"I have seen literally over a hundred families receive donations tell the organization that they spent it on everything from healthy vegetables to school fees when in fact they spent it on sugar, tea, larger celebrations, new sound systems and more."
Even if that turns out to be true, this kind of spending could still help the country's economy and support local businesses. It seems like cash transfers to people in developing countries don't do enough harm to outweigh the positives associated with them. Your argument might still work for AMF, but I'm not so sure about GiveDirectly.
Tokvill > Tocqueville