Wednesday, February 21, 2024

Foreign ‘aid’ to Botswana returns to pre-recession levels

Botswana was not exactly Zimbabwe-broke in 2008 when shock waves from the global recession rippled from its New York epicentre. However, its economy needed a lot of help with shock absorption. In that year the total official development assistance (ODA) from overseas benefactors jumped from US$105 million to US$723 million. Botswana’s situation was particularly precarious because it sells most of its diamonds ÔÇô the mainstay of its economy ÔÇô to the United States and is also hard-wired into the global financial system. In 2009, the ODA dropped to US$282 and has been declining since. The African Development Bank (AfDB) has just released its statistical brief on selected socio-economic indicators on Africa which shows that Botswana’s ODA for 2015 was US$66 million, which is only US$1 million more than the 2006 level. The steepest rise was between 2007 and 2009 when the recession hit. On the surface, ODA sounds like a good thing and makes the donors look good. The reality though is that there is an astounding amount of evidence that shows that there is no such thing as foreign “aid” from the west.

The west merely returns less than a tenth of what it appropriates from Africa. The reality is that it is the west that gets foreign aid from Africa. In its recently released Strategic Framework and Action Plan on the Prevention of Illicit Financial Flows in Africa (2017-2021), the AfDB says the following: “A joint study conducted by the AfDB and the Global Financial Integrity (GFI) found that between 2000 and 2009, some US$30.4 billion per annum flowed out of Africa, mostly in the form of illicit financial flows [IFFs]. Over the longer period of 30 years calculated from 1980, the resource drain was between US$1.2 – 1.3 trillion.” IFFs refers to money that is illegally earned, transferred or utilized. This money typically originates from three sources: commercial tax evasion, trade misinvoicing and abusive transfer pricing; criminal activities, including the drug trade, human trafficking, illegal arms dealing, and smuggling of contraband; and bribery and theft by corrupt government officials.

In 2013, Botswana was said to be losing between 5 and 7 percent as a percentage of GDP through IFFs. IFFs divert resources away from priority sectors such as health, education and infrastructure to efforts to fight illegal activities. According to the United Nations Economic Commission for Africa High Level Panel on Illicit Financial Flows, Africa is estimated to be currently losing more than $50 billion annually in IFFs. Some reports estimate that for every dollar of development assistance that developing countries received over the 10 year period (2003-2012) 10 USD left in the form of illicit financial flows. According to the OECD, there is a general consensus that IFFs from developing countries likely exceed aid flows and investment in volume.


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