Executive Summary

Chinese aid to Sub-Saharan Africa (SSA) has increased significantly over the past two decades. While this aid has provided vital relief to Africans, it deepens critical problems that have long-term implications for the continent. The United States and Canada in particular, are uniquely positioned to highlight and contribute to solutions that can help Sub-Saharan Africa understand and appreciate the real problems of the continent’s foreign aid dependency. Policy positions the US can take to optimize aid to SSA and reverse the problem include conducting research to understand objective truths about the Chinese aid problem and its alternatives, supporting the creation of free markets and smaller and more efficient governments, and developing human capital. Over time, state-level and intra-continental in Sub-Saharan Africa could increase to maintain a self-sustaining economy. Aid to the private sector could counterbalance the powerful political elite accused of having a history of corruption and wasteful utilization of foreign aid. Through an empowered and reliable free market system, the risks of China’s foreign aid trap can be minimized by improving the policy position and economic systems in Sub-Saharan Africa, which can be improved sustainably.

Introduction

The calculus of foreign aid in the family of nations reflects the principles of “poor relief” that were first introduced into England in 1576. Many writers assert that poverty was generally invisible before the Industrial Revolution since most of the poor were generally confined to rural settings. Poverty becomes apparent when there is massive wealth in a given space, and people endure serious destitution and economic distress.

Poverty relief fails when it intensifies adversity among the intended beneficiaries. This is a breach of the fundamental ethico-legal principle of malevolence – the obligation to desist from helping another if the help will worsen their plight. Externalities in failed foreign aid programs to some of the poorest regions of the world include uncontrolled population growth among the poor, which creates Malthusian conditions, discouragement of effort among low-income earners, destruction of vital sectors like the markets, and the encouragement of corruption and kleptocracy.

Until a conscious effort is made to break the cycle of aid dependency and its externalities, some of the poorest regions of the world, like Sub-Saharan Africa (SSA), cannot develop vital institutions and efficient sustainable markets. This research examines the Chinese foreign aid trap in Sub-Saharan Africa and how leading countries like the Untied States and Canada can contribute to the enhancement of free markets and strong state structures to support efficient and sustainable economies and systems in the region.

Chinese Aid & Sub-Saharan Africa Aid Dependency Problem

African countries south of the topmost fringes of the Sahara Desert are highly dependent on Chinese aid. Some estimates indicate that in the two decades between 2000 and 2020, Sub-Saharan African (SSA) states raked up aid of approximately $160 billion from China. This translates a cumulative injection of over $7 billion each year into the region’s economy.

While there is no doubt that this aid helped African states meet dire humanitarian goals, it is apparent that a lot of it was wasted and/or used to fund inefficient African governments built on faulty economic foundations.

The pattern of independence of most Sub-Saharan African countries created de facto states that had a federal-like dependence on their former European colonizers. One can hardly think of any reason for France or the United Kingdom to maintain their permanent seats on the UN Security Council beyond their considerable influence over their former colonies.

What London does for its former colonies in Africa is no different from what Washington’s federal apparatus does for relatively poor states in the US. The only point of divergence is that the poorest states in the US have a say on how federal resources are used – this is not the case with the many former European colonies of Sub-Saharan Africa.

The US federal government also deploys best practice solutions to the most deprived states to ensure even development in the Union. Furthermore, US federal government guarantees allow capital and entrepreneurial resources to move from state to state. This is conspicuously missing in the relationship between Sub-Saharan African states and their former colonial masters. The relationship between European colonizers and their former colonies ultimately supports authoritarianism rather than rule of law, democracy, human rights, and thriving free markets.

Most SSA countries have serious developmental challenges. Africa also lacks significant free market systems that can power their economies out of poverty and underdevelopment. This goes back to colonial times where industrialization and modernization were viewed by the European powers as a threat.

After independence, many African countries got caught in the straitjacket of the Cold War. This created wars, poverty and serious humanitarian crises (Malthusian challenges) that paved the way for China to enter and take charge of sensitive aspects of the Sub-Saharan African economic structures. 

As leader of the “Third World”, China played a quiet and non-threatening role towards the end of the Cold War. In the early 2000s, when the United States withdrew from less profitable regions of the world because of the emerging terrorist threats, China entered Sub-Saharan Africa through its traditional soft power and economic support model.

The closest to a federal government for Sub-Saharan African countries is their link to their former European colonial authorities, mainly France and the United Kingdom. These UN Security Council permanent states tend to be less willing and efficient in helping the continent meet its developmental needs.

In effect, Sub-Saharan Africa has the highest number of failed states. The relatively more successful states in the region have weak economies and poor state structures that can neither support free market systems nor provide sustainable developmental solutions. Thus, Sub-Saharan Africa continues to depend on aid.

The Paradox of Chinese Aid to Africa

While China's aid is, in many cases, lifesaving on the African continent, the merits of Chinese aid to Sub-Saharan Africa seem highly limited. The long-run implications of Chinese aid are highly problematic and call for immediate and swift action by Africa’s governments and productive populations.

The problems with Chinese aid on the continent include:

1. Enhancing Africa’s dependency on aid,
2. Supporting authoritarian & incompetent regimes,
3. Threatening free markets in Africa,
4. Discouraging industrialization and keeping African economies dependent on the exports of cheap raw materials,
5. Encouraging population explosions and counter-developmental behavior, and
6. Encouraging a culture of corruption and waste.

These issues inherent in Chinese aid to Sub-Saharan Africa can only be reversed through proactive action. It is necessary for Africans to understand what is at stake and also want to actively reverse them. Three vital things are necessary to control these externalities:

1. Free markets,
2. The evolution of context-appropriate institutions and standards, and
3. Free enterprise.

Africa, south of the Sahara, has seen various experiments with free markets. However, in many cases, political instability and the lack of political guarantees affect the sustainability of successful markets whenever they are established.

A decade ago, law enforcement officials’ accountability was a major problem in most par of Africa, and it often resulted in the illegal expropriation and transfer of private assets with little to no accountability for the public officials involved in these acts. Thus, it was not uncommon for a local military officer in Nigeria or Ghana to order the closure of a shop and transfer assets from one owner to another without being questioned by any authority. Obviously, these trends continue in some fragile states on the continent, like South Sudan and Congo.

Sub-Saharan Africa is known to have limitations in the policy and financial space. This is steeped in the fact that most SSA economies depend on raw material exports, and the diversification of the economies is generally slow. There are major challenges in prioritizing spending, containing public debts, and mobilizing tax revenues in SSA.

China's international expansionist policy is widely non-judgmental. They do not actively tie aid to responsible government behavior. China is known to have protected some of the most brutal dictatorships at the highest levels of international politics. Thus, pouring aid onto a politically fragile and precarious state system is a natural aftermath of Chinese aid. This is at the root of all the problems linked to Chinese aid in Africa.

The harsh reality is that the fragile and weak political and state structures of Africa lay the foundations for inconsistencies that affect continuity and efficiency in vital institutions. Due to this, commerce is generally complicated, and Africans in the Diaspora are forced to keep their savings and investments far from the continent.

Reversing the Trends – What the US, Canada and Other Major Countries Can Do

The United States has done a lot to promote democracy and freedom around the world. Canada was a fairly neutral country throughout the era of colonialism and during the Cold War. As globalization booms and the old restrictions in the movement of persons become apparent, it is clear that keeping Sub-Saharan Africa behind some Iron Curtain is no longer feasible.

Instead of viewing Africa as a “scar on the conscience of the world” the time has come to harness African potential by contributing to the building self-sustaining economic conditions on the continent.

Africa has come a long way since the end of the Cold War. The Third Wave of Democracy and the expansion of digital communication has raised the human capital in Africa, to a point where people want to generate meaningful value individually and collectively.

Thus, the old system of simply dumping foreign aid to a few corrupt ruling elites has outlived its purpose and essence. Aside from the corruption and waste it creates, it discourages Africans from developing sustainable economic networks by helping one another in an efficient market.

External help from the US, Canada and other leading democracies to reverse the Chinese aid trap can focuses on:

1. Human development,
2. Free market enhancement,
3. Efficient small governments, and
4. Encouraging the return of productive Africans in the diaspora to trade on local markets.

The US and Canada are best placed to address these issues efficiently, especially now that Chinese aid is digging SSA deeper into poverty and underdevelopment. 

Human Development

Poverty begets more poverty.

China's aid to Africa breeds poverty in many ways. Such aid supports weak and authoritarian governments that build curricula and educational systems that encourage Africans to embrace and live with poverty.

Many African institutions train their students to embrace a communal living that is devoid of efficient market ideals. Due to this, trade is very infantile in most parts of the African continent. This goes back to the era of mass independence on the African continent (1960s), where the earliest governments came under pressure to develop rapidly into the international political economy. Collectivist socialist models that encourage population booms and underdevelopment were used in many parts of the continent.

To this day, many schools run on collectivist ideals and values. That in itself reduces a desire for efficient market goals and ends. This has kept the continent impoverished and significantly reduced wealth generation.

Like China, there should be a mechanism to encourage productive free market systems in Africa. This is the best way to encourage innovation and inventions, promote international trade beyond primary raw materials, and optimize technologies.

Property Ownership & Free Market Enterprises

The wave of multiparty democracy that led to massive development in Africa after 1991 was an external injection into Africa. This was done through the application of soft power by many Western countries, especially the United States. It also led to massive urbanization and the creation of some production capacity in different parts of Sub-Saharan Africa.

History has shown that underdevelopment in Africa is strongly linked to the lack of political guarantees to underwrite major market infrastructure and trade systems on the continent. As identified above, most African countries lack direct supranational oversight, as a province in Canada or a state in the US or Brazil might get from the federal government.

Effectively, the claim of independence of these often too-small-to-be-viable African states created gaps that ultimately led to corruption, authoritarianism, wars, and dependence on foreign aid – which the Chinese are conveniently filling.

Property ownership and free market systems can be protected in many ways. There can be ways of empowering and helping these trade systems, including capital injections into private hands based on merit. Over time, this can help Africa’s private sector to grow and trade sustainably.

As of now, most aid goes to the often corrupt political elites. However, if aid could go directly to private enterprises, the continent could develop viable markets to promote national and intra-continental trade.

Efficient Government

In advanced Anglo-American countries, supporters of free enterprise constantly argue for small government on the basis of a primary Hobbesian ideal—the government must do what only the government can/should do.

However, in this era of Chinese aid in Africa, the notion of survival in the face of harsh poverty and underdevelopment justifies government overreaching. The only way to rectify this in SSA is to introduce watchdogs and internal voluntary oversight bodies from the private sector that raise objective questions about government failures in steering the economy.

The reality is that the corruption and misuse of foreign aid in Africa often involve collective action by the elite. This means the collaborating media and public figures will look the other way when cogent issues come under discussion because they are part of this elite. However, independent groups driven by the benefits of a free market will ask critical questions and demand the proper steering of the economy and systems.

What this means is that African analysts and researchers, driven by a quest for objective truths, would challenge and demand more efficient mechanisms for distributing national resources and preserving the markets.

Furthermore, a tradition of players on the markets documenting issues and raising them after a major and significant event provides a greater guarantee of development in Africa in the long run.

Encouraging Productive Migrants to Return and Trade

The options for Africans to transmit their business competencies from advanced Eurocentric countries to Africa are highly limited. Many Africans with productive skills are likely to become isolated and less efficient when they go back home. That is because of the lack of an opportunity to trade most products and services on the continent. This leaves most African migrants permanently resident in Eurocentric countries.

On the other hand, if this Western aid and its problematic aftermaths were transformed into a mechanism of empowering individual African migrants with the vision of running some viable business to help the continent, the economy of the continent would gradually improve.

Over time, Africans who can build businesses that sell to the world will lead the transition from aid dependency to self-sustaining economic systems. Hence, the system of simply viewing Africa as the continent to be “helped” and given “aid” is in itself crippling, and it kills effort. A change in mindset across the globe will help improve African self-esteem and encourage Africans to do more for themselves and their countries.

Policy Recommendations for the United States and Canada’s Relationship with Sub-Saharan Africa in the Face of the Chinese Aid Trap

Chinese aid to Africa is lifesaving and essential. However, the trajectory this aid puts the continent on is dangerous and can potentially deepen Africa's poverty and underdevelopment.

1. American support can proactively work to change things in a targeted manner that promotes democracy, the rule of law, civil liberties, and free markets. Canadian neutrality and independence can be utilized to conduct deeper research to understand and appreciate the scope of Africa’s aid dependence and the role of China’s aid.
2. The United States and Canada can provide support to build traditional elements of state legitimacy in SSA like free markets, smaller and efficient governments, and human capital development, which can help significantly.
3. If new consensuses are made to grant aid and support to thriving businesses and the private sector, the SSA region is likely to grow through trade.
4. Trade among Africans can help overcome poverty, reduce the aid dependency cycle, and force the public sector to become more efficient. An empowered African private sector can go to China and acquire vital technology to develop the continent – instead of exporting only primary unprocessed goods.
5. American and Canadian private sector and charitable entities can play a leading role by supporting small enterprises to contribute to the free markets of Sub-Saharan Africa to counterbalance the externalities of Chinese foreign aid to the continent and its mismanagement to limit the corrupt political elite who deepen the continent's challenges.

Sam Yeboah is an expert in Public Law and International Law. He manages several research projects focused on Public Diplomacy and International Relations. Sam is part of a team pursuing exploratory research on the concept of Smart Power in Statecraft and Public Diplomacy. He studied in the UK, where he earned a Qualifying Law degree (LLB, England & Wales), and a Masters in Technology & Learning Design.