MWE Correspondent
Foreign aid is commonly presented as a mechanism for financing development, strengthening public services and supporting economic transformation across Africa. But development assistance can also create commercial opportunities for companies from donor countries, particularly when funding is connected to procurement, technology, consultancy and long-term service contracts.
The issue is not that every aid programme is designed to benefit foreign corporations. Rather, the structure of some aid arrangements can allow development spending to generate business opportunities for companies based in the countries providing the financing.
The OECD defines tied aid as assistance whose procurement is restricted to the donor country or a limited group of countries. The organisation has repeatedly warned that tying aid can reduce competition, increase costs and limit the ability of recipient countries to determine which goods, services and technologies best fit their development needs.
This becomes particularly important in sectors requiring expensive equipment and long-term technical support.
In health programmes, donor financing can support hospitals, laboratories, pharmaceutical supply chains, digital health systems and medical equipment. Once a particular technology or supplier is introduced, future spending may follow the same technical standards, maintenance arrangements, software systems and replacement markets.
Agriculture presents a similar dynamic. Development assistance can finance irrigation equipment, agricultural machinery, digital platforms, seeds, fertiliser systems and technical services. While such investments can improve productivity, procurement choices can also create continuing markets for foreign suppliers if local alternatives are not sufficiently developed.
Technology projects can have an even longer commercial life. A donor-funded digital system may initially arrive through an aid programme, but maintenance, software licences, upgrades, cybersecurity services and specialised consultancy can continue generating contracts long after the original development project has ended.
The OECD’s current analysis shows why procurement remains central to the debate. Although most Development Assistance Committee members have formally moved toward untying aid, the organisation says aid can still be effectively tied through informal barriers, including contract size, procurement requirements and limited access to information. In 2019–23, suppliers from developing countries received 40 percent of untied aid contracts by number but only 10 percent of their total value, highlighting the difficulty local companies face in accessing larger contracts.
The pattern is particularly significant for major infrastructure and investment projects, where contracts can involve substantial amounts of money. OECD data also show that even formally untied aid can result in a disproportionate share of contracts going to companies from donor countries.
This does not mean that foreign companies are necessarily receiving contracts unfairly. International firms may possess technology, capital, experience or specialised expertise that local companies currently lack. The deeper concern is whether aid-funded procurement simultaneously builds the capacity of domestic businesses to compete in future markets.
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The OECD itself now recommends that aid-funded procurement promote local and regional suppliers and strengthen local ownership. Its 2026 guidance notes that informal procurement barriers can favour provider-country firms and potentially distort markets, while local procurement can strengthen locally led development.
For Tanzania, the issue deserves greater attention as external financing continues to support major development programmes. The World Bank’s financing database shows more than US$24.9 billion in total commitments across 236 projects in Tanzania as of August 2026, illustrating the scale of international development financing operating in the country.
At this scale, the economic consequences extend beyond the immediate project.
A development programme that imports most of its equipment, relies heavily on foreign consultants and awards major service contracts to overseas companies can deliver infrastructure or services while creating a relatively limited domestic commercial footprint. A programme that combines international expertise with Tanzanian suppliers, universities, engineers, manufacturers and technology firms can leave behind a stronger local market.
This is where Tanzania could strengthen its aid-management framework.
Major aid agreements could undergo a national-interest and economic-benefit assessment before approval. The assessment could examine the expected value of the project, procurement arrangements, foreign and local contractors, technology ownership, local employment, domestic tax contributions, technology transfer and the long-term maintenance costs that Tanzania will carry after donor financing ends.
Government could also require major donor-funded programmes to disclose the geographical origin of suppliers and the value of contracts awarded to local and foreign companies.
Local-content targets could be incorporated where technically and legally appropriate, particularly for consultancy, construction, maintenance, digital services and supply-chain contracts where Tanzanian firms have the capacity to participate.
Such measures would not require Tanzania to reject foreign companies or international development assistance. Instead, they would ensure that development finance produces a stronger domestic economic base.
The objective should be to move from aid that finances projects in Tanzania to aid that also builds Tanzanian markets.
Foreign assistance can provide technology, capital and expertise that accelerate development. But without careful procurement and economic analysis, part of the value created by that assistance can flow back to companies in donor countries through contracts, technology sales, consultancy fees and long-term service arrangements.
For Tanzania, every major aid agreement should therefore be evaluated not only by the development problem it promises to solve, but also by its effect on local businesses, local skills, domestic industries and the country’s long-term economic independence.
