Response of Inclusive Growth to Development Aid in Africa and the Role of ICT Diffusion

Over the years, some regions of Africa have witnessed stable economic growth, which could not be considered pro-poor or inclusive given the region’s high rate of poverty and income inequality. Development aid flow, on the other hand, has been contended to be a pro-poor strategy, which could play a key role in the drive towards the achievement of sustainable, inclusive growth in Africa. Thus, the purpose of this paper is to evaluate the role of development aid, which has been argued to be welfare-enhancing, especially in developing countries, taking into account digitalization. The research hypothesis is that development aid in the form of foreign aid and remittances promotes inclusive growth, especially in the face of digitalization in Africa. Premised on the inclusive growth-aid nexus, the study carried out panel data analysis using the common correlation effect technique for 50 African countries from 1996 to 2021. The main findings reveal that remittances have a welfare-enhancing effect through improving inclusive growth. Foreign aid, on the other hand, had a positive effect but was not significant, which was attributed to the weak institutional framework in the region. Digitalization was observed to have an adverse effect attributed to its high affordability. The theoretical contribution of the study is the incorporation of structural systems such as digitalization in the nexus between inclusive growth and development aid, which has been identified as a facilitator in the drive for inclusive growth. In terms of practical significance, the study highlights the need for digital reforms and investment in this sector as well as the need to address the institutional gap to mitigate the inefficiencies of development aid performance.