambisa Moyo, an international economist and author of "Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa." Dr. Moyo notes that development aid has fueled corruption, has removed incentives for governments to become efficient, has created a culture of aid dependency, and has distorted markets. In a 2009 article in the Wall Street Journal, she points out that in spite of $1 trillion of aid delivered over 60 years, real per capita income in Africa has fallen. She argues that countries that rely on markets rather than aid are more successful, citing Ghana as an example. “Governments need to attract more foreign direct investment by creating attractive tax structures and reducing the red tape and complex regulations for businesses,” she writes.
She is not alone in calling for a bigger role for the private sector. Dr. Donald Kaberuka, the president of the African Development Bank, recognizes that traditional aid has had successes. But in a recent article in Handshake, IFC’s quarterly journal on Public-Private Partnerships (PPPs), he argues that changes in Africa call for “Smart Aid,” an approach that includes the private sector. He notes that the growth of telecommunications sector in Africa was led by the private sector, and he mentions a number of infrastructure projects funded through a combination of donor, government and private financing, including roads, power plants and ports.
Donor strategies have also changed, in part because of the Paris Declaration on Aid Effectiveness, which calls for government-led development policies, and also by supporting the growth of the private sector. Handshake’s latest issue, Africa & PPPs, includes donor case studies that reflect this approach. In Uganda, KfW, Germany’s development bank, worked with the private sector on renewable energy projects. In Liberia, the Norwegian government led a multi-donor effort to rebuild the country’s war-shattered power infrastructure. Across the continent, private-sector entities are playing a bigger role in Africa’s development.
I often think that my classmate’s question planted the seed that led to my career in private sector development. I answered him as best I could: “Ghana is a young country and just needs more time,” I said. “America is almost 200 years old. Ghana is only 18.” My classmate nodded in agreement, satisfied with my explanation.
I’m not sure if I could answer the question any better today. But regardless of the causes of poverty in Ghana, or anywhere in Africa, the private sector will be an important part of the solution.
Read more about how public-private partnerships are helping Africa in Handshake: Africa & PPPs.