Waiting for South Africa’s new aid agency

South Africa is considered an upper middle-income country by the World Bank, and is slowly transitioning from a recipient to donor country. Photo by author, taken in Johannesburg.

Since its democratization in 1994, South Africa has come a long way in its pursuit of a development agenda focused on international peace and security, socio-economic growth, and South-South cooperation.

The establishment of the South African Development Partnership Agency holds potential to advance the country’s foreign aid commitment by capitalizing on its key role in the region and consolidating its foreign policy and development goals for the African continent.

While South Africa remains vital in implementing African development assistance, Devex reports that the official launch of the agency has been delayed amid government and fiscal uncertainty.

Years in the making

Creating a centralized development agency for Africa’s largest economy has been discussed for more than half a decade, but with the originally proposed deadline of April 2013 passed, it remains to be seen exactly when the agency will be established.

The primary objective of the new aid organization is the formalization of a South African international development arm much like the U.S. Agency for International Development or the United Kingdom’s Department for International Development. The move is in line with a growing trend among emerging countries with strong regional presences to put a stamp on their development assistance — for instance Brazil, South Korea, India and Russia — of which the last two have yet to officially establish their own aid agencies.

According to plans, SADPA will fall under the Department of International Relations and Cooperation in order to align South Africa’s foreign aid with a coherent foreign policy plan. South Africa’s development efforts, analysts say, are still characterized by an absence of an overarching framework, strategy and operational guidelines, and the planned agency will focus on facilitating coherence rather than initiating a new process in development cooperation.

The holdup seems to be due to internal government issues, but involved officials have not been sitting still. They are working on structure, staffing and strategy — about three weeks ago, openings were posted for key senior SADPA positions to be filled.

USAID has been engaged for a while as a supportive partner of SADPA, and plans to help build the agency’s capacity in its early years by sharing best practices in project management, oversight and cost-benefit analysis. Other international aid agencies are also excited about SADPA and a growing South African influence on African development affairs. Many donors have hosted visits for DIRCO employees in an effort to find the right model for SADPA.

SADPA will replace the African Renaissance Fund, which was launched in 2001 and has been the country’s main instrument for providing development aid across the region. ARF encapsulated the theme of the “African renaissance” — an idea first envisioned by former President Thabo Mbeki to match the spirit of reconciliation and outreach with the rest of Africa in the post-apartheid period. South Africa’s aid has been directed through the New Partnership for Africa’s Development, which provides assistance to several African countries for peacekeeping, technology development, research and education. Since the NEPAD framework guides the ARF, it is expected that SADPA will continue in the same vein.

Development cooperation priorities through the ARF, and in the future through SADPA, are geared toward regional integration; peace, security and stability; post-conflict reconstruction; strengthening relations with Africa and the Global South; promoting good governance; and humanitarian assistance. While the ARF was limited to offering mostly single-party grants, SADPA will pursue multipartner cooperation using a broader array of instruments, such as microgrants, loans, joint ventures and public-private partnerships.

While 70 percent of South African aid is targeted for South African Development Community member states, and the focus of SADPA will remain predominantly in Africa, the government has indicated some assistance could be extended to Asia and the Caribbean. Development assistance has also been directed to countries that share ideological links and liberation struggles similar to South Africa, including humanitarian assistance provided to Palestinian territories and a $100 million debt cancellation and agriculture support offered to Cuba in 2010.

The pot’s not insignificant, but not a game changer

While South Africa is the largest economy on the continent, it has been battling lackluster economic growth and currently suffers from a 25 percent unemployment rate. In 2012, foreign direct investment into South Africa dropped 24 percent while rising 5 percent for Africa as a whole. The country also faces large current account and trade deficits and recent strikes in construction, mining and car industries, while growth prospects are less than encouraging — projected at only 2.1 percent for 2013 and 3 percent for 2014. In last month’s midterm budget speech, finance minister Pravin Gordhan emphasized leanness in spending and reduced fiscal flexibility. These factors lead to unambitious levels of development assistance funding planned for the coming years.

South Africa’s budget for foreign assistance is expected to stay modest over the next three years and far off the peak of more than $100 million in 2010, the same year that worldwide development assistance crested due to the delayed impact of the global economic crisis on donor budgets. Between 2012 and 2013, the country’s foreign assistance spending amounted to $87 million, which stands considerably below the amounts of traditional donors and lagging behind the BRIC countries.

Click on the image to view a larger version of the chart.

When SADPA was conceived, it was proposed that 0.2 to 0.5 percent of South Africa’s gross domestic product should be dedicated to development assistance. The agency will inherit ARF’s annual $50 million allocation plus whatever else is left over in the ARF account (around $100 million as of early 2013). If SADPA ultimately controls the bigger pockets of development financing that DIRCO manages, such as contributions to humanitarian and multilateral institutions, or the international development projects of other South African departments, the agency’s budget and influence would likely increase considerably.

Like ARF, SADPA will have a rolling budget that will allow the organization to build up savings from previous years without having to return unspent money — an important feature that deters the pressure other development agencies face of having to spend allotted funding before fiscal year’s end for fear of a lower allocation the following year.

Still a leader

Despite being an aid recipient itself, South Africa provides essential development assistance to other African countries. In fact, the country is at a point along its own development trajectory where traditional donors have begun halting aid. ODA has never exceeded 1 percent of the government’s budget, and donor support has mostly been in the form of technical assistance such as capacity development and knowledge exchange instead of direct funding.

Though its development assistance budget is limited, South Africa contributes significant leadership to African multilateral institutions including the SADC and African Union, where it furnishes 20 and 15 percent of the organizations’ budgets, respectively. Historically, the country’s support for the region has focused on customs-related budget transfers, elections, debt readjustments, peacekeeping initiatives, technical assistance, scholarships and training.

The majority of the country’s aid goes to defense and security in the region, most notably through its major contributions to the AU and U.N. peacekeeping efforts in the Democratic Republic of the Congo, Burundi, Darfur in Sudan and Nepal. Between 2009 and 2010, South Africa provided $500,000 to support the AU observer mission to the 2010 Sudan elections, and $36.3 million to Zimbabwe’s agricultural and economic recovery programs.

South Africa also provides strong leadership in the South-South cooperation movement. It has joined the India-Brazil-South Africa Dialogue Forum to engage in cooperation and closer coordination on global issues and development, taken a leadership role within BRICS and even committed $5 billion to the upcoming BRICS bank, and involved diverse organizations of the Global South to promote the attainment of Millennium Development Goals and the International Finance Corp. Development Goals. South Africa’s leadership has also been key to advancing closer economic ties between Africa and the Gulf Cooperation Council and securing GCC investment in African infrastructure, and facilitating China-Africa cooperation.

At the same time, South Africa is leveraging its position in African affairs to build a respected international image and reputation. The country plays an important role in trilateral dialogue, where it acts as a mediator between donor countries and African aid recipients, especially in AU-EU relations. And it is increasingly involved in G-20, Organization for Economic Cooperation and Development, World Economic Forum, International Renewable Energy Agency, International Energy Agency and U.N. Security Council affairs.

From Maputo to Khartoum, leaders are looking to Pretoria to play a key role in the continent’s development. While SADPA’s projected budget may not be as significant as other international donors, analysts agree that the agency has a unique geostrategic advantage and its more intimate insider understanding of Africa’s political and cultural landscape and development challenges could help channel the right kind of aid and technical assistance for maximum impact. South Africa’s major strength lies in its unique position to offer peacekeeping, conflict mitigation and negotiation to secure stability in the continent.

No doubt that an official aid agency to coordinate its development assistance programs and funding will only heighten South Africa’s influence on African development. But it appears we will have to wait longer for the SADPA plans to turn into a reality.

A version of this article was originally published by Devex in December 2011. This revised and updated version contains the latest information and analysis. Join the Devex community and gain access to more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.

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About the author

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    Janet Lau

    As a development analyst, Janet contributes to Devex's analysis of global development business trends. At Devex, she can combine her passion for sustainable urban and social development with her business background. Her past experience includes urban sociological research, transportation planning, communication networks for global agricultural producers, education, finance and banking.