African countries and donors share the belief that aid has the potential to contribute to economic growth, reduce poverty and achieve the Millennium Development Goals (MDGs). However, the way both donors and recipient countries are performing for delivery and use of aid undermine this potential. Some of the conditionalities imposed to aid recipient countries to access aid reduce the extent to which it can contribute to poverty reduction and achievement of the MDGs by forcing governments to implement policies that lead to unemployment, bad quality of public services and reduced capacity by citizens to access basic services. Privatisations, cuts in government expenditures in public services such as education and health and adjustment of prices of essential goods like water, electricity and transport to reflect market prices result in unemployment, shortage and lack of motivation of civil servants as well as incapacity of poor people to access these essential services are some examples of such conditions.

On the other hand, recipient countries still face challenges in ensuring good governance, adequate institutional capacity and coordination of activities at different levels. Corruption practices without an appropriate mechanism of imputing responsibilities, lack of coordination across sectors and weak institutions and systems combined with the absence or weak donors’ coordination and harmonisation practices undermine the full potential of aid.