Home > Africa, Aid, Development, Development Economics, Economics > Is Philanthropy Killing Business In Africa?

Is Philanthropy Killing Business In Africa?

Chris Blattman asks:

Todd Johnson asks his Ethiopian friend, an IT entrepreneur, his greatest business challenge. His answer? NGOs.

“ “Africans don’t see a reward system in place for being entrepreneurial. In fact, they view it as a matter of survival, not an opportunity to lift themselves out of poverty. Rather, what they learn at a very early age, is that in order to make good money, they should learn to speak English incredibly well and then maybe, just maybe, they can get a job driving for an NGO. In a few years, if they play their cards right, they might be able to land an NGO job as a project manager and even advance further.”

Sammy’s point was simply this. As a struggling businessman creating new start-ups, he could not compete with what NGO’s were paying for some of the best and brightest. And even worse, he said, “by the time the NGO’s are done with them, there isn’t an ounce of entrepreneur left.” ”

When a lot of aid hits a small skilled workforce, there are consequences. I think the message is that, if tallying the benefits of an NGO program, it’s good to look on the other side of the ledger.

h/t: Africa Unchained

NB: I have to say that in my experience (I’ve lived in Nigeria for all but 5 of my 20 years) I have never come across this line of thinking and have continually met the opposite: people hustling for themselves in the knowledge that even the educated cannot take the availability of jobs for granted. However, I concede that the point might be valid (I have no data) in areas with serious poverty, which usually attracts a lot of aid (like Ethiopia where the anecdote is from).

Megan McArdle points out another effect while also noting that it’s difficult to tell one person to give up their (sometimes) only source of sustenance for the good of the economy:

there are also fears that aid acts like a "resource curse", insulating political leaders from the need to win public support for their spending, and breeding corruption. On the other hand, I’m not sure I’m quite willing to walk up to a woman dying from malnutrition to tell her that I’m sorry, we’d like to help, only unfortunately it would distort the local economy and so I’m afraid you’ll need to lean into the strike zone and take one for the team.

Matthew Rognlie in a very good post (read it) argues that we should concentrate aid campaigns on things that we know and can prove work such as vaccination programs which has brought about a 78% reduction in measles deaths worldwide:

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Meanwhile, I have pointed out elsewhere that the inability to obtain funds for investment from banks, venture capitalists etc. means that those who do have the entrepreneurial spirit are unable to act on it compounding the problem:

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