Economy of Africa

The economy of Africa consists of the trade, industry, and resources of the peoples of Africa. As of July 2005, approximately 887 million people were living in 54 different states. Africa is by far the world's poorest inhabited continent, and it is, on average, poorer than it was 25 years ago. Of the 175 countries reviewed in the United Nations' Human Development Report 2003, 25 African nations ranked lowest.

Africa's current poverty is rooted in its history. The transition from colonialism has been shaky and uncertain. The Cold War and increased corruption and despotism have contributed to Africa's poor economy. While China and India have grown rapidly and South America has experienced moderate growth, lifting millions above subsistence living, Africa has stagnated and even regressed in terms of foreign trade, investment, and per capita income. This poverty has widespread effects, including low life expectancy, violence, and instability, which in turn perpetuate the continent's poverty. Over the decades, attempts to improve the economy of Africa have met with little success.

Regional variation

Variation

National GDP per capita ranges from wealthier states in the north and south to poorer states in the east. These figures from the 2002 World Bank are converted to US dollars.

While no African nation is wealthy enough to join the ranks of the developed nations in the Organisation for Economic Co-operation and Development (OECD), the entire continent is not utterly impoverished and there is considerable variation in its wealth. The richest areas are the far north and south of the continent. Arab North Africa has long been closely linked to the economies of Europe and the Middle East. South Africa is by far the continent's wealthiest state, both in GDP per capita and in total GDP, and its neighbours have shared in this wealth. The small but oil-rich states of Gabon and Equatorial Guinea round out the list of the ten wealthiest states in Africa.

West Africa, with its long pre-colonial history of trade and development, has tended to be wealthier and more stable than the continental average. Island nations such as the Seychelles, Cape Verde, and Mauritius, have remained wealthier than the continental nations, although the unstable Comoros remain poor.

The poorest states are those engaged in or just emerging from civil wars. These include the Democratic Republic of the Congo, Sierra Leone, Burundi, and Somalia. In recent times the poorest region has been the Horn of Africa, although it had historically been one of the wealthiest regions of sub-Saharan Africa. Ethiopia in particular had a long and successful history. The current poverty of the region, and the associated famines and wars, have been a problem for decades.

There is considerable internal variation within countries. Urban areas, especially capital cities, are generally wealthier than rural zones. Inequality is pronounced in most African countries; an upper class has a much higher income than the majority of the population.

By country

History

Before the Roman Empire, Ancient Egypt was one of the world's most prosperous and advanced civilizations. The port of Alexandria, founded by Alexander the Great in 334 BC, was a hub for Mediterranean trade for centuries. Well into the 19th century, Egypt remained one of the most developed regions outside Europe.

South of the Sahara conditions were different. Internal trade within the continent, hindered by thick forests and massive deserts, was always difficult. Prosperity in sub-Saharan Africa was rare, excepting Nubia, Ethiopia, Mali and Ghana, which had trade routes north to the Mediterranean world and Middle East.

Once a departure point for trans-Saharan caravans, the market of Douz, Tunisia is today popular with Western tourists.

However, new technologies and the development of civilization made trading easier. For most of the first millennium AD, the Axumite Kingdom had a prosperous trade empire on the eastern horn, where the modern states of Ethiopia and Eritrea lie. Axum had a powerful navy and traded as far as the Byzantine Empire, India, and possibly China. The introduction of the camel by North African Arab conquerors in the 10th century opened trade across the Sahara for the first time. The profits from the gold and salt trades created powerful empires in the western Sahel including the Kingdom of Ghana and the Mali and Kanem-Bornu Empires, where travellers reported vast wealth. Arabs helped build a maritime trade along Africa's east coast, which prospered as Swahili traders exported ivory and slaves across the Indian Ocean.

Further south empires were less common, with the notable exception of Great Zimbabwe. In the Great Lakes region, states such as Rwanda, Burundi, and Buganda became strongly centralized, due to its high population and agricultural surplus.

In the 15th century, Portuguese traders circumvented the Saharan trade route and began to trade directly with Guinea. Other European traders followed, rapidly boosting prosperity in Western Africa. States flourished, including the Kingdom of Benin, Dahomey, and the Ashanti Confederacy. Loose federations of city states such as those of the Yoruba and Hausa were common. However, this wealth was principally based on the slave trade, which collapsed following the abolition of slavery and later European colonization.

While Europeans were ostensibly committed to developing their colonies, the first decades of colonial rule saw a laissez-faire strategy employed, where it was hoped that European companies would do most of the actual development work if given a secure operating environment. This only occurred in a handful of areas with especially rich resources, and growth of the colonial economies was minimal from the 1890s until the end of the 1920s. The colonies were also obliged to pay their own way, receiving little to no development money from the home country. It was only in the 1930s with the rise of Keynesian economics that it became agreed that the colonial administrations had a significant role to play in encouraging development. However, the Great Depression and the Second World War hampered new projects. It was not until the post-war years that colonial development projects truly got under way.

The 1950s saw booming economies in much of Africa as growth and international trade increased to many times their pre-war levels. This was tied to the insatiable demand for raw materials in the rebuilding economies of Asia and Europe and the strong growth in North America, which caused raw material prices to increase greatly. By the end of the colonial era in the 1960s, there was great hope that Africa could continue to grow substantially on its own. Sporadic growth during the years after independence continued as the new nations borrowed heavily from abroad to fuel growth.

However, Africa was hit hard by the world economic decline of the 1970s, rising oil prices, corruption, and political instability; and in subsequent decades Africa has steadily become poorer compared to the rest of the world. Africa stands in stark contrast to the solid growth in South America and the spectacular growth of East Asia over that same period. In 1970, according to the World Economic Forum, ten percent of the world's poor were in Africa; by 2000, half of them were. From 1974 to 2000 the average income declined by 200. Beginning in 1976, the Lomé agreements and Cotonou agreement between the EU and ACP countries (including Sub-Saharan Africa) have structured economic relations between the two areas.

Economic sectors

Agriculture

60% of Africans work in the agricultural sector, making the continent more reliant on agriculture than any other. About three fifths of African farmers are subsistence farmers tilling small plots of land to feed their families, with only a minimal surplus that can be sold for other goods. However, there are a significant number of larger farms that grow cash crops such as coffee, cotton, cocoa, and rubber; these farms, normally operated by large corporations, cover tens of square kilometres and employ large numbers of labourers.

The cultivation of crops for export to the West while millions on the continent starve has often been criticized. Many blame it on the current practices of Japan, the European Union and the United States. Each massively subsidise their own farmers, leading to overproduction of such commodities as grain, cotton and milk; this lowers the global price of such products and makes Africans unable to compete with the West and Japan, except in cash crops that do not grow easily in a northern climate. On the other hand, these countries also protect their agricultural sector by high import tariffs.

Thus, in Africa all excess capacity is turned over to growing crops for export; as a result, when crisis sparked by civil unrest or a bad harvest occurs, there is no extra food saved that could make up the shortfall, and people starve. The excess foodstuffs grown in the developed nations are often just destroyed, as it is not economically viable to transport it over long distance across the oceans to a market that has little money to spend. While in ideal circumstances cash crops can help to improve the wealth of a nation, any positive aspects are negated if their production leads to famine.

See also: Trade and development

Mining and drilling

By far Africa's most valuable exports are minerals and petroleum; these resources are concentrated in only a few countries. The southern nations have large reserves of gold, diamonds, and copper. Nigeria and its neighbours export significant amounts of petroleum, as does Libya. These areas make up the vast majority of mineral and petroleum exports from the continent.

While mining and drilling bring in the most money to Africa each year, these industries employ a tiny fraction of the continent's population, only about two million people. This means that the profits normally go either to large corporations or to the governments. Both have been known to squander much of this money on luxuries for the elite or on megaprojects that return little value.

In some cases, these resources have turned out to be a curse. For example, though Congo is rich in minerals, the country remains one of the poorest countries in the world. This is historically due to ownership fights over these minerals. In Congo, the fights could be traced back to early 1900s. After Congo became independent from Belgium, the colonial government hesitated to leave behind these resources. Congo solicited UN help to push Belgium, but that turned out to be a bad idea. In an attempt to get out of the quagmire, Congo sought USSR assistance, but this led the country deeper into trouble, as the country separated into two and a lengthy proxy war between the west and east began.

Manufacturing

Africa is the least industrialized continent; only South Africa has a substantial manufacturing sector. Despite large local supplies of cheap labour, almost the entire continent's natural resources are exported elsewhere for secondary refining and manufacturing. According to the AFDB about 15% of workers are employed in the industrial sector.

The multinational corporations that control most of the world's major industries, and the financiers who pay for them, require some guarantee of political stability before erecting an expensive factory—and this stability is rare in Africa. A certain level of education among the populace, good infrastructure and a stable source of electricity are also considered essential factors in investment decisions, but these factors are lacking across much of Africa. Thus other poor regions of the world—India and China—are more attractive to companies looking to build a new factory or invest in a local enterprise.

In earlier years, many states also had limits on foreign investment to ensure local majority ownership, and close governmental control over industry further discouraged international investment. Attempts to foster local industrial concerns have been hampered by insufficient money for investment and lack of technology and training. The paucity of local markets for goods and the difficulty of transporting goods from major African centres to world markets also plays an important role in the lack of manufacturing outside of South Africa.

Investment and banking

Banking in Africa has long been problematic. For the most part, the continent is served by local banks, which are often unstable and corrupt. Thus, governments and industry rely mainly on international banks. The one major exception is South Africa, which has a thriving banking sector that was in some ways aided by the international sanctions of the apartheid era, which forced out the British banks that had once dominated. In the years after independence, the banking sector in most of Africa was heavily regulated by governments, with strict limits placed on international competition. In recent decades, banking reform has been a priority of the IMF and World Bank, and there have been some significant changes. One of the most important is permission for more penetration by foreign banks, and the South Africans have been the most successful in attracting foreign banks to operate in their country.

Encouraging foreign investment in Africa has been very difficult. Even Africans are reluctant to invest and about forty percent of savings from sub-Saharan Africa are invested in other markets. Much investment must thus come from foreign governments, who often have ulterior motives, or the IMF and World Bank, who impose stringent conditions (see austerity) before lending money.

Determinants

The intractable nature of Africa's poverty should not, according to modern economic theory, be the case, and the root causes of Africa's poverty are much debated. It is also difficult to tell what is an effect and what is a cause of poverty. Endemic warfare and unrest, widespread corruption, and despotic regimes are both causes and effects of the continued economic problems.

Geography

Africa's geography is unsuited to trade and thus hampers its economy. The centre of the continent, at least on the western side, is an almost impenetrable rainforest that greatly impedes the transit of people and goods. Some of the wealthiest parts of South Africa are blocked from the rest of Africa by the Kalahari Desert, while the Sahara creates an obvious barrier to trade. While Africa has a number of great river systems such as those of the Nile, Niger, Congo, and Zambezi, it is not nearly as well-linked by rivers as are other areas, such as Europe and China. Moreover, many of the rivers are blocked by rapids and cataracts that require vast development projects if they are to be bypassed. The wetness of the interior also makes transport difficult. Few roads are paved and during the wet season many of the unpaved tracks become impassable mud.

Countries in Africa are also cut off from the sea to a greater extent than those on other continents. Africa has more landlocked nations than any other continent, and countries in the centre of Africa are more populous than those of other areas. By contrast, the centres of North America and Asia are composed of vast steppes or plains that can never support a high population density. Most notably, the ridge running from Zimbabwe to Ethiopia has superb volcanic soils and the higher altitude gives it a more temperate climate. The lack of access to the sea makes international trade far harder.

A satellite composite image of Africa

Within Africa, the wealth of nations is highly correlated with changes in latitude. One potential explanation for this is that modern civilization originates and is possibly best suited for temperate climates, but fails in the tropics. The majority of the world's population and wealth is found in the temperate zone. Historically the vast expanse of Eurasia, almost entirely in the temperate zone, was linked by land routes, allowing technologies and ideas to spread from one area over time, aiding innovation. This expanse and spread of technologies among those in the temperate zones means that everything from agricultural techniques to medicines are more often made to address the concerns of the northern climes, and often fail when brought south. This theory could partly explain why temperate South Africa is by far the wealthiest part of Africa, and why other tropical areas in South America and Indonesia share in Africa's poverty. There are no tropical countries in the OECD, and only a handful have a GDP per capita above the world average. A tropical latitude is not a guarantee of poverty, but globally there is a definite correlation between wealth and climate. Variations of the theory of geographic determinism date back to Montesquieu but have recently been revived by academics such as William Masters and Jeffrey Sachs and popular writers such as Jared Diamond.

Africa is well-endowed with natural resources. The continent has the world's largest supplies of gold and diamonds and contains large reserves of oil both in the north and around the Gulf of Guinea. Some have suggested that, counterintuitively, these foster a resource curse, leading to poor governance, and few African countries seem to have materially benefited from their mineral wealth. It is as well suited to agriculture as any other continent; the volcanic soils of the Great Lakes region are—by some measures—the best in the world.

One resource that Sub-Saharan Africa has historically lacked is stone suitable for building. This meant that almost all pre-colonial civilizations built mainly out of mud brick, which leaves few lasting ruins. The only notable exception to this is Great Zimbabwe. For many years this led European explorers and historians to conclude that pre-colonial sub-Saharan Africa was devoid of civilization, as in Europe all great civilizations left an indelible mark in stone ruins.

AIDS has compounded already slow economic development in Africa.

Disease

Related article: AIDS in Africa

Closely linked to geography is the problem of disease in Africa. The tropics have been, and still are, more hospitable to disease than the colder climates. The most significant illness has long been malaria. A new problem, but one of vast magnitude, is the rise of HIV/AIDS in Sub-Saharan Africa. AIDS, the spread of which to some degree correlates with that of poverty, has hit hardest in some of the wealthiest African countries, including Botswana, Swaziland, and South Africa. AIDS has decimated or will decimate the working-age population of many states.

The healthcare costs, including those of importing anti-retroviral AIDS drugs from the west is also a major new burden on many African states, leading to the challenging of drug prices and the manufacture of cheap generic alternatives. Tropical diseases are often just as expensive to cure, when cures exist. Since the tropical regions are far poorer, pharmaceutical companies are reluctant to invest in curing the diseases of the region. Disease not only reduces the work force and creates an extra burden on health care, but also has an important effect on agriculture and transportation, as most forms of livestock cannot survive the diseases of the region. Historically this meant that sub-Saharan Africans did not have the use of pack animals for trade or work horses for labour, hurting the continent's development.

Africa is in the midst of major AIDS epidemic (HIV/AIDS in Africa). The cost of vaccines and medical supplies, is compiled with the cost of significant portions of the labour aged population becoming medical dependents. In addition, as parents become unable to work or die, their children must then find care elsewhere, adding to the burden of already struggling families and states.

Colonialism

Main article: Colonization of Africa.

Map showing European claimants to the African continent in 1913

There is great debate over the effect of the Colonization of Africa. Africa reached its greatest relative wealth in the years just prior to decolonization. Since then many countries have yet to return to the levels of wealth they reached in the 1960s. Some see this as evidence that colonialism helped the local economies, while others argue that colonialism left a debilitating mark on African economies.

To achieve the relative wealth of the colonial period, imperial overseers geared the economies of Africa towards exporting raw materials. Thus Egypt became a vast producer of cotton, Ruanda-Urundi almost completely dedicated to growing coffee, and Upper Volta to the production of palm oil. Basing an entire nation's wealth on one commodity, however, would have debilitating effects in later years. These monocultures left national economies extremely vulnerable to price swings, making economic planning difficult. Some writers, such as Walter Rodney in his influential book How Europe Underdeveloped Africa, argue that these colonial policies are directly responsible for many of Africa's modern problems.

Other post-colonial scholars, most notably Frantz Fanon, have argued that the true effects of colonialism are psychological and that domination by a foreign power creates a lasting sense of inferiority and subjugation that creates a barrier to growth and innovation.

Europeans in the late 19th century also were infused with racism and social Darwinism. The elevation of the white race above blacks would have lasting repercussions in those lands that saw significant European immigration, most notably South Africa and Rhodesia. Even more damaging, in many cases, was the introduction of the idea that northern Hamites such as the Ethiopians and Tutsi were racially superior to other Africans. This division of society into rival ethnicities would have long-lasting negative effects, especially in Rwanda and Burundi.

While in some cases European rule was a protectorate, in those areas that became actual colonies one of the first acts was to ensure all the top members of society were Europeans; this not only meant the rulers but also the lawyers, doctors, and academics. In areas of Africa that had a significant educated native population, such as the Gold Coast and the Maghreb, the educated were looked upon with great suspicion by the colonial rulers as they were seen as likely nationalists and anti-imperialists. Many colonial regimes therefore did not put money or effort into creating a local elite. While they funded education, this was almost entirely primary education that taught basic skills such as literacy. Thus upon independence many African states saw an exodus of the European administrators and consequently lacked individuals with the training or education to operate the government they had inherited. For instance, the massive area of French Equatorial Africa was divided into four independent nations, but was home to only five locals who were university graduates.

One method of seeing if colonialism had an effect on the economies of Africa is to see if the very different colonial policies of the European powers have led to different results. It can quickly be seen that any region unlucky enough to be ruled by the raubwirtschaft of for example Leopold II in his Congo Free State has not prospered. The long reluctance of Portugal to surrender its colonies, leading to long wars of independence, has also had an obvious negative effect on Mozambique and Angola. By contrast the countries under French control are much better off, while those under British dominion were the most successful of all. However, this can be seen in a completely different manner. Britain, at the time of the Scramble for Africa, was the world's greatest power and could thus cherry-pick the wealthiest parts of the continent for itself. The French, who also had a mighty navy, could also occupy prosperous areas, while the Belgians were forced to take the interior, which was then already far poorer.

Using the same method one could compare Africa as a whole with other colonised regions such as Asia or South America. At the end of the second world war South America was economically the strongest of the colonised regions yet in the span of one generation, previously colonised regions of Asia have become economic powerhouses.

Borders

A related outcome of the Scramble for Africa is that the national boundaries within sub-Saharan Africa were often established by Europeans using maps in Europe, frequently using latitude and longitude rather than natural borders in Africa. In some cases this has separated population centres from their supplies of food or natural resources. Most African states were created based on initially artificial borders, which often cut across cultural, tribal, linguistic and religious boundaries. These artificial borders created ethnic and religious cleavages which could potentially make national unity more difficult and internal violence more likely.

However, those states that preserved pre-colonial boundaries are no more successful than those that did not. Few countries in Africa have more troubled recent histories than Rwanda and Burundi, even though their borders are almost identical to those of the prosperous kingdoms from which they are descended. The ancient and only briefly occupied state of Ethiopia is one of the poorest on the continent, and ethnically unified Somalia has failed so completely that it no longer exists in any real sense.

Africa is also a much divided continent with many small countries. Any successful economic growth requires regional cooperation, sometimes difficult due to political tensions. This also means that to be effective foreign aid must be multilateral, making it far harder to base aid upon the performance of local governments.

Language issues

Tamale in linguistically diverse Ghana

The sheer diversity of much of Africa also hurts growth. There are a huge variety of languages existing across Africa. Seven of the ten most linguistically diverse countries in the world are African. In 1996, the most linguistically diverse country in Africa was the Central African Republic, which included 68 distinct language groups spread across a population of 3.4 million people, with only 350,000 people belonging to the major language group in the country—the Sango. Situations similar to this, where language groups are comparatively small and where a considerable plurality of languages exists, are common in Africa. Moreover, 68 language groups is not the highest total of living languages in an African nation; Africa's most populous country, Nigeria, possesses over 400 language groups, while Cameroon encompasses 279 language groups, the DRC 221, Tanzania 131, Chad 127, and still others have similarly high numbers.

An added difficulty is that in many states the primary language of government is the language of the former colonial powers—English, French, or Portuguese. Much of the political debate and discourse in Africa and Africa's institutions of learning is also conducted in these European languages. However the majority of people in the nation rarely speak these European languages fluently enough to be able to participate in political debate except via intermediaries. This creates a divide between the elites and the rest of the population.

Governance

The political situation in much of Africa, while not a root cause, is seen as one of the primary causes of the intractable nature of African poverty. The history of democracy in Africa has not been a successful one. With only a few exceptions the countries of Africa rapidly turned to military dictatorships or other forms of centralized authoritarian rule. While some of these rulers did work to improve the lot of their nation's citizens, others used power purely for their own benefit. One of the most notorious was Mobuto Sese Seko of Zaire, whose regime has been called a kleptocracy due to its looting of the nation's wealth. According to most international measures the economies of Africa generally rank as some of the worlds most corrupt, with bribery and graft widespread. These problems are to some degree a product of colonialism, the poorly handled de-colonization, the superpowers' practice during the Cold War of supporting any ruler with the desired political alignment, and the continent's poverty itself.

Economists argue that one of the factors behind the differing economic development in Africa and Asia (both were at similar levels of income in the 1960s) is that in Africa, corruption has primarily taken the form of extraction of economic rent with the resulting financial capital moved overseas rather invested at home (hence the stereotypical, but sadly often accurate, image of African dictators having Swiss bank accounts). By contrast, Asian dictators such as Suharto have often taken a cut on everything (requiring bribes), but otherwise provided more of the conditions for development, through infrastructure investment, law and order, etc. University of Massachusetts researchers estimated that from 1970 to 1996, capital flight from 30 sub-Saharan countries totalled $187bn, exceeding those nations' external debts.[1] (The results, in terms of development (or lack of it), have been modelled in theory by economist Mancur Olson). In the case of Africa, one of the factors for this behaviour was political instability, and the fact that new governments often confiscated previous governments' corruptly-obtained assets. This encouraged officials to stash their wealth abroad, out of reach of any future expropriation.

The massive inequality generated by this corruption also hindered development, as the wealthy elite not only avoided investing at home, but also imported most of its consumption (as the desired luxury goods were generally not available at home). This hindered the development of national markets. Historically, economic development is closely linked with the creation of a middle class with enough income to save (and invest), but not substantially in control of the levers of the state. In countries where elites fail to nurture such a middle class, development is all but impossible (except the illusory and destructive development based on resource extraction, especially oil).

Civil and international wars

Since independence Africa has seen dozens of wars, both civil and international. This has contributed to poverty as states have spent their scarce resources on military equipment and supplies. It has also greatly hurt development as warfare has scared off foreign investors, destroyed infrastructure, and created lasting animosities.

Much of this conflict was initially driven by the Cold War. The countries of the Western and Eastern blocs used foreign aid money as leverage to move countries into their camp. This foreign aid had a questionable effect on development: because large amounts of it were tied to the purchase of military weapons and the donor countries turned a blind eye to corruption and the misappropriation of the funds, corruption became endemic. Even worse, the cold war led to proxy conflicts in Africa as both blocs would fund and assist any rebellious or sectarian groups in a nation under the control of the opposing bloc.

Almost all developed countries have slashed foreign aid spending since the end of the Cold War and so one would expect a reduction in violence. However, violence has, if anything, increased. Civil wars have raged throughout the Great Lakes region, Somalia, Sudan, Mozambique, Liberia, Sierra Leone, Ivory Coast, and Guinea-Bissau. International wars have involved the Democratic Republic of the Congo and its neighbours (see the First and Second Congo Wars), and war broke out between Ethiopia and its former province Eritrea.

Foreign trade

Dependency theory asserts that the wealth and prosperity of the "core" nations of Europe, North America and East Asia is dependent upon the poverty of the rest of the world, including Africa. This theory originated in the 1950s and 1960s as a rationalization for the failure of developmental policies in South America and Africa. Unlike classical Marxism, in which the poor of every nation are united (in theory), dependency theorists thus believe that poorer regions must break their trading ties with the developed world in order to prosper. Many economists have lambasted this theory for its inherent weaknesses.

A less radical critique of foreign trade is the assumption that the protection of certain economic sectors in developed countries hampers Africa's growth. One of the most important of these protected industries is the agricultural sector. Many developing countries harvest large quantities of agricultural produce at low cost, yet generally do not export as much of these products as would be expected. Abundant farm subsidies and high import tariffs in the developed world, most notably in Japan, the European Union, and the United States are generally thought to be the cause. During the last (few) decade(s?) these subsidies and tariffs have been gradually reduced, though they are still fairly high.

''See also: Agricultural subsidy, United States Department of Agriculture, Common Agricultural policy (European Union)

Effects of widespread poverty

The position of African countries on the UNDP's 2004 list of countries by quality of life (lower index is better)

Many of the causes of Africa's economic malaise are also its effects. These include the disease, warfare, misgovernment, and corruption that have all been discussed above.

The most direct consequence of the low GDP in the area is its low standard of living and quality of life. With the exception of elites throughout the continent and the wealthier areas of South Africa and the Maghreb, Africans have very few consumer goods. Quality of life does not correlate exactly with a nation's wealth. Angola, for instance, reaps large sums annually from its diamond and other mines, but after years of civil war, conditions there are still poor. Radios, televisions, and automobiles are all rare luxuries. Most Africans are on the far side of the Digital Divide and are cut off from communications technology and the Internet. Quality of life and human development are also low. African nations predominate in the lower reaches of the UN Human Development Index. Infant mortality is high, while life expectancy, literacy, and education are all low. The UN also lowers the ranking of African states as the continent sees greaterinequality than any other region. The best educated also often choose to leave the continent for the West or the Persian Gulf to obtain a better life.

Especially deadly, however, are the periods of great shortages. The worst of these are the famines that have regularly hit the continent, especially the Horn of Africa. These have been caused by disruptions due to warfare, by several years of drought, and sometimes by plagues of locusts.

An average African faced annual inflation of over 60% from 1990 until 2002. This number is somewhat misleading as much of the inflation is accounted for by only a few countries. Angola and the Democratic Republic of the Congo both saw triple digit inflation throughout the period. Most African states saw inflation of around 10% per year.

There are no good numbers for unemployment in most African nations, but it is an important problem. This is especially true in the major cities like Lagos and Kinshasa that have large slums of the unemployed and underemployed.

Environmental degradation is also an important consequence. Farmers on the verge of starvation are unlikely to be concerned about the fate of the rainforest in their pursuit of new land, and starving people do not often consider the rarity of an animal before eating it (see bushmeat). Along the length of the Sahel, deforestation and overgrazing has caused increased desertification as the Sahara spreads south. The illegal poaching of rare animals or timber to be sold in the West and the killing of elephants for ivory is also attractive to the poor. Local governments have little money to devote to protecting the environment.

Attempts at promoting growth

The relative economic failure of Africa has long been an important issue both in Africa and abroad. Many attempts at solving Africa's poverty have been attempted, but few have had any great degree of success.

Socialism

In the years immediately after independence many nations saw the rapid industrialisations of the Soviet Union and China under communism as models to follow. This led to command economies and major investment in heavy industries such as coal and steel production to stimulate growth, but this approach had little success. Only a handful of states formally adopted socialism and even fewer turned to outright Marxism. Everywhere government intervention in the economy was seen as necessary for growth, especially since private companies and investors were unlikely to invest in the region.

Often the approach of governments in Africa was to borrow heavily from abroad and use this aid to grow the economy to a level that the loans could be paid off. Sporadic growth during the years after independence continued. The countries focused on exports to pay for these development efforts. The 1973 energy crisis hit sub-Saharan Africa as hard as anywhere in the world. While some nations were net exporters, most were heavily reliant on imported fuels. Economies quickly began to falter and events such as famines hit Africa in the 1980s. The collapse of the Soviet Union, which had supported socialist and collectivist projects throughout the continent, undermined the legitimacy of such an approach, while it also meant that there were no longer any sources of international aid to help pursue this approach.

''See also: African socialism

Liberalism

Average annual growth in per capita GDP from 1990 to 2002.

Thus in the 1980s, socialist ideas were discarded throughout almost the entire continent as free market capitalism became seen as the route to salvation in what became known as the Washington Consensus. By 1990, forty of the nations of Sub-Saharan Africa had agreed to follow rigorous IMF restructuring plans. IMF recommendations saw the continent's currencies drop by an average of 50%, the selling off of government-owned industries, and the slashing of government spending. After twenty years, however, these methods have seen as little success as the socialist approaches of the previous era. Average growth increased from 2.3% per annum to 2.8%. Only a handful of African states reached new levels of wealth, and many others became poorer over the course of the 1990s. Today there is a great deal of controversy on why this failed. One school of thought is that the reforms failed because they were only economic in nature and without democracy and the rule of law development cannot occur. However, another school of thought is that the liberal capitalism represented by the Washington Consensus was fundamentally flawed.

Yet another school of thought attributes some of Africa's problems to insufficient liberalization. It has been pointed out that while the developed world has insisted that Africa open its markets and eliminate public subsidies, this has been one-sided as the developed world has not opened its markets to agricultural goods from Africa nor has it eliminated agricultural subsidies. At the GATT free trade talks, the African leaders repeatedly request that the developed nations abolish the subsidies they provide their farmers and open their markets to African agricultural goods. It has been argued that the abolition of the subsidy would have three beneficial effects for the developing world and Africa:
* The developed nations would produce less food locally, therefore providing a larger export market for developing countries.
* Food prices would rise without the artificial subsidy and therefore would increase profits for food exports from the developing world.
* The developing nations could adopt a more balanced agriculture policy, producing food and grain for export; this would provide a surplus that would shield countries from famine.

''See also: Agricultural policy, Common Agricultural Policy (European Union), United States Department of Agriculture, Agricultural sector of Japan.

Autarky

The pursuit of self-sufficiency as advocated by dependency theory has been given limited trials in several African countries. In the 1980s, Nigeria banned the importation of many foodstuffs to stimulate domestic production. The Lagos Plan of Action of 1982 called for Africa as a whole to block imports from the rest of the world, but few countries followed through on the idea. Eventually even Nigeria agreed to liberalization.

Foreign aid

Since independence there has been a constant flow of foreign aid into Africa. The benefits of this aid have been mixed. In many cases much of this aid was misappropriated by unscrupulous leaders. During the Cold War the main goal of much of the aid money was to win the allegiance of these rulers, and so their misappropriation of the aid was at the very least overlooked. Since the end of the Cold War almost all developed countries have slashed foreign aid spending. Many also allege that the aid that was not stolen was long misdirected. For many decades the leading notion of development was government supervised mega-projects; today many believe that small grants to local businesses would be more effective. One example of foreign aid which has come under considerable criticism is food aid. In some circles, it is believed that food aid does not solve any fundamental problems and can also lead to a dependency on outside assistance, as well as hindering the development of indigenous industries. Food shipments in case of dire local shortage are generally uncontroversial; but as Amartya Sen has shown, most famines involve a local lack of income rather than of food. In such situations, food aid - as opposed to financial aid - has the effect of destroying local agriculture and serves mainly to benefit Western agribusiness which are vastly overproducing food as a result of agricultural subsidies. Historically, food aid is more highly correlated with excess supply in Western countries than with the needs of developing countries.

Debt relief

Recently, advocacy for debt relief has become widespread. Each year Africa sends more money to western bankers in interest on its debts than it receives in foreign aid from these countries. Debt relief is not seen as a panacea, but many believe that relieving some of the burden, especially of debts that were run up by regimes for their own benefit, will help the economies of Africa grow and prosper. However, a number of arguments against full and unconditional debt relief exist. The first is that debt relief will in effect punish nations which have managed borrowing well and are in no need of debt relief. The second is that unconditional debt relief will not necessarily cause nations to spend more in social programs and services. Finally, it has been argued that debt relief may make it more difficult for nations to receive credit in the future. It has been suggested that any debt relief policy should be conditional upon a commensurate reduction in aid.Recently the Heavily Indebted Poor Countries initiative was launched; if implemented, it would greatly affect Africa's economy.

Central banks and currencies

There are two African currency unions; the West African Banque Centrale des Etats de l'Afrique de l'Ouest (BCEAO) and the Central African Banque des Etats de l'Afrique Centrale (BEAC). Members of both currency unions use the CFA Franc as their legal tender.

Below is a list of the central banks and currencies of Africa.

Country	Currency	Central Bank			CFA Franc	Banque Centrale des Etats de l'Afrique de l'Ouest																	Banque des Etats de l'Afrique Centrale													Algerian Dinar	Bank of Algeria			Kwanza	National Bank of Angola			Pula	Bank of Botswana			Burundian franc	Bank of Burundi			Cape Verdean Escudo	Banco de Cabo Verde			Comorian franc	Banque Centrale des Comores			Congolese Franc	Central Bank of Congo			Djiboutian franc	Banque centrale de Djibouti			Egyptian Pound	Central Bank of Egypt			Nafka	National Bank of Eritrea			Birr	National Bank of Ethiopia			Dalasi	Central Bank of Gambia			Cedi	Bank of Ghana			Guinean franc	Banque Centrale de la République de Guinée			Kenyan Shilling	Central Bank of Kenya			Loti	Central Bank of Lesotho			Liberian dollar	National Bank of Liberia			Libyan dinar	Central Bank of Libya			Malagasy ariary	Banque Centrale de Madagascar			Malawian kwacha	Reserve Bank of Malawi			Mauritanian ouguiya	Banque Centrale de Mauritanie			Mauritian Rupee	Bank of Mauritius			Dirham	Bank Al-Maghrib			Mozambican metical	Banco de Moçambique			Namibian dollar	Bank of Namibia			Naira	Central Bank of Nigeria			Rwandan franc	Banque Nationale du Rwanda			São Tomé and Príncipe Dobra	Banco National São Tomé and Príncipe			Seychelles rupee	Central Bank of Seychelles			Leone	Bank of Sierra Leone			Somali shilling	Bankiga Dhexe ee Soomaaliya			Rand	South African Reserve Bank			Sudanese dinar	Bank of Sudan			Lilangeni	Central Bank of Swaziland			Tanzanian shilling	Bank of Tanzania			Tunisian dinar	Banque Centrale de Tunisie			Ugandan shilling	Bank of Uganda			Dirham			Zambian Kwacha	Bank of Zambia			Zimbabwean dollar	Reserve Bank of Zimbabwe

See also

*Africa
*List of African countries by GDP
*Geography of Africa
*Sino-African relations

References

External links

*Africa in the World Economy: the national, regional and international challenges, Jan Joost Teunissen and Age Akkerman (eds.), FONDAD, December 2005, book, pdf.
*Africa: Living on the Fringe - Monthly Review. Samir Amin offers a Marxist analysis of Africa's continued economic crisis.
*Africa's Failed Economic History - Yale Economic Review
*Lending Africa an Invisible Hand - Yale Economic Review
*BBC: Africa's Economy
*Africa Economic Analysis
*World Economic Forum - Africa
*African Development Bank Group
*IMF World Economic Outlook (WEO) Public Debt in Emerging Markets
*Language and Africa
*Public Private Dialogue in Africa Case studies on improving the investment climate through public-private dialogue (sponsored by World Bank, IFC, OCED, DFID, GTZ)
*Africa's economy: A glimmer of light at last? - The Economist