When is a Gift not a Gift?

For several years Western leaders, such as Gordon Brown and his predecessor Tony Blair, stressed the need and the moral imperative to increase donor aid to poor countries, particularly in Africa. Tony Blair even described Africa as a “scar on the conscience on the world;” a remark that offended some Africans, keen to promote the impressive economic growth in some parts of the continent. Yet extreme poverty and preventable diseases are an unfortunate feature of many parts of Africa and millions of people in wealthy countries feel compelled to help in some way; often in private or community projects. Distressingly though, governments in poor countries sometimes stand in the way of humanitarian assistance.

William Easterly, author of White Man’s Burden, and New York University economist provides some insight into why poor country governments may obstruct private aid initiatives. Easterly writes that the failed ideologies of the 20th century have come to an end, but unlike Communism or Fascism, “Developmentism” is here to stay and is widely accepted and increasingly popular.

Developmentism, like other ideologies, provides all the answers to all possible problems in grand schemes and requires large government bureaucracies to implement programmes and spend taxpayers’ money. The problem though is that these big-government approaches to eradicating poverty haven’t worked. In most instances, people are poor not in spite of government action, but because of it. The Index of Economic Freedom demonstrates that far too many African governments have not secured the basic institutions and rights, such as private property and an unbiased, independent judiciary, that allow individuals to create their own wealth and determine their own futures.

By maintaining demands for more government-to-government aid, bureaucrats in donor and recipient countries maintain their jobs and bloat their budgets. Big government’s trendy allies, such as Bono and Bob Geldof make donor aid popular and cool. They give much-needed PR to paper over the cracks and divert attention away from the fact that billions of dollars in aid over many decades has not lifted people out of poverty and disease. But Bono et al. surely wouldn’t begrudge individuals and groups in developed countries forming partnerships in poor countries to provide direct assistance. Unfortunately some governments in Africa do.

There have, for about twenty years, been links between the Parish of St. Peter and St. Paul Wantage in Oxfordshire, England and that of St. Phillip's Thokoza, one of the poorest areas of South Africa.

In Wantage, we have been striving to do something that brings the "man in the street" in our small town, closer to our counterparts in South Africa, in a way that really benefits both societies. After various experiments, we came up with the idea whereby the elderly women in and around Wantage, knit school jerseys for children in the poorest part of Thokoza. These children have been identified by their teachers as being unable to afford the school uniform. A jersey, thinner than those we make, costs them R99.99. In this way, not only do we help keep them warm and matching their peers, but we keep about fifty people (mostly but not all women!) happy in doing something positive and knowing that it will actually reach its intended destination. We have photographs and letters of thanks from the children and their teachers proving the success of the venture.

But what took us completely by surprise this year, was the imposition of duty and VAT on a consignment of garments, on which we had declared the actual cost to us of the wool as their value (R20.00). We had suddenly to find an amount of 65% of the value, in order that the children should be warmly clad. The pro forma invoice that had accompanied the consignment clearly stated that these were gifts, and each jersey showed the name and address of the knitter/donor and the name, school and age of the recipient.

I mentioned the problem to several friends and have heard on more than one occasion that people have been sending gifts to friends or relations in South Africa who are living in great poverty. The duty demanded has on some occasions been too much for the recipients to pay and they have thus been unable to gain access to their gifts.

If this grossly unfair imposition of duty on gifts is to continue, all it will mean is that for the funds that we are able to raise locally, there will be 65 per cent less warmly clad children and 65 per cent less happy knitters.

Over the years the jerseys we have knitted have kept children warm and comfortable and able to attend classes during the bitter highveld winter. The direct linkages between Wantage and Thokoza have enriched both communities and we are able to respond directly and quickly to the needs of some of the most vulnerable children. Importantly, we get almost immediate feedback from Thokoza on what is and isn’t working, such as getting the colours and designs of the jerseys right. Decades of big “Developmentism” projects simply cannot respond to what people actually want and need. It has left the continent littered with the unwanted, rusting carcasses of big development schemes; it hasn’t benefited Africans and has left taxpayers in rich countries poorer.

No doubt some local manufacturer of over-priced school jerseys benefits from the duty, but the children of Thokoza suffer and the residents of Wantage see their efforts go to waste. Bureaucracies involved in government-to-government aid and in collecting taxes also benefit as these private initiatives are crowded out.

I got a sympathetic response in raising this matter with the Trade Department at South Africa House in London, but sympathy won’t pay the duty and VAT. The South African government says the duty must be paid and is the law. This is a law worth reviewing.

Author: Judy Tren manages the outreach between St. Peter and St Paul in Wantage, England and St. Phillips, Thokoza. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.

FMF Feature Article/ 11 September 2007