Shifting sands of Sahel aid

Club du Sahel

Ruairi O Brien

Africa is the poorest of the earth’s continents and the Sahel is the world’s poorest region at peace. Six of the nine countries that make up this West African region – the Gambia, Chad, Guinea Bissau, Mali, Burkina Faso and Niger – are among the bottom twelve on a list of 174 countries ranked in the latest UNDP report on human development.

Adding to the crushing poverty is an unstable climate, fragile natural resources, dependence on a small number of exports that are subject to highly unpredictable market fluctuations, and a heavy reliance on financial transfers from abroad. All these factors generate an environment of permanent uncertainty that is hardly conducive to investment.

Progress at a price

At a time when multilateral institutions are talking about allocating aid according to income levels and performance, the Sahel can claim to have put in the effort and achieved the kind of results that would not normally be expected of such an impoverished region. Indeed, in defiance of its alarming economic situation, the Sahel is a region that is making progress. Food and social conditions have improved substantially over the past decade. In 1999 the Sahel will enjoy a grain surplus – something that would have been almost inconceivable 15 years ago. Sahelian societies are emerging as mobile and dynamic. In Mali, for instance, there are currently almost a thousand non-governmental organisations, or NGOs, when there were barely fifty in 1990. Most of these organisations are involved in providing social and economic services to local communities – training, health care, credit, hydraulics, and so on. Furthermore, in recent years the region has posted highly encouraging growth figures: 4.3% in 1995, 4.8% in 1996 and 5.3% in 1997.

For larger graph, please click here

And yet, aid to the Sahel countries has declined substantially. At US$2.3 billion in 1997, it reached its lowest level in nominal terms since 1986. Moreover, aid flows to the Sahel seem to be falling faster than total official development assistance (ODA). In real terms, aid granted by the rich countries to the Sahel dropped by 27% between 1990 and 1997, whereas the decline for all recipient countries combined was 21%. The gap may be larger than it looks, as 5 percentage points of the latter decrease are explained by the removal of a number of countries from the recipient list. While the proportion of ODA earmarked for the Sahel countries had exceeded 5% of the total in the latter half of the 1980s, it has been only 4.6% since the early 1990s.

The fall is substantial. On the face of it, its impact may not have been fully felt in the Sahel. Fluctuations in real exchange rates, in particular when the CFA franc – the currency used in seven of the nine Sahel countries – was devalued, may actually have meant that, on balance, the amount of aid did not diminish as a percentage of national output. While aid to the Sahel, when adjusted for donor-country inflation, dropped by 28% between 1986 and 1996, it rose by 11% when adjusted for inflation in the Sahelian countries. It could be argued that while the “donors’ effort” vis-à-vis the Sahel has shrunk considerably, the net size has remained more or less unchanged. But while the ratio of aid to GDP in the Sahelian countries, at 17% for the period 1995-97, has stayed fairly constant since the beginning of the decade, it is lower than it was in the 1980s, when it exceeded 20%. Furthermore, per capita aid has fallen significantly, shrinking from $80 in 1990 to $51 in 1997.

On the whole, the Sahel remains heavily dependent on aid. Private flows, amounting to several tens of millions of dollars, account for between 1% and 4% of the region’s net resources. Private transfers from abroad are still a largely unknown quantity; stemming largely from Sahelian expatriate communities, they are probably concentrated on a handful of countries in the region, like Cape Verde, Mali, Burkina Faso and Senegal. In Mali, they are estimated at about $10 per capita per year, which is not a great deal. Actually, official flows and grants account for a predominant and rising proportion of outside financing.

For the least developed countries as a whole, the share of grants and official funds is set to expand steadily, reflecting the severe tightening of conditions for access to international credit, whether public or private, a tightening which seems particularly pronounced in the countries of the Sahel.

For larger graph, please click here

Rising debt

The Sahel’s dependence on the donor community is increased by the fact that, in addition to the changing mix of external resources, the region’s indebtedness is rising too. The level of debt climbed from 80% of regional GDP in 1990 to nearly 100% in 1995-96. Moreover, debt is increasingly being drawn from aid institutions, and from multilateral credit institutions in particular. Over 80% of the outstanding debt of Burkina Faso, Cape Verde and the Gambia is multilateral.

The breakdown and direction of aid flows have also shifted in the 1990s. While there are no exhaustive figures by industry, the indicators available do show that the share of aid to social uses is rising significantly, to the detriment of economic support for infrastructure and production. Aid in kind, and food aid in particular, is also on the wane, though this is because the foodstuffs market in the Sahelian countries has improved so much.

The rise in the portion of social aid reflects the importance attached to institutional development, covering such topics as democracy and the rule of law, governance, capacity building and, to a lesser extent, education. The share earmarked for institutional support has in fact experienced the most spectacular increase, having risen more than fivefold over the past five years. Support for NGOs probably explains much of that increase. In contrast, the share of inflows for health care and hydraulics has remained fairly stable over a long period.

The shift in funding away from physical investment to intangible areas, like education and institutional support, may be seen as a consequence of a proper refocusing of the role of the state and public funding to promote improved governance and deliver social services, rather than playing a direct role in economic activities. These are important objectives, but the sustainability of outside funding also relies on economic returns, and so with the shift comes the risk that funding will become more uncertain.

This would be a pity, for although the Sahel may be considered a showcase for development assistance, the results of nearly 40 years of international co-operation have been mixed. The truth is that the Sahel is still poor and will probably require support from the international community for a long time to come. A country like Chad, even if it expanded by a steady 6% a year, would not match the current per capita income of the west coast country of Benin for another 25 years. And it would need 35 years to catch up with the per capita income of Pakistan, one of Asia’s poorer countries.

To tackle the question of the Sahel’s future requires a long-term perspective. Aid that is impatient and subject to fads, with constant calls for change and the application of powerful new models – in short, aid that overwhelms – will be of little help to the region. Sahel co-operation has to be seen as a lasting partnership, one that seeks to harness local dynamics and inspire reforms. If we take a patient approach, then we may be able to start writing that final chapter in the saga of world development sooner than we think.

Bibliography

Naudet, Jean-David (1999), Finding Problems to Fit the Solutions: Twenty Years of Aid to the Sahel, Club du Sahel, OECD.

©OECD Observer No 219, December 1999




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