Insight: Rethinking global aid
2025 may come to be seen as the year the global aid market reached a natural correction point.
For two decades, international assistance expanded at a rate outpacing both population growth and absorptive capacity. Donor states built vast bureaucratic architectures to deliver aid at scale. At its height, this system financed extraordinary progress — most notably through PEPFAR, The President's Emergency Plan for AIDS Relief, which helped save an estimated 26 million lives and prevented 7.8 million HIV+ births.
But scale came at a price. A generation of intermediaries, contractors and consultants absorbed significant value along the chain, while the ultimate delivery point — the community — remained the least capitalised. The suspension of thousands of USAID programmes this year, alongside reductions in the U.K.’s Official Development Assistance and Global Fund commitments, has simply accelerated what was already a structural reality: a system whose marginal returns were declining.
The abrupt U.S. funding pullback was dramatic but not irrational. It may become seen as a necessary reckoning. The new “America First” framework has re-centralised aid under a domestic economic interest test, reflecting a broader geopolitical shift. Governments are asking whether long supply chains, multi-layered reporting systems and heavy transaction costs represent efficient capital deployment.
Even critics within recipient nations acknowledge this. Speaking at an African Union Summit in Ethiopia earlier this year, Zambia's President Hakainde Hichilema described the traditional aid model as wasteful and bureaucratic, and the funding suspension as "inevitable" while urging investment into capable local actors. His remarks echo a growing consensus among development economists: that efficiency, accountability and ownership improve as the distance between funder and community-actor narrows.
"This moment confirms what two decades of practice have taught us: that real impact is achieved not by enlarging bureaucracy, but by backing capable local actors."
Collapse or market correction?
The foreign-aid economy (worth over US$200 billion annually) is undergoing the same market discipline applied to other sectors: inefficient intermediaries are being priced out, while new, leaner models are emerging. The same forces driving private capital towards impact investment and decentralised finance are now at work in development; demanding transparency, measurable outcomes, and proximity to value creation.
For organisations like Egmont, this shift validates a model already aligned with these principles. We have long operated on a portfolio basis, diversifying across sectors and geographies to manage risk and maximise impact. Egmont Partners are not subcontractors but local equity-holders in social outcomes. In other words, they have skin in the game.
Impact on Egmont Partners
As global funding has contracted, practical implications have started to be felt across the communities in which Egmont Partners operate. PEPFAR funding is dropping from US$4.85 billion in FY 2025 to US$2.9 billion in FY 2026 — a reduction of nearly US$1.9 billion. An estimated 83% of USAID programmes and contracts were terminated early in 2025.
Egmont Partners report varied impacts. In Malawi and Zambia, community health data systems have stalled; in Kenya and Mozambique, commodity shortages and service suspensions have hit frontline work. When a 19-year-old in Blantyre cannot refill her HIV medication because a contract in Washington or Whitehall was cancelled, the problem isn’t abstract inefficiency - it’s the real world impact of distance.
Egmont's response
For Egmont, this moment confirms what two decades of practice have taught us: that real impact is achieved not by enlarging bureaucracy, but by backing capable local actors and giving them the freedom to lead.
Recognising this changing and uncertain context, The Egmont UK & US Boards voted to issue emergency grants to the most impacted Egmont Partners - those demonstrating strong local leadership and measurable community outcomes. To date, 15 grants worth US$225,670 have been approved, with more under consideration. These funds will be used to sustain core services; restore testing and ensure treatment continuity; and strengthen maternal and adolescent support. This support will help ensure that despite the global funding headwinds, the critical lifelines of HIV and health-service delivery in these communities remain intact. While donor generosity cannot completely offset systemic shifts, it can be the stabilising force at community level.
Aid: rethought?
The traditional aid architecture was designed top down to maintain control of projects. The hope is that the next phase will be designed bottom-up, for local empowerment and responsibility while demonstrating - necessitating - capital efficiency.
The aid system, which has seen significant capitalisation since the early 2000s, (see above) has achieved historic results, but its cost structure is now being seen as unsustainable. The correction now under way creates space for models that are smaller, faster and closer to the ground.
For discerning philanthropists and social investors, the lesson is clear: the most efficient capital in this new landscape will be local capital — directed through trusted, transparent networks with proven delivery. Egmont's approach is well placed to capitalise on this emerging new normal.