In this column called “The Indicator”, we will be taking an economic or financial statistic from East Africa and breaking it down into bite-sized nuggets of knowledge for investors.
Today’s indicator figure is 8,481,740,000
8,481,740,000 of what?
8,481,740,000 ($8.5 billion USD) is the total amount in current US dollars that is provided as Official Development Assistance to countries in the East African Community (EAC) in the most recent year reported.
What do you mean by Official Development Assistance?
According to the World Bank, Official Development Assistance (ODA) consists of “disbursements of loans made on concessional terms and grants by official agencies of the members of the Development Assistance Committee (DAC), by multilateral institutions, and by non-DAC countries to promote economic development and welfare in countries and territories in the DAC list of ODA recipients”.
In other words this money is grants and low interest rate loans from donor countries and institutions (think UN, World Bank, GIZ in Germany, USAID in the US, African Development Bank, and so on) to less developed countries like those in the EAC.
This figure does not include personal or religious charitable donations which would certainly increase the figure of financial support to EAC nations.
How does this compare to other regions of the world?
In the history of ODA tracking, the most a single country ever received was Iraq in 2005 taking in $22.0 billion USD with the next highest being Nigeria in 2006 with $11.4 billion USD in support.
Beyond that, recent years show that Sub-Saharan African countries receive the most aid assistance of any region and three EAC countries, Kenya, Tanzania and Uganda were listed as the top ten recipients of foreign aid in Africa.
So which countries in EAC have the most – and which the least – donor aid support?
Kenya and Tanzania both received approximately $2.6 billion USD. Uganda and Rwanda received between 1 to 2 Billion USD and Burundi received the least amount of aid in 2014, taking in only 501 Million USD.
How much per person does that mean?
The total amount of development assistance per year equates to about $54 USD for each and every EAC citizen with the highest being Rwanda at approximately $82 USD per person and lowest, Uganda at $44 USD per person. But the money doesn’t actually go directly to the citizens.
Where does that money actually go?
Development aid in the EAC covers many parts of government functioning. Some aid is provided as a low interest rate loan to government ministries with specific conditions for development projects that are intended to sponsor economic development.
Other aid is granted as part of projects, which tend to be focused on education, healthcare, infrastructure, entrepreneurship development, HIV/AIDs treatment and prevention and relief from natural crises such as droughts, famines or earthquakes.
Significant criticism has been waged against aid programs to government ministries for enabling bad behavior and in the past years these programs have sought to adapt through closer monitoring and procurement methods to prevent misuse of funds.
How does this compare to government budget for these countries?
Overall in East Africa the average aid to government budget percentage is 20.5% though there is significant variation. For example, the governments of Burundi and Rwanda receive 50.2% and 45.3% respectively, of support from foreign aid whereas Kenya recieves 12.8% of government budgetary support.
Is the amount of aid going into EAC countries expected to increase or decrease?
Since 1960 when ODA numbers began to be tracked, EAC countries have recived a total of $147.3 billion USD or an average of $2.7 billion per year.
The most recent year has seen more than triple the long run average of aid to EAC countries and Sub-Saharan African countries overall received 36 billion USD, the most in any region of the world.
Except for a few outliers, aid figures have tracked with stability of governments. Peace and stability is good for business and good for receiving aid assistance.
With the recent adaption of the United Nations Sustainable Development goals, building on the Millennium Development Goals for poverty alleviation and overall positive development globally, we expect the amounts of ODA to increase generally to countries that are politically stable in the near term.
How can I learn more?
This article uses statistics and figures from several publicly available sources. To learn more about aid and developmental assistance visit:
The World Bank’s site which contains the Net official development assistance and official aid received: http://data.worldbank.org/indicator/DT.ODA.ALLD.CD
About the authors:
David L. Ross is Managing Director of Statera Capital and US Ambassador to the Open University of Tanzania active in growing companies in Eastern and Southern Africa through primary investment, investment advisory, strategic partnerships, and executive education. Connect on LinkedIn at https://tz.linkedin.com/in/davidlross1 or at [email protected]