Aid-related business under threat

While the needy in Africa are likely to go hungry due to cut-backs in foreign aid, the effects will also be felt in South Africa’s freight and logistics sectors. The lucrative and once growing aid business in Africa is set to shrink thanks to the global financial crisis, if predictions by the United Nations Conference on Trade and Development (Unctad) prove accurate. “If past experience is anything to go by, today’s financial crisis will deal a hard blow to official development assistance (ODA) flows. “The current recession, and some of the stimulus measures being introduced to combat it, is compounding budget deficits and budget reallocations in many donor countries. ODA is a soft target in such situations; during past banking crises, it has dipped anywhere from 20% to 40%,” warns the organisation in a media release. This will affect large parts of the logistics sector in southern Africa, ranging from the ports unloading aid to trucking companies transporting the aid supplies. The effects will be longterm, and may influence world trade. “ODA levels tend to recover very slowly,” warns Unctad. “Developing countries will be caught short, lacking the productive capacity they need to take advantage of reviving opportunities,” it adds. For many developing countries, “foreign aid provides the main, and in some cases the only source of the financing needed to prevent their sliding into deep recession and losing their hard-earned productive and exporting capacities.”