Saturday, September 21, 2013

Africa: South Africa's aid to its neighbours should be explicit and conditional

Source: ISS

South Africa's aid to its neighbours should be explicit and conditional

At their bilateral forum last week South Africa and Britain resolved their row over UK International Cooperation Minister Justine Greening’s ‘unilateral’ decision a few months ago to end British development aid to South Africa completely by 2015. It has already steadily declined to £19 million a year. Her announcement of this step angered Finance Minister Pravin Gordhan in particular, since he and she had just discussed the issue at a meeting in London. To add insult to Gordhan’s injury, Greening said that the South African government had agreed to the aid being terminated, which he said it hadn’t.

After last week’s bilateral forum that’s water under the bridge. The two governments essentially confirmed what Greening had earlier indicated – that the direct aid would end in 2015. Henceforth British cooperation with South Africa would go beyond the old donor recipient relationship. This would include trying to build up South Africa’s trade with Africa – especially through continued UK support for the proposed Tripartite free trade agreement joining the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC). And the UK would in future funnel development aid through the new South African Development Partnership Agency (SADPA) to Africa.

Because they share Britain’s sense that South Africa has grown too rich for aid, other aid donors have also already started shifting their bilateral aid into trilateral projects with South Africa elsewhere in Africa. SADPA is the obvious vehicle for such trilateral cooperation but it presents some problems. First it is taking much longer to establish than was originally intended. It should have been up and running by now but the Department of International Relations and Cooperation (DIRCO) where it is located in government, is still erecting the structure, looking for a CEO and other staff. Evidently inter-departmental rivalry has also contributed to the delay.

Diplomats representing other donor countries contemplating such trilateral cooperation with South Africa through SADPA this week expressed some concern about allegations of corruption in the African Renaissance Fund (ARF) which is in a sense SADPA’s precursor entity, also housed in DIRCO. Evidently Maite Nkoana-Mashabane, the Minister of DIRCO, has ordered an investigation of allegations by DIRCO's internal audit committee that Director General Jerry Matjila approved humanitarian aid and development projects to Mali and Guinea without proper authorisation. It is not encouraging to donor governments that already struggle to ensure recipients correctly use their money, that in future it might be channeled through another pipeline that could be just as leaky.

The whole concept of a country like South Africa having a development agency like SADPA is inherently rather intriguing. Some might consider it rather presumptuous that South Africa, while still being an aid recipient country – and, as we saw in the row with the UK, rather insisting on that status – also styles itself as an aid donor country. That might be regarded as having your cake and eating it. Viewed from a slightly skeptical perspective, this arrangement implies that Pretoria is asking traditional donors to finance its pretention to join the ranks of the donor countries. Or at least to partly finance that pretention. It would be interesting to calculate the difference between the donor aid that flows into South Africa and that which flows out to other African countries.

To be fair to the South African government, the outflow might well be greater and certainly so if you count the considerable transfers of the Southern African Customs Union (SACU) customs revenue – in the region of R27 billion a year – to other SACU member states. Add that to all the other development assistance to Africa, including considerable military training to countries like the Democratic Republic of Congo (and, more controversially, the Central African Republic) and it would amount to a very large sum.

One of the aims of SADPA is evidently to collect all of the disparate bits and pieces – although not the SACU customs revenue disbursements since they are not ostensibly development aid – so they can be managed better. When SADPA gets going, it will also be interesting to see if it explicitly introduces the notion of conditionality into its aid disbursements. Conditionality has always been controversial as aid receiving countries have chafed against being told how they should spend the money and objected to donor auditors snapping at their heels.

South Africa has in the past joined the chorus of criticism of conditionality, suggesting it is demeaning to African governments who should be trusted to know what’s best for their own countries. Such criticism has driven a tendency among donors away from project finance towards providing budget support which essentially has no strings attached.

But it was revealing that when Swaziland’s government faced bankruptcy two years ago and asked South Africa for a loan, Pretoria offered it R2,4 billion which was highly conditional. The Swazi government had to commit to proper management of its finances, implementing fiscal and related reforms required by the International Monetary Fund (IMF). And South Africa also wrote into the loan agreement terms which amounted to political conditionality.

Though very delicately worded, the political aspect of the Treasury’s loan agreement essentially amounted to a requirement that the narrow and absolute Swazi monarchy engage with the full spectrum of its citizenry in plotting its way out of its crisis. A gentle nudge towards democracy.

As a result of such conditionality, King Mswati’s government has to date not accepted the loan. It was rescued from doing do – rather ironically – by an unexpectedly large windfall payout from SACU. In other words, it was essentially saved from having to accept conditional money from South Africa by receiving unconditional money from South Africa. Perhaps it is time for Pretoria to amend the SACU customs-sharing agreement to make the development component discreet and explicit. And then attach conditions to its disbursement.

Peter Fabricius, Foreign Editor, Independent Newspapers, South Africa