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Should African philanthropists donate to developed countries?

Most of Africa’s 19 billionaires are involved in some kind of philanthropy work. Four have signed the Giving Pledge, an initiative where they commit to give away more than half of their wealth to philanthropy or charitable causes.

They join the ranks of well-known international philanthropists like Bill and Melinda Gates, Elon Musk, Richard and Joan Branson and Warren Buffet.

Many of the others who have not joined the pledge still donate handsomely to causes in Africa.

A high net worth individual (HNWI) has a minimum of $1 million in total investable assets. Africa does not have a shortage of HNWIs. According to AfrAsia Bank’s 2019 Africa Wealth Report, which covers 17 major African markets, the total continental wealth amounts to $2.2 trillion. Of this, HNWI hold around 42% - around $920 billion.

Speaking on the Change Voices podcast, Social Justice Initiative Executive Director Bongiwe Mlangeni describes Africa’s HNWI who contribute to philanthropy as a broad spectrum of people who want to drive change using their capital. And they love to offer.

But are they allowed to “offer” to causes in far more developed countries?

Dangote’s $20 million donation to The Africa Center in New York

The the Aliko Dangote Foundation donated $20 million to The Africa Center, based in New York, during the Future Africa Forum that was held on September 23, 2019.

With a net worth of $10.3 billion, Dangote is Africa’s wealthiest individual. He said that he hoped that his donation would help reverse the widespread perception that Africa is always approaching developing economies, cap in hand for development aid.

Aliko Dangote at the Future Africa held on September 23 at The Africa Centre, New York. Image: The Africa Centre

Dangote's contribution did not cause as much of a stir as Ghana’s rumoured intention to donate $2 million for the restoration of the Notre Dame Cathedral after the church in Paris was devastated by a fire in April 2019. Fact-checking organisation Africa Check was later able to trace the origins of the rumour to a satirical website, but this was too little, too late.

Ghana’s president had already been vilified for not showing the same compassion for his own people. In the week leading up to the cathedral fire, flash flooding in Accra claimed 12 lives. Few seemed to care that the rumours were unfounded.

Dangote’s recent donation, on the other hand, has been hailed as historic. The centre described it as “one of the largest known donations of its kind by an African philanthropist to a US non-profit organisation.” The centre’s venue has since been renamed to 'The Africa Center at Aliko Dangote Hall'.

In his defence, Dangote could argue that his donation is still an investment for Africa, and in Africa, albeit indirectly. The Africa Centre host exhibitions and performances and shows visual and digital art from Africa. "“The Africa Center is an important gateway to understanding contemporary and future Africa and Africans," he explained.

Has Africa really been a beggar continent?

The beggar tag is not just something developed countries use to irritate African leaders for being upstarts in global power dynamics. The Organisation for Economic Co-operation and Development’s (OECD) statistics seem to support this - Africa as a region has received the lion’s share of development aid for the greater part of the last two decades.

These statistics may be one of the reasons why Dangote seems unsettled about what goes on in the development aid sector in Africa. His own country Nigeria, which is ranked as Africa’s biggest economy, features among the five largest recipients in the region. Nigeria’s Gross Domestic Product (GDP) overtook that of South Africa a decade ago. In 2018 Nigeria’s economy was valued at $397 billion while South Africa’s GDP trailed behind at $366 billion.

Another frustration about development aid is the dependency that seems to persist, even after income levels improve. Is there a reason why Kenya and Nigeria, classified as lower-middle income countries, are still among the top destinations for aid?

The Overseas Development Institute (ODI) has followed how reclassification impacts the amount of aid countries receive. According to a paper titled ‘Exit from Aid: An analysis of country experiences’ by Annalisa Prizzon, a shift to middle income reflects a country’s strong economic performance and greater access to a more diverse set of financing options.

However, lower middle-income countries experience the ‘missing middle’ effect. This is because the rise in tax revenues due to improving economic performance is usually not enough to compensate for the fall in income when donors begin to scale back on aid.

Being classified as middle income puts a country in a better position to borrow from capital markets and makes it more reliant on loans. According to data from the World Bank that covers 48 African countries, other governments lent $157 billion to African governments from 2006 to 2017.

Loans from other governments to African governments from 2006 to 2017

The national debts of both Kenya and Nigeria has risen between 2006 and 2017 and continued to rise throughout 2019, in keeping with a trend from the previous year. In December 2018 Nigeria's debt accounted for 16.1%, while Kenya's was much higher at 59.2%.

Nigeria's Government Debt: % of GDP from 2007 to 2018

Source: CEIC Data

Kenya's Government Debt: % of GDP from 2007 to 2018

Source: CEIC Data

Exit from Aid says 35 countries globally have transitioned from low-income to middle-income status in the past 15 years. Aid received by most of these countries increased when compared to the five years before when they were classified as low-income.

The organisation analysed eight countries that were reclassified between 1995 and 2010: Egypt, Ghana, the Lao People’s Democratic Republic, Nigeria, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. Aid increased after reclassification in five of them, with Ghana, Vietnam and Sri Lanka being the exceptions.

In countries where aid increased it was often driven by geostrategic motivations rather than their actual income levels. Egypt benefited from instability in the Middle East, while Papua New Guinea's proximity to Australia seems to have played a role.

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