It is not only South Africa that is threatened with a cut-off in US aid.
On Sunday, US President Donald Trump accused SA of, “confiscating land, and treating certain classes of people very badly.”
“The United States won’t stand for it, we will act. Also, I will be cutting off all future funding to South Africa until a full investigation of this situation has been completed!” he said on his Truth Social network.
The ANC, political parties and some civil society bodies have slammed Trump for his statement, and President Cyril Ramaphosa has insisted the Act is part of a constitutional process.
With uncertainty over the full consequences of what might happen if South Africa does not back away from expropriation without compensation, the ANC is under pressure. Trump may also call out SA over the genocide case it brought against Israel, and SA could face a very difficult time with the Trump administration.
That will matter for our continued preferential access to the US market under the African Growth and Opportunity Act. Having good relations just makes things a lot easier.
The intended effect of Trump’s statement may well have been to be disruptive and unnerve the ANC.
Whether there will be a permanent cut-off in US aid to SA is uncertain, as is the case with a lot about the Trump administration. For South Africa, a cutting-off of aid would be of marginal consequence. Including US funding for HIV/AIDS programmes, aid from Washington only amounts to about 0.3 percent of total SA government spending.
Trump will uphold an “America First” policy in allocating US aid, to ensure that the US’s best and most loyal friends are the largest recipients.
For many countries, a cut-off in US aid might be catastrophic, as they heavily rely on the agency for funding budget deficits, for food and health care, and development projects. But any massive cut in aid is unlikely. Political reality means that to “Make America Great Again” and ensure its influence, US aid cannot be slashed.
A massive revamp in the administration of US aid is more likely. The entire future of the US Agency for International Development (USAID), the US government agency which disburses US development and emergency funding across the world, is uncertain. The agency is responsible for more than 40% of global humanitarian assistance, according to the United Nations.
The offices of USAID were closed earlier this week, and its website is offline. What seems most likely is that the agency will be shut down and its activities will be brought under the tighter control of the US State Department.
Trump has said that “radical lunatics” run the agency, and Elon Musk, who heads the Department of Government Efficiency has said the agency is “beyond repair.”
The White House press secretary, Karoline Leavitt, said earlier this week that USAID had “insane priorities”, including diversity, equity, and inclusion projects. “I don’t want my dollars going towards this crap,” she said.
As much as there are deep flaws in the entire system of development funding by governments, the political reality is that official assistance has its own impetus. Donors are effectively paying for political influence through development funding. A trade deal, a big development project, financial support for a foreign government, and payoffs to local politicians for special access are usually part of a wider deal to ensure aid recipients give the donor what it needs.
Without the aid, the richer countries would not have the same sort of influence, and their place could easily be taken by a geopolitical rival. The oil producers, China, the Gates Foundation and other private aid donors have changed the world of global assistance and reduced the influence of western donors.
Many donors call their development programmes a partnership. It is nothing of the sort, as the donors’ development “experts” mostly design and select the projects. A sizeable chunk of any assistance programme is spent on development consulting firms and suppliers from donor countries. And while internal post-project evaluation exercises might show success in achieving worthy goals, these are often self-serving attempts by the bureaucrats to gain more funding.
Aid is also a means of promoting the political agenda of donor countries. European countries and the US, until Trump came to power, were keen to support their own current internal political agendas of dealing with climate change and the promotion of diversity, equity and inclusion goals.
A revamp to focus on reform and growth alone would be a real contribution by the Trump administration. There is a direct accounting link between foreign aid and growth, in that foreign funds and spending boost consumption and help boost an economy. But projects are very often poorly selected and managed, and their local contribution undermined by red tape and multiple and often conflicting donor requirements. Climate change and diversity, equity and inclusion goals might often affect the selection of projects, which should be on the basis of their contribution to growth alone.
There is an enduring problem in reaching the very poorest in society. How will the Trump administration address this in its “America First” framework? Development thinking trends go through phases, but all are driven by government planning rather than markets. If it really believes in free markets, the administration will have to give thought to this. Investment in infrastructure, meeting basic needs and making markets work for the poor, and giving support to government’s policy have been some of the phases, but all are heavily reliant on the state.
There is a moral motivation for humanitarian assistance for emergencies such as famines, earthquakes, fires and floods. It is also based on the understanding among countries that in disasters, there is an obligation of mutual assistance. The Trump administration would lose enormous influence if it cut emergency humanitarian funding.
The world of development assistance has a very mixed track record. Why is it that China and India have rapidly boosted their growth rates?
The reason is that they embarked on key policy reforms to allow private enterprise and markets to thrive. India has received a mammoth amount of aid since independence, but it is only with policy reforms that it boosted growth. Aid often acts as an incentive not to reform.
Trade rather than aid is a far better instrument for boosting growth, but the protectionist Trump administration is unlikely to pursue this path.
What the Trump administration wants is to ensure greater political leverage on aid recipients. It could be frustrated in this aim, as very often recipients of aid make big promises to donors but deliver little, or drag the reform process out to keep up donor interest.
The Trump administration will shake things up, but much of this might be for show. It is trapped by political reality and will have problems making aid more effective as an instrument of growth.
“Making America Great Again” through influence to counter the Russians and Chinese will necessarily involve spending large amounts on foreign aid.
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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