Africa, Colonialism, and the Paradox of International Aid

A new initiative from the World Bank, Mission 300, aims to bring green-energy electrification to 300 million people in Sub-Saharan Africa by 2030. To achieve this, the World Bank and the African Development Bank (AfDB) are providing $30 billion in grants and loans, which planners expect to attract an additional $60 billion in private funding. Akinwumi Adesina, president of the AfDB, describes the initiative’s importance this way: “Development is about dignity, and you cannot have dignity without electricity.”

However, some are critical of internationally funded development altogether. Tunisian economist and senior advisor with Power Shift Africa, Fadhel Kaboub, shared his thoughts in an interview with NPQ: “When [the World Bank] talks about being a bigger, better bank, I say please don’t get bigger. You’ve done enough damage.” He views such an approach as the modern manifestation of colonialism, leading to structural debt traps and locking the continent at the bottom of the world’s economic value chain. Given the outcomes of past efforts, Kaboub’s skepticism is not unwarranted.

Electricity Shortages and the Promise of Mission 300

“When [the World Bank] talks about being a bigger, better bank, I say please don’t get bigger. You’ve done enough damage.”

In Sub-Saharan Africa, a region comprising 53 countries and over one billion people, more than half of the population (roughly 600 million people) lack access to reliable electricity. Not only is it impossible to develop an advanced economy without it, but something as simple as cooking becomes dangerous—many turn to charcoal, wood, agricultural waste, and animal dung as fuel, which all create toxic fumes.

During my visit to Tanzania, I experienced this firsthand. Every few days, the electricity would go out. My friends would shrug and say: “Yeah. This is normal. You should buy a battery-powered light and a backup for your phone. And don’t open the fridge for a while, you’ll let the cold air out.”

Why hasn’t electrification happened already? If it were profitable, it would already exist. Since it isn’t, the public sector steps in to nudge the market.

Mission 300 aims to address these challenges by leveraging both public and private capital to invest in renewable-energy infrastructure. By providing initial funding and risk mitigation, the initiative hopes to attract private foreign direct investment (FDI), creating a self-sustaining cycle of investment, infrastructure development, and returns.

Some financial tools that Mission 300 can use to reduce risk include:

• Loss-first loans, where public lenders agree to absorb initial losses, should they occur.
• Third-party guarantees covering investors in the event of a loan default.
• Subordinated debt, where public lenders agree to be repaid after private lenders.
• Equity co-investments, where public entities accept lower rates of return to encourage private sector participation.

Andrew Herscowitz of the Rockefeller Foundation—and an alumnus of the US Agency for International Development’s Power Africa initiative—is CEO of the Mission 300 Accelerator. Herscowitz explains his theory of the case:

In its first few years, Power Africa used approximately $500 million of funding to work with its global partners to help 120 power projects worth $20 billion get across the finish line. It has helped 180 million people get access to electricity. That’s a leverage of 1:40 of U.S. money mobilizing capital to effect real change.

By focusing on leveraging public dollars to attract foreign direct investment, Mission 300 eschews charitable approaches, which are regarded as well-intentioned but ultimately harmful. Hersocwitz warns of the danger of gifting solar home systems, aligning with Nigerian economist Benedict Oramah, who explains:

Africa doesn’t need hand-outs. They do more harm than good by blocking the potential and opportunities for poor people to help themselves. After all, it’s hard for local farmers to sell their crops or eggs or cattle when they’re competing with free food from a foreign government or institution.

Adopting inclusive institutions that promote broad participation ensures that power is distributed widely.Leaders are also avoiding a one-size-fits-all approach. Emeke Oragunye, regional director for Mission 300 partner Sustainable Energy for All, emphasized the importance of national context in an interview with NPQ:

Each country has a different context….Some countries are blessed with geothermal resources while others can better utilize solar or wind, hydro or gas, you name it. Each country is defined by what works best and the necessary reforms that need to take place.

Persistent Colonial Legacies 

In their book Why Nations Fail, Daron Acemoglu, Simon Johnson, and James Robinson—winners of the 2024 Nobel Prize in economics—discuss how critical junctures, such as war or colonialism, significantly alter a nation’s trajectory. They argue that adopting inclusive institutions that promote broad participation ensures that power is distributed widely, encouraging innovation, growth, and investment. Conversely, extractive institutions, where power is concentrated in the hands of a few elites who extract wealth for personal gain, hinder development.

A history of colonialism—a form of government whose primary purpose, after all, is to extract resources from the colony to benefit the colonizer—can be difficult to overcome, in large measure because the institutional patterns established during colonization often persist in the postcolonial period.

Kenya offers a case in point. Earlier this year, riots erupted after President William Ruto proposed new taxes. Kenyan economist Ken Opalo explains how President Ruto’s policies, rooted in a longstanding system of extraction, precipitated the unrest. As Opalo writes:

He [Ruto] completely misjudged the months-long simmering public anger over new taxes amidst the rising cost of living, public sector corruption, in-your-face flaunting of opulence by corrupt officials on social media, deteriorating public services, and generalized erosion of government legitimacy.

Internal policies and externally led development projects that operate within a neoliberal paradigm often replicate exploitative colonial patterns, undercutting their legitimacy and effectiveness.

Flaws in Externally Led Efforts

Africa has seen over $1 trillion in foreign direct investment since 1990 and over $1 trillion in foreign aid since 1950. But such support has often been linked to Western-prescribed reforms—including trade liberalization, deregulation, and privatization—which have often made African economies worse off.

Kaboub, in his keynote speech at the African Monetary and Economic Sovereignty Conference, highlighted that net financial flows from the Global South to the Global North were over $2 trillion annually. In other words, the aid and investment figures are highly deceptive; money is flowing away from the Global South, not toward it.

David Ndii, former economic advisor to President Ruto, summarizes how this practice landed Kenya in fiscal trouble:

The government shoots itself in the foot by awarding construction projects to foreign—predominantly Chinese—state-owned firms. This undermines revenue in two ways. First, the companies are exempted from paying tax. Second, the money they make is repatriated, denying the economy the multiplier effect it would have if the money had been earned by domestic firms.

When organizations issue loans, they expect repayment. But more than that, when those loans are used to fund companies that are also owned by outsiders, profits are extracted as well.

While in Tanzania, I noticed that most clothing sold in local markets was retail surplus purchased from abroad. By relying on imports for end products, supply chains that could have employed locals don’t exist.

The United States has its own variant of this problem. As the United States has imported cheap goods from abroad, domestic manufacturing has suffered—part of the cause of persistent poverty in many US counties, especially in rural communities.

Market liberalization has similarly weakened African self-sufficiency. The bulk of the continent’s exports are raw materials, low-value-added manufacturing providing little room for profit, and cash crops. The major imports are high-value-added manufacturing products, refined petroleum, and staple foods.

Can Foreign Aid Work?  

Given these critiques, can foreign aid work? History provides an illustrative example in the Marshall Plan, enacted after World War II. Granted, the situation faced by post-war Europe and present-day Africa are not directly comparable: Rebuilding infrastructure destroyed by war meant restoring previously existing systems. Africa’s challenge lies in developing these systems in the wake of colonial practices (many of which continue in the neocolonial form today) intentionally designed to stymie internal development and extract resources.

Still, a comparison can be informative.

The Economic Recovery Act of 1948, also known as the Marshall Plan, succeeded because of its objectives, motivations, and execution rather than the scale of spending. US dollars amounted to just 2 percent of the collective gross domestic product (GDP) of recipient European nations. For comparison, not including aid, foreign direct investment in Sub-Saharan Africa alone has received between 1.5 and 3.5 percent of regional GDP annually for the last two decades.

To understand the virtues of the Marshall Plan, it’s helpful to compare it to its predecessor, the Morgenthau Plan, which was much more about controlling Germany than assisting economic recovery.

By contrast, the Marshall Plan intended to strengthen European independence as a means of combatting Soviet influence. As Barry Eichengreen writes in a World Bank report case note, the plan carries many lessons relevant to international development today:

• Recipient-Led Planning

Ranil Dissanayake, development economist and former advisor to the governments of Malawi and Tanzania, told NPQ that African development is often backseat driven by donors. In contrast, aid allocation from the Marshall Plan relied extensively on recipient input. Participating countries submitted plans describing how they would use resources. Aid was modified in light of information and requests from recipients.

• Regional Cooperation

The US insisted on regional coordination in the Marshall Plan that encouraged recipients to think about spillover effects. Cooperation seeded the institutions and trade networks, eventually forming the European Union. Presently, intra-European trade amounts to about 23 percent of continental GDP. Juxtapose this with intra-African trade, which amounts to just 3 percent or $100 billion from an estimated continental GDP of $3.1 trillion.

• Temporary Assistance

The Marshall Plan was set up as a four-year program, temporary assistance that forced recipients to plan for “life after aid” while preventing the possibility of dependence.

• Grants over Loans

The bulk of aid (90 percent) was through grant funding rather than loans (10 percent).

 A Just Transition for Africa?

A new report, Just Transition: A Climate, Energy and Development Vision for Africa, outlines a vision that departs from traditional development models. Written by an independent panel of experts led by Malian energy and sustainable development expert Youba Sokona, the authors advocate a focus on African ownership, retaining control of local industries rather than exporting raw materials and creating value chains within the continent.

In addition to calling for debt cancellation and concessionary financing from abroad, the text outlines how African countries can reduce reliance on external funding by expanding local capacity. As the report authors explain:

Africa needs a renaissance of Africa-based, endogenous ideas and leadership that clearly envision the connections and interdependencies between energy, food, industrial, and other systems and development pathways that respect climate constraints. In practice, this means redefining what progress and well-being mean for Africa and asserting new and independent visions of genuine people-centered development (22).

Despite the formal end of colonialism, much of the continent’s economy continues to serve foreign interests. Mission 300 may succeed in bringing electricity to much of Sub-Saharan Africa, but if it does so by relying on imports without contributing to domestic production or intra-regional trade, it could perpetuate African countries’ dependency on foreign aid and investment.