The purpose of the paper is to determine the key institutional factors that could make Foreign Aid more effective on the economic growth of Lesotho

MONAHENG, Leoma

Syracuse University Research Facility and Collaborative Environment

The purpose of the paper is to determine the key institutional factors that could makeForeign Aid more effective on the economic growth of Lesotho. .’’ The aim of theresearch is to identify the key institutional factors that lead to sustainable economicgrowth. The ‘’paradox of aid,’’ according to Bauer (1971), refers to the ‘’ineffectivenessof foreign aid to achieve a substantial improvement in living standards in the absenceof the right institutions.’’ In this paper, the Paradox is tied to what has currently madeaid ineffective in regards to economic growth in African countries like Lesotho andhow we can find a solution to this.INTRODUCTIONBACKGROUNDHYPOTHESISABSTRACT Using Foreign Aid to Bolster  Economic Growth: Botswana as a Case StudySOLUTIONSThe Paradox of Foreign Aid: Lesotho as a Case Study of the Impact of Foreign Aid on the Growth of AfricaBy: Leoma MonahengGlobally, Africa is noted as the worlds largest beneficiary of foreign aid (Izobo, 2020),however, in acknowledgement of the Parodox of Aid, Izobo (2020), argues that little tono improvements have been made in terms of socioeconomic or political development.In the absence of strong, accountable democratic or financial institutions, aid has beenshown to have the opposite effect of positive economic growth, usually leading to aposition of aid dependence, and in some instances halting socio - economic growthaltogether (Izobo, 2020). Unlike most African countries, Botswana, however has hadsuccess in terms of leveraging aid support to grow the country’s economy (DebatingAfrica, 2021).The country of Lesotho has historically depended on foreign aid. According to Thamae (2013), a largecomponent of the country’s economic growth is driven by the African Growth and Opportunity Act (AGOA),an American trade act that enhances market access to the United States of America (AGOA.INFO,2018). Through this act, over 36 000 Basotho have found jobs in the textile manufacturing industry asLesotho is able to export its manufactured goods, mostly jeans and clothing apparel, to South Africa and theUnited States (Thamae, 2013). Despite this, the United Nations still classifies Lesotho as one the mostunderdeveloped nations in the world, with almost 60% of the population living under the poverty line(Callender, 2017). This then goes to question the impact of aid in Lesotho in terms of economic growth. Whatcould be the factors that contribute to the lack of economic growth in Lesotho despite aid support?Rakhoro and Coetzee (2020) acknowledge that governance in Lesotho has been characterized by an unstabledemocracy since independence in 1966. Moreover, civil society has been criticized for not maintaining highstandards of legitimacy, transparency and accountability. It is the author’s view that such instabilities lead togeneral accountability issues and weak financial institutions necessary in the successful conversion offoreign aid to economic growth.Strong institutions lead to economic growth and decreased aid dependency. Analysingsuccessful countries’ path to development can help to broaden the scope of development for othernations as well (Talesco, 2015).‘’Botswana achieved its extravagant growth due to the countries ability to adopt andincorporate good governmental and economic policies’’ (Ukessays, 2003). For instance, thecountry has proactively sought to reinforce its legal and institutional frameworks to activelyfight against corruption. With the use of efficient anti-corruption agencies, the governmenthas been able to stop corruption in its tracks (Transparency International, 2014). The authorthereby advocates the use of efficient and strong anti – corruption agencies to direct theproper use of aid. Annalisa Prizzon (2019) infers that part of Botswana’s success that has ledto leveraging aid to grow the economy lies in strong institutions that are able to put in placeaccountability practices for the use of aid. This helps in checks and balances and the tracing offunds used for the benefit of the country.• The establishment of efficient  anti – corruption agencies• Institutions that put in place accountability practices to ensure proper checks and balancesANALYSISThe graph below shows the economic growth of Botswana since independence. This economicsuccess has been partly credited to its strong institutions which have been able to leverage aidto assist economic growth (Annalisa Prizzon, 2019).Badham-Jones. (2014). Overview of corruption and anti – corruption in Botswana. Transparency international Bauer, P. T. (1971). "Economic History as Theory". Economica. 38 (150): 163–179Callender, G. (2017). The Complex Causes of Poverty in Lesotho. Borgen MagazineDebating Africa (20201). https://debating.africa/debate/has-foreign-aid-crippled-or-benefited-africa/Izobo, M. (2020). The Impact of Foreign Aid in Africa: A case study of Botswana. Prolaw JournalPrizzon, A. (2019). Moving away from aid: the experience of Botswana. ODIRakhare, M. Coetzee, T (2020). The Impact of Civil Society on Governance in Lesotho. Sage Journals Talesco, C. (2015). Aid Effectiveness and Development Policies in Botswana: A Successful Story. Thamae, R (2015). The Fiscal Effects of Foreign Aid in Lesotho. Mediterranean Journal of Social Sciences. 7(1): 116Ukessays. 2018. Factors influencing the Economic Success ofBotswana. https://www.ukessays.com/essays/economics/factors-influencing-the-economic-success-of-botswana-economics-essay.php?vref=1REFERENCEShttps://plancksconstant.org/blog1/2014/04/would_you_stop_aid_to_africa_if_it_were_the_best_t.htmlMint Photography, 2016. https://twitter.com/lesothobrand/status/702187170111614977 Apperel Resources Newsdesk, 2019. https://apparelresources.com/business-news/sustainability/cy-garment-factorys-initiatives-workers-win-applause-french-ambassador-south-africa/ https://www.pinterest.com/pin/414401603210122703/

The Paradox of Foreign Aid: Lesotho as a Case Study of the Impact of Foreign Aid on the Growth of Africa

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The Paradox of Foreign Aid: Lesotho as a Case Study of the Impact of Foreign Aid on the Growth of Africa

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