On Emeka's blog, Africa Unchained he mentions an article by Thilo Thielke on Der Spiegel. Thilo's position is that aid to Africa causes more harm than good. While it is difficult to talk in absolutes, there is anecdotal evidence to both support and discredit his position.
After the post election violence, I had an opportunity to visit with quite a few NGOs that were involved in the peace effort in some way or another. I was really impressed with the caliber of people working in these organizations. From a entrepreneur standpoint, I made a mental note to recruit from the NGO World next time I am hiring.
NGOs in Kenya, particularly the well funded "Multinationals" have access to the best talent in Kenya. They renumeration structure is based on Western salary scales. This means that they can afford to hire the best talent in the country, talent that would be a great resource to the private industry. The are some industries such as the mobile phone and the name brand accounting firms that are able to compete, but based on a conversation with an HR manager of one of the multinational car companies in Kenya, hiring and retaining top employees is a huge challenge in Kenya. One might argue that when the best brains are working for NGOs and are interested in alleviating the problems in the country, then they are talent is being applied in the best possible way.
At a conference at Stanford University, Larry Brilliant, Executive Director of Google.org presented on Google.org's work around the World. After the presentation, an Engineering Student at Stanford University who is originally from Ethiopia, approached him and mentioned that Google.org had funded a NGO to provide market data from poor farmers to vendors in the City in Ethiopia. While the idea was noble, there was an existing entrepreneural venture that was already providing the data and hoping to expand nationally. The entrepreneural venture was faced by the unfair competition that was the donor funded NGO. Larry Brilliant was careful to indicate that his organization was not involved and works very hard to ensure that they don't step on small enterprises. This example however, illustrates the risk that a donor funded organization might outspend a local entreprise and nip its success in the bud.
I think that both Aid and private enterprise have roles to play in development. I believe that where possible, private enterprise should be encouraged because it is more sustainable. Aid should come with an expiration date and a clear path to sustainability so that the work and investment done during the "project" doesn't go to waste once the funding runs out.
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In any given community, NGO form an integral part of bridging the social needs of that community between what the Government can and is willing to do and what Private enterprise finds feasible to do. However when NGO's overstep these gray area parameters, they run the risk of frustrating private enterprise by creating competitions for talent and lowering the bar for market prices of commodities and services they may be providing. On the other side they also run the risk of creating complacence on the public sector by shifting responsibility onto themselves that local leadership would otherwise stand to be judged on.
On private enterprise, depending on the role they play, NGO's also run the probability of lowering local innovation by creating a dependancy syndrome, however the opposite can also be argued whereby the NGO's provide an incubation and seeding for local innovation
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