Towards a new aid paradigm: South Africa as African development partner

Abstract

As the largest African economy and the leading African aid-provider, with plans to establish an aid agency, South Africa is often ranked among the developing world's ‘emerging donors’. However, the country's development cooperation commitments are smaller in scope, scale and ambition than the aid regimes of the BRIC (Brazil, Russia, India, China) or Gulf state donors. Given its limited resources and domestic socioeconomic challenges, South Africa prefers the role of ‘development partner’. In this role, South Africa's development cooperation in Africa has ranged from peacekeeping, electoral reform and post-conflict reconstruction to support for strengthening regional and continental institutions, implementing the New Partnership for Africa's Development (NEPAD) and improving bilateral political and economic relations through dialogue and cooperation. This article seeks to determine whether Pretoria's development cooperation offers an alternative perspective to the aid policies and practices of the traditional and large rising donors. We conclude that South Africa does not fit neatly the ‘donor’ category of the Organization for Economic Cooperation and Development's (OECD's) Development Assistance Committee (DAC) and neither is Pretoria's aid-spending typically ‘ODA’ (official development assistance). Instead, with its new aid agency, South Africa occupies a unique space in Africa's development cooperation landscape. With fewer aid resources, but a ‘comparative advantage’ in understanding Africa's security/governance/development nexus, South Africa can play an instrumental role in facilitating trilateral partnerships, especially in Southern Africa.

Notes

¹ South Africa received US$1032 million in net ODA in 2010, down from US$1075 million in 2009 and US$1125 million in 2008. Over the period 2000–2010, South Africa's share of ODA to Africa was about 2.2 per cent. The top ten donors of gross ODA to South Africa are the United States, European Union (EU) institutions, Germany, the United Kingdom, France, the Netherlands, the Global Fund, Norway, Denmark and Belgium ( < www.oecd.org/dac/aidstatistics/1878742.gif>).

² Confidential interview, DIRCO, May 2012.

³ The official definition of ODA is ‘Flows of official financing administered with the promotion of the economic development and welfare of developing countries as the main objective and which are concessional in character with a grant element of at least 25 per cent (using a fixed 10 per cent rate of discount). By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries (“bilateral ODA”) and to multilateral institutions. ODA receipts comprise disbursements by bilateral donors and multilateral institutions. Lending by export credit agencies—with the pure purpose of export promotion—is excluded’ (IMF 2003).

⁴ The South African government has agreed on 12 outcomes as a key focus of work up to 2014. Outcome 11 provides the vision for South Africa's international relations ( < http://www.thepresidency.gov.za/MediaLib/Downloads/Home/Ministries/DepartmentofPerformanceMonitoringandEvaluation3/TheOutcomesApproach/Delivery%20Agreement%20Outcome%2011.pdf>).

⁵ The DBSA is internally debating a greater donor role in post-conflict assistance in Africa. Development finance institutions are ideally suited to the post-conflict or post-disaster context due to their intermediate role between international finance institutions (IFIs) and the private sector, as they ‘seek to narrow the gap between pure commercial loans from the private sector and grants from donor agencies’ (Ruiters and Giordano 2010, 11). Their risk appetite is bigger than that of the private sector and they engage in economic development where the IFIs do not. This places them ideally at the forefront of post-conflict economic reconstruction with a potential role to ‘[a]ddress the capital market inefficiencies where private capital is unwilling or unable to bear the risk of providing capital to countries, projects or clients that are not considered creditworthy’ (Musasike et al 2004, 18).

⁶ Formerly the South African Management Development Institute (SAMDI).

⁷ In 2000, the ARF replaced the Economic Cooperation Promotion Loan Fund Act of 1968 (as amended by the Economic Cooperation Promotion Loan Fund Amendment Act of 1986).

⁸ Confidential interview, DIRCO, May 2012.

⁹ The ARF's Advisory Committee consists of seven members, all from government, namely five from DIRCO, one from the National Treasury and one from the Department of Trade and Industry.

¹⁰ These include agriculture, culture, defence, education, energy, environment and climate change, health, human settlements, information society, public administration, revenue administration, science and technology, social development, trade, transport and tourism.

¹¹  < http://www.ibsa-trilateral.org>.

¹² In the Delhi Declaration at the end of the Fourth BRICS Summit in 2012, the BRICS announced setting up the Bank, described as a ‘BRICS-led South–South development bank’. The finance ministers of the member states were directed to conduct feasibility studies of the initiative and to submit their reports at the 2013 BRICS Summit in South Africa.

¹³ The SACU Agreement was renegotiated in 2002 to establish more democratic structures and procedures. In particular, the Agreement makes provision for consensus-based decision-making and the establishment of a SACU Tariff Board, which means that decision-making, is no longer the sole preserve of South Africa. The new agreement also calls for the establishment of common policies and new supranational institutions in future.

¹⁴ In the wake of the global financial crisis, reduced demand for and falling prices of diamonds led to lower export receipts and lower government revenues in Botswana. As a result, Botswana was forced to apply to the African Development Bank for a US$1.5 billion budget support loan to help cushion the impact of the crisis. Botswana last approached the Bank for support in 1991, 17 years earlier.

¹⁵ SADC's Regional Indicative Strategic Development Plan (RISDP) is based on a classical market integration paradigm. The launch of the FTA in 2008 (with some progress towards liberalizing trade in services) is seen as the initial step towards establishing a Customs Union which was set for 2010, a Common Market by 2015 and a Monetary Union by 2016. A regional central bank and a common currency are expected in 2018. Since the necessary structural and institutional prerequisites for deeper integration are presently lacking in the region, these benchmarks are being reviewed to accommodate a more ‘developmental’ regionalism.

¹⁶ The World Bank estimates that Africa needs US$93 billion annually over the next decade to overcome its infrastructure deficits, particularly in the power sector, which is more than twice what was previously thought. The new estimate amounts to roughly 15 per cent of the continent's GDP, comparable to what China invested in infrastructure over the last decade (Foster and Briceño-Garmendia 2010).

¹⁷  < http://www.icafrica.org>.

¹⁸ Confidential interview, DIRCO, Pretoria, July 2010.

¹⁹ Since the advent of democracy in 1994, the ANC-led government has adopted a range of economic policies, including the Keynesian-inspired Reconstruction and Development Programme (RDP) in 1994, the fiscally conservative Growth, Employment and Redistribution (GEAR) macroeconomic strategy in 1996 and the hybrid Accelerated and Shared Growth Initiative for South Africa (ASGISA) in 2006. More recently, government planning for a ‘democratic developmental state’ has centred on the mixed economy New Growth Path (NGP) adopted in 2010, the diagnostic National Development Plan (NDP) released in 2011, and the massive infrastructure development programme announced by President Zuma in his 2012 State of the Nation address.

²⁰ Confidential observation made at a high-level government meeting, October 2010.

²¹ During his first 18 months in office, President Zuma paid state visits to each of the BRIC capitals to strengthen bilateral political and economic relations, lobby for BRIC membership and explore trilateral development partnerships.

²² Confidential interview, DIRCO, May 2012.

²³ Confidential interview, DIRCO, May 2012.

²⁴ With a wider range of financing options other than traditional ODA, Manning (2006) argues that low-income countries face three key risks: they may prejudice their debt situation by borrowing on inappropriate terms; they use low-conditionality aid to postpone necessary adjustment; and they waste resources on unproductive investments.

²⁵ Since 2000, Pretoria has experimented with a range of trilateral partnerships, collaborating with Belgium, Norway, Sweden, Switzerland and the Netherlands to deliver development assistance to African countries (Braude et al 2008).

²⁶ With a population of almost 50 million citizens in mid-2010, only 12.7 million South Africans have jobs; 5.5 million are registered as taxpayers, and only about five million actually pay tax. At the same time, 13.8 million South Africans are on welfare payments (Business Report, 28 July 2010).