7th January 2022

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Problem Identifications: Impact of Foreign aid on sub-Saharan African Development

 By David Okereke


Development issues have been a critical focus of most Sub-Saharan African socio-economic development trajectories in the past five decades. Despite vigorous and numerous supports from developed countries and substantial foreign aid towards a solution to the crippling development crisis, real development has remained elusive as foreign aid has failed to produce the desired positive results in most African nations.

The UNDP Human Development Index (HDI) report on human development (HDR) shows that despite unprecedented progress against poverty, hunger, and disease, many sub-Saharan African countries are not functioning as expected. Sadly, most of the Sub-Saharan African countries were ranked under the ‘low human development’ category (HDI Report 2019).  Hence, Sub-Saharan Africa has remained the least developed region in the world and home to the most distressed nations in the world. As a result of this deep crisis, there has been a clamor for a re-think of the policies and programs initiated through foreign aid and external cooperation (Omideyi, 2007). Therefore, this paper examines some of the external influences of underdevelopment in the region using the PESTLE analysis to understand new strategies for development.

Effects of the Development Challenge in Sub-Saharan Africa

Despite concerted efforts towards African growth in terms of trade liberalization policies, economic and political strategies specifically designed to bring sub-Saharan Africa out of poverty through foreign aid, the region has remained the least developed of the world (Conchesta, 2008). Moyo (2009) argues that foreign aid does more harm than it does good, and that developing nations need free trade rather than free handouts to overcome poverty. Therefore, sub-Saharan Africa development trajectories cannot be tackled with a half-hearted commitment or faltering support towards her development goals. As a result, world leaders in an effort to provide solutions to the prolonged issues of poverty at the national level, re-conceptualizes reducing extreme poverty into sustainable development goals (SDGs). To achieve the first goal, the Open Working Group (OWG) of member states came up with a plausible phase that includes an agreement to eliminate extreme poverty within the global space by 2030 (SDG Report, 2020). 

The United Nations report (2019) highlights that as of 2018, projected data illustrates that the world is far behind in achieving her stated goal of purging extreme poverty by 2030. Considering the impact of COVID19 to the global economy in terms of financial deficits, and overutilization of the scarce resources to combat the pandemic, a lot of sub-Saharan Africa countries may not be able to meet up with their national goals towards the SDGs. Hence, it has become clearer that the world is no longer on track to achieve her target of ending extreme poverty by 2030 (The United Nations report, 2019). Easterly (2014) argues that one of the fundamental drawbacks of foreign aid and development assistance is that it has not been effectively designed to be successful in the real sense of development, and not that it cannot be successful as a development strategy. Consequently, the issues with foreign aid and development assistance failing to produce some positive outcomes in Sub- Saharan African, is not because the funds provided are insufficient to trigger or encourage development in these countries that would result in a poverty reduction and a significant rise in per capita income of the people living in these countries. Hence, Sub-Saharan Africa’s desire for development must be an alternate development that involves a considerable mobilization of resources (human and material) to bring about positive changes to all human facets.

Analysis of the Underlying Problems 

There are several methods of analysis to draw out the underlying problems that prevent poverty eradication in sub-Saharan African. However, this paper focuses on the external influence that underlies issues of foreign aid towards sub-Saharan African development. Hence, PESTLE analysis would be applicable in this study, as it primarily examines the external conditions of potential influences to development (Chaharbaghi, et al., 2005), and in practice, it assesses the connection between contingencies of expected outcomes (Collins, 2010). Thus, effective use of PESTLE analysis would help development practitioners to reflect upon new strategies on potential influences of external conditions in their development work. 

Table 1: Sub-Saharan African Poverty PESTLE Analysis on Micro- Finance Lending on Empowerment Programs

PoliticalPolitical instability – lack of democracy and a short term in office tenure would result in ineffective policy implementation and strategy.    Corruption and foreign aid implementation – issues with inadequate market policies, high level of corruption by government officials and unethical regulations towards program implementation
EconomicLack of steady economic indicators – unstable market with high interest rate and inflation.    Unemployment – ineffective educational system with high demand for mobility at the cost of cheap labor.
SocialCultural barriers – complexity of cultural norms as a result of factors relating with rural women in business, and other gender inequalities.   Rural -Urban gap – high level of concentration resources in the urban cities leads to high rural poverty rate, and low opportunities to trade.
TechnologyLack of technical training and innovation – the negative impact of inadequate knowledge in advancement of technology in terms of means of production and storage facilities. Inability to properly disseminate technology.   Technological incentive – Improper application of incentive to encourage and support community groups to growth. Quality training and technology information sharing.
LegalBilateral agreements – unfair bilateral agreements, and in the disbursement of foreign aid towards development programs.    Property rights – The strength of property rights and enforcement of contracts. Many issues of bureaucratic bottleneck and inefficiencies in regulations.
EnvironmentClimate change – change in climate conditions could lead to the high cost of implementing development programs.    Local effect – traditional views of environmental symbolism and unstable local conditions.

The PESTLE analysis identifies the overall impact of how the external environment influences program objectives. In the context of women empowerment programs, political, technology, and environmental factors are the most critical analysis of PESTLE that would help to understand some of the challenges that sub-Saharan Africa countries faced in development programs. Thus, issues relating to property rights, democracy, and corruption have been argued to be very instrumental in explaining the underdevelopment gap in developing countries. Hernando De Soto (2002) presented an all-encompassing argument on the extension of property rights, and how the poor are disproportionately unable to leverage assets, unable to get a loan because property rights are unstable (De Soto, 2000).

Democracy is another important institution that has been used to examine the causes of sub-Saharan Africa underdevelopment. The assumptive argument is that democratic institutions expedite development through policy continuity and market stabilization. Accordingly, Halperin, et al. (2005) argues that democratic states outpace others on the most social and economic indicators and that advocating for democracy should be given extensive priority for economic development, especially in developing countries. 

Corruption is a potential explanation for the causes of underdevelopment in most countries. It involves the deliberate diversion of public revenue and spending towards a private purpose. Moyo (2009) argues about the impact of corruption by African leaders on the continuous underdevelopment of the continent. She described it as an endemic that cuts across all public contracts. This further supports Graf Lambsdorff’s (2007) analysis, which found a country has a significant rise in their corruption indicator and a 4 – percent increase in the gross domestic product. Moyo (2009) summarizes that the degree of perversion and ambiguity in most African countries has resulted in a low level of motivation for people to engage in a new trade. Accordingly, Acemoglu et al. (2005) posit that ineffective organizations are the fundamental causes in the pronounced disparity of the economic development in sub-Saharan African countries.

Problem Identification

This paper focuses on the impact of empowerment programs on community groups, especially to rural women. It conceptualizes the use of foreign aid as any form of international development assistance, grants, and official debt forgiveness. This measure is relative to the standard used by other scholars in analyzing foreign aid (Chong et al. 2009).  As mentioned in the previous section, the technology factor is critical to sub-Saharan development due to the advancement in global markets. Thus, it identifies technological innovation as a problem that affects underdevelopment in sub-Saharan Africa. 

The information communication technology (ICT) curve in most African countries has been slow in comparison to the global scale. Some of the challenges include a lack of adequate training and awareness towards the application of advanced technology in the means of production and storage facilities. Also, few studies have argued that African countries adapt to new ideas that challenge their cultural perspectives. In context, during the introduction of mobile money platforms, a lot of Africans avoid transactions online because of fear of relative fear of the new process and general concern about safety (Bangens & Soderberg, 2011). One way to optimize these shortfalls is to develop training modules that will engage participants on the impact of technology in enhancing business opportunities within their community and provide progressive incentives that would encourage participation.


According to the World Bank (2019), some of the consequences of poverty result in a lack of sustainable resources necessary for improved livelihood, hunger, and a lack of basic health provision, increased mortality rate, homelessness, and environmental dysfunction. Also, numerous studies have pointed out the shortcomings of inappropriate use of aid and technical assistance in Africa (Apter 1965; and Riddell, 2008). There is a need to re-evaluate the effectiveness and policies associated with the implementation of aid and development assistance. For development programs to be more successful, members of the community should be encouraged to participate in most of the projects designed for their community. Finally, this paper argues that PESTLE analysis helps to examine the external influences, and to understand critical issues that confront developing agencies from implementing effective developmental programs that would help in poverty reduction strategies, tailored to achieve the short-term goal of SDGs, and getting back on the track towards the eradication of extreme poverty by 2030. 


Acemoglu, D., Johnson, S., & Robinson, J. A. (2005). Institutions as a fundamental cause of long-run growth. Handbook of economic growth, 1, 385-472.

Apter, D. (1965). The Politics of Modernization (Chicago and London.

Bangens, L., & Soderberg, B. (2011). Mobile money transfers and usage among micro-and small businesses in Tanzania. Retrieved from:

Chaharbaghi, K., Adcroft, A., Willis, R., & Walsh, P. R. (2005). Dealing with the uncertainties of environmental change by adding scenario planning to the strategy reformulation equation. Management Decision.

Chong, A., Gradstein, M., & Calderon, C. (2009). Can foreign aid reduce income inequality and poverty?. Public choice, 140(1-2), 59-84.

Collins, R. (2010). A graphical method for exploring the business environment. Henley Business School. Version, 8.

Conchesta, K. (2008). Foreign aid and economic growth: the case of Tanzania. Institute of social studies.

De Soto, H. (2000). The mystery of capital: Why capitalism triumphs in the West and fails everywhere else. Civitas Books.

Easterly, W. (2014). The tyranny of experts: Economists, dictators, and the forgotten rights of the poor. Basic Books.

Halperin, M. Joseph T. Siegle and Michael Weinstein. 2005. The Democracy Advantage: How Democracies Promote Prosperity and Peace.

Lambsdorff, J. G. (2007). The institutional economics of corruption and reform: Theory, evidence and policy. Cambridge university press.

Moyo, D. (2009). Dead aid: Why aid is not working and how there is a better way for Africa. Macmillan.

Omideyi, A. K. (2007). Poverty and development in Nigeria: trailing the MDGs?. African Journal of Infectious Diseases, 1(1), 3-17.

Riddell, R. (2008). Does foreign aid really work?. Oxford University Press.

SDG (2020). The Sustainable Development Goals Report of 2020. Retrieved from:

UNDP (2019). Human Development Index (HDI) Report of 2019. Retrieved from:

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