Macro finance works on a much larger scale involving multiple entities. In the case of African development, I believe that the way forward is to invest in big time Pan-African entrepreneurs. The annual backing of Pan-African entrepreneurs like Dr Mo Ibrahim 20 could start a chain of beneficial events that subsequently lead to the ulterior motive, developing the African economies. Although it is, admittedly, not an appealing strategy, I believe granting larger subsidies to macro entrepreneurs could be better than aiding the smaller scale businesses, through economies of scale revenues will continue to rise as well as the employment of local population. By creating and encouraging more business minds like Ibrahim and building more world class businesses, Africa could be well on its way to reaching its potential. This could also lead to an increase in more lucrative trade. Pan African trade means that over 1 billion people can trade with each other, even though there are trade barriers and other set back the opportunities outweigh the challenges. In basic economics larger firms are able to trade more successfully due to tax exemptions usually due larger labour force and/or larger loans at later deliverable times. This is because they have more valuable assets as collateral.
The debate of whether foreign aid in Africa is actually effective is endless. We are unable to argue against the motion that aid donor countries have made mistakes and a lot of the time and during the cold war, the benefactors partly misused foreign aid in order to influence African leaders which provided a breeding ground for corruption. This was called tied aid and between the 1950s and 1980s it dominated foreign aid. In most of the cases in this time period, the donor countries benefitted more than the African nation in need of aid. An example of tied trade was seen in Egypt in the 1970s. Macro financing can be the factor that encourages great development in infrastructure that benefit economies at large despite the hidden agendas. For
example, in Egypt the Soviet Union helped fund the completion of the Aswam Dam in 1976. $554m was given to the Egyptian government which proved to be an excellent investment for the country as since its completion it has proven to be a great water irrigation source and at its peak it produced half of Egypt’s electricity through hydroelectricity. It was recorded to produce 10 billion kilowatts per hour of hydroelectric power It revolutionised Egyptian culture and industry and it’s the cases like this that I feel should be followed. However, I believe that being realistic with our aim’s (especially involving macro strategies) is essential. The predicament Tanzania was left in after microfinance help is a perfect example of this. In the 1980s, the Mufindi pulp and paper factory in Tanzania (which is a good example for a white elephant 21 project) received generous loan of roughly $200 million. The investment was too large and the technology too advanced and it was never successful. The project was discontinued leaving Tanzania paying back the loan over the next 20 years. From this we must realise and learn that regulation is needed and not try to force the outcomes. The perfect balance of financial aid and education is needed. Despite immense efforts over the past few decades, the movement for development in Africa has not so much been in vain but is in need of redirection and altering. The fact of the matter is that most economies of the nations of Africa are still stagnating and regressing. For an unhealthy amount of countries aid provided has caused huge 20 Mo Ibrahim is a Sudanese business man who founded Celtel, a telecommunications network, in 1998, from its creation it achieved 24 million subscribers across 14 countries including Sierra Leone, Kenya and Malawi. Africa’s dynamic mobile boom can partly be attributed to the Sudanese business man, he set up his company at a time when international investors shied away from what is now the fastest telecommunication market in the world. 21 White elephant - A possession which its owner cannot dispose of and whose cost, particularly that of maintenance, is out of proportion to its usefulness
29
Made with FlippingBook Annual report