International development support for South Africa is being snagged on a paradoxical problem, writes Simon Segal
THE much-hyped flow of foreign aid to South Africa is being held up by a paradoxical problem: the government does not have any clarity about what exactly is being offered, and the donors won’t move until the government proposes projects.
Broad commitments and intentions have been announced, but details are unknown. No one is really sure when aid money will be available; in what form it will be (grants, loans, trade-related, investment-related); to whom it should go (government or non-governmental organisations); and for what projects and sectors.
The government is trying to obtain details through delegations comprising the departments of Reconstruction and Development, Trade and Industry, Finance, and Foreign Affairs, meeting each donor this month. It expects to have a schedule by next week.
Donors are waiting for South Africa to come forward with detailed projects. But government officials argue that they cannot do so without details of what the donors’ commitments entail.
Donors are also unsure about who in government is co- ordinating foreign assistance. The government’s plan, soon to be put in place, is that the Reconstruction and Development Department comes up with projects, then sets priorities, then approaches the Department of Finance for funds, which then goes to the donors to mobilise funds that match the RDP project.
But this is not yet running smoothly and only applies to funds earmarked for the government. Funds targeted for non-governmental organisations (NGOs) are a different story. So figures being bandied about are little more than crude guesstimates.
The only detailed package is from Japan: for this fiscal year it has committed $30-million to the government for health and education, $10-million to NGOs and $10-million for technical assistance.
As a developed economy with substantial development problems, South Africa occupies a unique position in the world of development assistance. It is not a “basket case” where the donor/recipient relationship is one-sided — it will not be passively reliant on international donors. The thrust of current thinking is to encourage targeted assistance, as opposed to ending up in a position of perpetual passivity.
It is not a matter of asking for money with no specific projects in mind — a shopping-list approach — but of putting forward viable projects around which donors can participate while South Africa maintains full control over the resource flows.
Such an approach links in with the two pillars of modern international opinion on development assistance: lending at market-oriented interest rates and encouraging private initiative (in South Africa’s case, this largely means supporting black economic empowerment).
In the past, foreign assistance to this country was directed at support for anti-apartheid causes, mainly through church, civic and non-governmental associations. The Development Bank (DBSA) reckons it totalled more than R1,5-billion in both 1992 and 1993.
Now indications are that under the government of national unity, development co-operation will focus on enhancing trade, private investment and development loan funding. Grant assistance will be more limited due to the country’s international development classification based on income per capita, although a special case will be argued for South Africa.
This transformation of international assistance has brought a whole new set of challenges. Most crucially, the country must detail a RDP which can pass scrutiny as being affordable and sustainable within a framework of macro-economic stability.
This entails consensus among local interest groups over key policy and strategy principles. Co- ordinating mechanisms, through a single institution, will have to be set up to prepare and inform the government in engaging the international community.
Thanks to its pariah status, South Africa’s links with the international development institutions have been abnormal. The country has been excluded from multilateral assistance, while bilateral assistance has been purely grant aid that, unlike loans, does not have to be repaid.
In 1992 an estimated $327-million was received in grant money in bilateral assistance. For this fiscal year, just under R1,5-billion is pencilled in, albeit loosely, from bilateral donors.
The main donors in 1992 were the European Union ($107-million, or 32 percent of total grants) and the United States ($80-million, or 24 percent), primarily via USAID. This year the US is expected to overtake the EU.
Sweden (17 percent), the United Kingdom (eight percent) and Germany (five percent) have been South Africa’s other large backers. Sweden is expected to cut back sharply.
In 1992 more than 90 percent of this grant aid came in through the South African Council of Churches, the Catholic Bishops’ Conference, Kagiso Trust and Cosatu/Nactu. The DBSA reckons 43 percent went to education and training, 12 percent to community development, 11 percent to human rights/legal aid and 11 percent to rural/agricultural development. More recently, the bulk of grants went towards voter education and other aspects of the April elections.
Now foreign aid will become development oriented and South Africa will compete on a level playing field for international development support. There is a critical chance to take advantage of the political dividend surrounding the elections. Much will depend on how South Africa uses this initial “sympathy” period over the next few years.