Calling Africa's Bluff: Obama's Using Aid to Subsidise Investment in Africa

By Alexander O'Riordan · 3 Jul 2013

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Picture: American President Barack Obama and South African President Jacob Zuma at a press briefing in Pretoria courtesy GovernmentZA.
Picture: American President Barack Obama and South African President Jacob Zuma at a press briefing in Pretoria courtesy GovernmentZA.

When the UK announced it would end aid to South Africa, many pundits and African leaders heralded the decision as an end to Africa’s dependency on aid. These African leaders and elites see aid as patronising, an indignity to be resisted, a charity not needed. This critique of aid complements critiques by post-colonial theorists that criticise aid as another form of imperialism. At the same time, since 2007, the financial crisis and protracted narrative of austerity have allowed Western governments to undo many of their past obligations to aid and service delivery.

Many of Africa’s powerful have dared Western governments to cut aid for a long time now. American President, Barack Obama, and even some of the European donors are now calling Africa’s bluff. However, instead of cutting aid, they are seizing the opportunity to divert aid to their own national, commercial and security interests. Here Africa and South Africa have fundamentally misplayed the game once again. With Western anxiety about the rising influence of China and other emerging economies dominating the attention of decision makers, the West has seen a unique opportunity to divert aid to essentially subsidize their own investment in Africa and particularly around the globally most important geo-political asset of energy.

In 2011, the EU announced in its Agenda for Change that aid would increasingly be used to focus on renewable energies and could also be allocated to blending, which essentially allows aid to be used as to lower the cost of loans to private corporations. It is no coincidence that France and Germany amongst other EU countries are fast becoming global leaders in the clean energy field.

At UCT this weekend, Obama called Africa’s bluff arguing that with ‘Africa rising’ there is no longer a need for charity to Africa and then most eloquently, Obama announced that aid will be used to subsidise US private sector investment in energy in Africa. According to the press release on the White House website, the US will use $7 billion of aid money to help giant corporations like General Electric gain a better foothold in the energy sector in Africa as well as build partnerships with Africa’s burgeoning energy elites.

The ANC’s response was as short-sighted as it was laden with self-aggrandisement; the ANC confirmed that Africa is rising and no longer needs aid but pays absolutely no attention to the fact that this move will specifically undermine the competitive position of South African corporations themselves interested in investing in the energy sector North of the border. After, all South Africa is not availing its private sector of comparable subsidised loans and free technical expertise like the Americans and the EU will.

What is more worrying is the apparent lack of interest in where these funds are coming from. These investments do not add to existing aid allocations they rather come out of them. So while Africa’s strongest get the affirmation that they no longer need charity, Africa’s weakest will see aid diverted from essential items like school books and diarrhoea medications to grandiose industrial plans.

What is most problematic is the lack of reflexivity amongst our own leaders on what is plainly in sight. Mozambique has discovered one of the largest gas fields in the world. At an estimated 100 trillion cubic feet, the market value of Mozambique’s gas alone is in the region of R3.5 trillion. Tanzania has discovered enormous gas and potential oil; Uganda and Kenya as well as Somalia also have potentially vast and lucrative reserves. Energy is not just money it is also a geo-political strategic asset; who gets to buy the energy and more importantly process the energy decides where that energy will be sold. It is worth keeping in mind that with energy being a depletable, finite resource, who sells it first gets to sell it cheapest…the longer you wait the more valuable it becomes. Western interest in Africa’s energy sector is about a lot more than getting light-bulbs into African households.

The Obama administration concluded their announcement of aid for energy in Africa by saying that Africa needs to improve its governance to ensure transparent financial management of its own resources. The implication is that Africa must get in bed with Western investors as opposed to those from emerging countries that are accused of supporting corrupt African leadership while extracting resources without adding value domestically.

Obama’s call for good governance, however, rings hollow: good governance in Africa will never be achieved without protection for whistle-blowers, safe-houses for witnesses and legal aid for rights actors. Not only have Western donors failed to make any significant allocations for these relatively cheap vital components of good governance, but the US’s own treatment of whistle-blowers like Edward Snowden and Julian Assange clearly demonstrate that the rhetoric has little relation to how the West acts in Africa.

Finally, for those that celebrate the end of aid to Africa, we should not forget how hard fought that aid was in the first place. Aid to Africa was originally based on and transformed from allocations to colonial administrations. The fight to make aid apolitical and to keep it from being diverted to commercial and economic interests of the donor is one constantly contested and this week a fight that lost significant ground.

It is understandable that African leaders want to see an Africa beyond aid but before cheering the diversion of aid to other Western interests we at least have the moral obligation of asking Africa’s most vulnerable their opinion. If we take the time to consult them we would find that what made them vulnerable in the first place is often a direct result of Western interventions in Africa from colonial times through to the cold war. The West is complicit in a lot of Africa’s problems from propping up and encouraging corrupt and violent regimes through causing conflict by creating artificial borders and in endorsing unjust allocations of natural resources such as Egypt’s claim to the Nile. Those affected, like the millions of refugees from Somalia, villagers in Ethiopia still being dispossessed of their lands, the whole of Lesotho that lost its agricultural land to South Africa or even the victims of British atrocities during the Mau Mau rebellion might have a different opinion about the end of aid to Africa. Perhaps we should spend more time listening to their voices and less with the romantic notion of an Africa beyond aid…an Africa made up of the strong and successful, this Africa rising.

O'Riordan is an Aid Effectiveness and Donor Funding Researcher.

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