LONDON, United Kingdom – Moving from an aid recipient to trade partner can be a rough road to travel. The first hurdle is determining when should this transition take place. This is the question South Africa is currently grappling with as the U.K. recently announced they would stop direct aid to the country in 2015.
The announcement made by International Development Secretary Justine Greening on July 2nd was met with outrage by South African government officials. South Africa’s Department of International Relations and Cooperation claimed they did not receive sufficient consultation on this matter appeared caught off-guard by the announcement.
The U.K. currently provides 19 million GBP a year to the nation. South Africa, now a donor nation as well as an aid recipient, has grown significantly over the past decade and is now considered an economic powerhouse on the continent. As a result, donors believe the country can handle its own development needs. The United States is also poised to scale down its aid for South Africa over the next five years. However, the European Union aid plan for the next seven years remains uncertain.
The scale down in aid is also reflective of the budget constraints donor countries are experiencing as well as the strain fragile states put on aid. Many emerging economies and middle income countries are experiencing similar aid reductions. As the aid landscape for these countries changes NGOs and recipient nations must rethink their aid portfolios.
Corporate social investment is an alternative aid source that may offset reductions in Official Development Assistance. Private corporations are encouraged to provide aid in regions where they have corporate or business interests. And thus is especially important for growing economies attracting increased investment and growing business potential. In 2012 South Africa companies spent approximately $700 million in corporate social investment programs according to Trialogue, a South African consultancy firm. And South African law requires that mining companies support community development initiatives.
While Corporate Social Investment is an encouraging avenue for aid funds priority areas differ from traditional Official Development Assistance from the international community. This may lead to certain development areas, such as health, still feeling a serious pinch in their aid portfolios. Traditional Corporate Social Investment has not operated like a development organization. However, this trend appears to be turning according to Michael Rifer of Tshikululu Investments, a non-profit managing corporate funding in South Africa. These programs tend to evaluate recipients based on monitoring and evaluation capabilities and measures of success. The move to development professionalism leads to more informative and effective aid.
Not everyone is encouraged by increased Corporate Social Investment by foreign entities, however. Investment in NGO’s and development programs by foreign firms through Corporate Social Investment programs confronts similar perception as Official Development Assistance by Western governments: imperialism by Western entities. Aid flowing from foreign firms may be seen as pursuing their own commercial interests. However, as NGOs realize, the aid must flow from some source. With the scheduled end to U.K. aid they will likely look to the private sector to make up for the difference.
– Callie D. Coleman