How can Foreign Aid be more effective in sub-Saharan Africa? Foreign Aid: Accountability and Service DeliveryNext, the research paper by Samuel Wangwe (2007) will links foreign aid accountability, and service delivery in to different aspects of the economy and society, and to the way in which it is allocated. This link is necessary to observe the positive/negative links between foreign aid and its effectiveness. In this research paper and literature analysis, Samuel Wangwe (2007) argues that service delivery is important for attaining accelerated growth, human development and resources need to be mobilized and be used effectively, to improve service delivery. He also argues that the improvement of service delivery can be achieved if the structure of incentives and the associated institution reforms and systems of accountability are appropriate for actors in service provision to effectively perform their service delivery roles and functions. The paper sets out to examine three things, first is to examine the review of the theoretical and empirical literature. Second, examining a review of the topical issues of concern and associated research issues that are deemed pertinent to Africa. Third, examine suggestions on the methodological approaches that may be adopted.Understanding the reasoning behind foreign aid and the different level of impacts that are associated with aid is the first step that Samuel Wangwe (2007) takes. Samuel Wangwe (2007) argues economic development has evolved from the preoccupation on growth of GNP to progressively include concerns of balance of payments, budgets, employment, basic needs, income redistribution (growth with equity), poverty, stabilization, structural adjustment, sustainability, world finance management and governance. As the paradigm shifted in the 1990s from a world with two dueling ideologies to one dominant phenomenon, the agenda of donors has also shifted. This new trend of ownership and good governance has quickly become an important influencer of aid allocation and reception. Multiple attributions have also been fashioned for aid allocation; these include selectivity, participation, ownership, and new modalities of aid delivery and management. Samuel Wangwe (2007) explains that concerns of the impact of aid has been diminished because, donors and others have taken advantage of the availability of a wider range of sophisticated analytical tools and more comprehensive data that has come out.As accountability and management systems evolve and become more sophisticated, aid effectiveness and delivery has to in turn improve. Samuel Wangwe (2007) makes two strong arguments when talking about accountability systems and management of aid. First, experience has shown that using conditionality as an aid delivery mechanism, to force African governments to implement reforms and other development programs is not likely to have a high success rate.[endnoteRef:1] Second, greater attention to poverty reduction and attainment of MDGs, and that the end of the Cold War, has been replaced by the war on terrorism, which has become a new mechanism in determining alliances and partnerships. Third, pressure applied from the international community to improve effectiveness and initiatives are being used to forge new partnerships between donors and recipients, and donors and various actors within recipient countries. [1: Devarajan and Holmgren (2001)]

Samuel Wangwe (2007) states the trend in Africa toward liberalization and democratization are clear indicators that Africa is changing its approach to development management. Although, a positive trend towards democratizations and liberalization exists, aid accountability has suffered on the way. Though foreign aid is an important resource for service delivery in many African countries, it has been evident that donors often underestimate how difficult it is to influence reform without undercutting domestic accountability. Although argues that state that bypassing country systems brings better results which outweigh cost of undermining the systems, exist, a study of 100 World Bank projects showed that implementation methods had no significant positive change on project outcomes, while at the same time the sustainability of the results suffered[footnoteRef:1]. [1: Boyce and Haddad (2001)]

In summary, Samuel Wangwe (2007) argues reforming the role of aid in service provision with a view of making it more effective has several factors at play. In the existing incentive systems we need to address multiple objectives that donors are facing. These are aid agencies preference towards flagship projects to show to their tax payers, agencies pressure to disburse resources rapidly, and pressures from interest groups in donor countries. These multiple objectives are associated with incentives that influence the way donors want to deliver and manage aid. An argument by Svensson (2006) is made stating that because those who finance aid are not direct beneficiaries and the aid agencies and the recipient country beneficiaries are not the ones who finance aid, which leaves a vacuum[footnoteRef:2] that is filled with consultants and experts. Svensson (2006) goes on to show that there are three main problems, first is the problem of multiple objectives and high staff turnover, making the staff more likely to focus on rewarding tasks. Second, institutional pressures to commit and disburse aid funding, and third, is the presence of multiple principles with the effect of increasing transaction costs and engendering collective action problems. The suggested solution to these problems is greater involvement from the beneficiaries of aid. [2: The vacuum that is left is who defines what the aid objective is, while consultants and experts fill this vacuum. The media becomes the source of information and feedback.]

In the above paper it is evident that much goes in to the allocation of aid, yet donors seem to underestimate and sometimes forgo the responsibility of implementation. Reasoning behind this is that they are not the beneficiaries of the aid, although they are beneficiaries of the wrongful allocation of funds Samuel Wangwe (2007). Accountability has to come from both sides of the foreign aid allocation both from the recipients and from the donors. Without this accountability, both purpose for the aid and the allocation of the aid suffers. While these two papers focused on foreign aid allocation, the accountability and its link to governments. The next the literature will observe the effect of foreign aid on growth, what the main purpose of foreign aid is and how it can spur growth. Foreign Aid and Growth Building on existing empirical evidence E. M. Ekanayake (2009),[endnoteRef:2] analyzes the effects of foreign aid on economic growth of developing countries. E. M. Ekanayake (2009) says the main role of foreign aid in stimulating economic growth and to serve as a supplement to domestic sources of financing such as savings and thus should increase the amount of investment and capital shock of a country. As Morrissey (2001) points out there are a number of mechanisms through which foreign aid can contribute to economic growth: these are increased investment in physical and human capital, increased capacity of import goods or technology; and not having indirect effects of reducing investment or savings rates. [2: The Effect of Foreign Aid on Economic Growth in Developing Countries ; E. M. Ekanayake, Bethune-Cookman University;Dasha Chatrna, University of Florida.]

To understand the impact of foreign aid on growth, one could just look just look at Africa and specifically Sub-Saharan Africa which received more aid than any other region in the world[endnoteRef:3], receiving more than $22.5 billion dollars out of the $26 billion granted to Africa. Given this importance of foreign aid to the economies of developing countries, it is important to understand its contributions to economic growth. [3: See ODA 2008 report]

This study focuses on the time period 1980-2007, in order to better understand the effect of aid on growth as well as any change of its effect over time. The economic growth rate is measured in this study as the growth of real GDP per capita in contrast to (2000) U.S. dollars. E. M. Ekanayake (2009) emerging points from the analysis was that foreign aid had a mixed impact on economic growth of developing countries, but when the model was estimated for different regions, foreign aid variable had a negative sign in three out of the four cases, indicating that foreign aid had an adverse effect on economic growth in developing countries. However, the variable is positive for Africa, indicating that foreign aid has a positive effect on economic growth in the region. This is not surprising given that Africa is the largest recipient of foreign aid.In summary, E. M. Ekanayake builds on the already existing empirical evidence and states that there are mixed results between foreign aid and economic growth in developing nations. However, the finding that there is a positive relationship between aid and economic growth in Africa is one that is interesting. This however is not surprising given that Africa receives the largest amount of aid, and is continuously increasing.This causal relationship between the amount of aid and economic growths leads me to my next article that states a big push to meet the MDGs[endnoteRef:4] would not only spur much needed development, but can have far reaching effects such as economic growth. [4: United Nations Millennium Development Goals (MGDs) proposal that an extra $135 billion in aid per year should be donated to the worlds developing nations by 2015, with Africa receiving $50 billion of the global aid. ]

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