In 2022, sub-Saharan Africa received $45 billion in official development assistance (ODA), highlighting its deep ties to global aid systems. While this aid has built schools, supplied hospitals and provided emergency relief across the continent, including South Africa, it often comes at a steep cost – governments tethered to donor agendas, disrupted local markets and a reliance on external goodwill that stifles self-determination.

The cost of aid dependency

Foreign aid, primarily from the US and EU, has shaped Africa’s development for decades. In South Africa, aid has funded critical programmes such as HIV/AIDS treatment but, across the continent, it fosters a dependency trap that undermines economic resilience. First, aid distorts local economies. Governments prioritising donor-driven agendas often neglect domestic needs. In South Africa, aid for health programmes has sometimes sidelined industrial development, exacerbating the 35% unemployment rate and energy crises. In Uganda and Malawi, where aid accounts for 20–30% of budgets, spending aligns with donor priorities rather than structural reforms such as industrialisation.

Second, aid weakens accountability. Reliance on foreign donors reduces pressure for efficient governance. In South Africa, multilateral loans from the World Bank for infrastructure have delayed energy reforms, worsening Eskom’s inefficiencies. In Zambia, repeated IMF bailouts have postponed fiscal discipline, perpetuating debt.

Third, aid suppresses innovation. Subsidised goods disrupt markets, as seen in South Africa’s textile industry, weakened by second-hand clothing imports tied to aid. In Nigeria imported textiles have crippled local production and in Ethiopia food aid has at times discouraged agricultural output.

Finally, aid conditionalities, like the 1990s IMF structural adjustment programmes, enforced neoliberal policies that prioritised austerity over investment, leaving lasting economic scars in South Africa, Ghana and Kenya. While aid offers short-term relief, it entrenches dependency, distorts markets and hinders self-sustaining growth.

Investment: A sustainable alternative

Replacing aid with investment offers a path to economic sovereignty. Unlike aid, investment fosters mutual value, creating jobs and resilience. According to UNCTAD, Africa attracted $83 billion in foreign direct investment (FDI) in 2021, targeting viable projects that drive innovation. In South Africa, German investments in renewable energy, such as Siemens’s wind projects, have created jobs and supported the coal-to-renewables transition. In Ethiopia, Chinese investments in textiles have boosted exports, showcasing investment’s transformative potential.

Investment can also address Africa’s infrastructure gap, estimated at $68–108 billion annually by the African Development Bank. In South Africa, public–private partnerships like Transnet’s rail expansion attract capital to improve trade logistics. In Kenya, the Standard Gauge Railway has reduced transport costs, enhancing regional trade.

To transition to investment, African governments must improve legal frameworks, reduce bureaucracy and combat corruption. South Africa’s reforms to streamline renewable energy approvals have attracted over $2 billion in FDI since 2023. Rwanda’s investor-friendly policies offer a broader model. Investments must prioritise local empowerment through impact investing, supporting South Africa’s small and medium-sized enterprises, which employ over 60% of the workforce. Diversifying funding sources, including partnerships with India and Germany, prevents new dependencies, unlike China’s debt-heavy model.

India’s role in Africa’s transformation

India, having transitioned from aid recipient to global economic force, is a compelling partner for Africa. Its approach emphasises mutual benefit and capacity building. In South Africa, Indian firms such as Tata provide affordable agricultural machinery, while Mahindra has introduced electric vehicles, supporting green mobility and job creation. Indian pharmaceuticals supply over 50% of Africa’s generic antiretrovirals, critical for South Africa’s HIV/Aids programmes.

India’s ITEC programme has trained South African professionals in renewable energy technology, enhancing expertise for the country’s energy transition. The Pan-African e-Network Project connects South African institutions to Indian expertise, improving healthcare via telemedicine. Indian investments in 4G networks by Bharti Airtel have boosted rural connectivity, enabling digital entrepreneurship.

India’s model of small-scale industries and digital innovations, like Aadhaar and UPI, inspires South African policies, such as the digital payment systems expanding financial inclusion since 2024. However, India must scale up investments and prioritise local job creation to maximise impact.

The India–Germany partnership: A blueprint

The India–Germany Green and Sustainable Development Partnership (GSDP), launched in 2022, offers a model for Africa’s transformation. With Germany committing €10 billion by 2030, the partnership emphasises reduced-interest loans and private-sector engagement. In India, German investments in solar energy, combined with Indian cost-effective technology, have benefited farmers.

The GSDP’s triangular cooperation model, involving joint projects in third countries, is ideal for South Africa. In 2022, India and Germany launched projects in Malawi and Ghana, and South Africa could leverage this for green hydrogen initiatives, using Germany’s €270 million Power-to-X fund and India’s renewable expertise. This could create jobs and support the Just Energy Transition Partnership.

The model offers various lessons, such as prioritising mutual benefit, engaging the private sector, building capacity and focusing on sustainability. South Africa must strengthen governance to attract such partnerships and ensure local communities drive project design.

A path forward

Breaking aid dependency demands a shift to investment-driven development. India’s innovation and the India–Germany partnership provide blueprints for sustainable growth. South Africa’s G20 presidency in 2025 offers a platform to advocate for these partnerships, leveraging its youthful population and resources. By fostering FDI, empowering local communities and diversifying partnerships, Africa can achieve economic sovereignty. The time to rethink development is now; Africa’s future depends on it.