Agriculture in Africa
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The economy of Africa consists of the
trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct excha ...
,
industry Industry may refer to: Economics * Industry (economics), a generally categorized branch of economic activity * Industry (manufacturing), a specific branch of economic activity, typically in factories with machinery * The wider industrial sector ...
,
agriculture Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people to ...
, and
human resources Human resources (HR) is the set of people who make up the workforce of an organization, business sector, industry, or economy. A narrower concept is human capital, the knowledge and skills which the individuals command. Similar terms include m ...
of the
continent A continent is any of several large landmasses. Generally identified by convention rather than any strict criteria, up to seven geographical regions are commonly regarded as continents. Ordered from largest in area to smallest, these seven ...
. , approximately 1.3 billion people were living in 54 countries in Africa. Africa is a resource-rich continent. Recent growth has been due to growth in sales in commodities, services, and manufacturing.
West Africa West Africa or Western Africa is the westernmost region of Africa. The United Nations defines Western Africa as the 16 countries of Benin, Burkina Faso, Cape Verde, The Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Maurit ...
,
East Africa East Africa, Eastern Africa, or East of Africa, is the eastern subregion of the African continent. In the United Nations Statistics Division scheme of geographic regions, 10-11-(16*) territories make up Eastern Africa: Due to the historical ...
,
Central Africa Central Africa is a subregion of the African continent comprising various countries according to different definitions. Angola, Burundi, the Central African Republic, Chad, the Democratic Republic of the Congo, the Republic of the Congo, ...
and
Southern Africa Southern Africa is the southernmost subregion of the African continent, south of the Congo and Tanzania. The physical location is the large part of Africa to the south of the extensive Congo River basin. Southern Africa is home to a number of ...
in particular, are expected to reach a combined GDP of $29 trillion by 2050. In March 2013, Africa was identified as the world's poorest inhabited continent; however, the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
expects that most African countries will reach "middle income" status (defined as at least
US$ The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
1,025 per person a year) by 2025 if current growth rates continue. There are a number of reasons for Africa's poor economy: historically, even though Africa had a number of empires trading with many parts of the world, most people lived in tribal rural societies; in addition,
European colonization The historical phenomenon of colonization is one that stretches around the globe and across time. Ancient and medieval colonialism was practiced by the Phoenicians, the Greeks, the Turks, and the Arabs. Colonialism in the modern sense began ...
and the later
Cold War The Cold War is a term commonly used to refer to a period of geopolitical tension between the United States and the Soviet Union and their respective allies, the Western Bloc and the Eastern Bloc. The term '' cold war'' is used because the ...
created political, economic and social instability. However, Africa was the world's fastest-growing continent at 5.6% a year, and
GDP Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is often ...
is expected to rise by an average of over 6% a year between 2013 and 2023. In 2017, the
African Development Bank The African Development Bank Group (AfDB) or (BAD) is a multilateral development finance institution headquartered in Abidjan, Ivory Coast, since September 2014. The AfDB is a financial provider to African governments and private companies i ...
reported Africa to be the world's second-fastest growing economy, and estimates that average growth will rebound to 3.4% in 2017, while growth is expected to increase by 4.3% in 2018. Growth has been present throughout the continent, with over one-third of African countries posting 6% or higher growth rates, and another 40% growing between 4% to 6% per year. Several international business observers have also named Africa as the future economic growth engine of the world.


History

For millennia, Africa's economy has been diverse, driven by extensive trade routes that developed between cities and kingdoms. Some trade routes were overland, some involved navigating rivers, still others developed around port cities. Large African empires became wealthy due to their trade networks, for example Ancient Egypt,
Nubia Nubia () (Nobiin: Nobīn, ) is a region along the Nile river encompassing the area between the first cataract of the Nile (just south of Aswan in southern Egypt) and the confluence of the Blue and White Niles (in Khartoum in central Sudan), or ...
,
Mali Mali (; ), officially the Republic of Mali,, , ff, 𞤈𞤫𞤲𞥆𞤣𞤢𞥄𞤲𞤣𞤭 𞤃𞤢𞥄𞤤𞤭, Renndaandi Maali, italics=no, ar, جمهورية مالي, Jumhūriyyāt Mālī is a landlocked country in West Africa. Mali ...
, Ashanti, the
Oyo Empire The Oyo Empire was a powerful Yoruba empire of West Africa made up of parts of present-day eastern Benin and western Nigeria (including Southwest zone and the western half of Northcentral zone). It grew to become the largest Yoruba language, ...
and
Ancient Carthage Carthage () was a settlement in modern Tunisia that later became a city-state and then an empire. Founded by the Phoenicians in the ninth century BC, Carthage reached its height in the fourth century BC as one of the largest metropolises in t ...
Some parts of Africa had close trade relationships with Arab kingdoms, and by the time of the
Ottoman Empire The Ottoman Empire, * ; is an archaic version. The definite article forms and were synonymous * and el, Оθωμανική Αυτοκρατορία, Othōmanikē Avtokratoria, label=none * info page on book at Martin Luther University) ...
, Africans had begun converting to Islam in large numbers. This development, along with the
economic potential Economic potential is the potential of a region, nation, or corporation for economic development and growth. Typically, discussions of economic potential occur when available resources have not yet been tapped and fully developed or exploited, poss ...
in finding a trade route to the
Indian Ocean The Indian Ocean is the third-largest of the world's five oceanic divisions, covering or ~19.8% of the water on Earth's surface. It is bounded by Asia to the north, Africa to the west and Australia to the east. To the south it is bounded by th ...
, brought the Portuguese to sub-Saharan Africa as an imperial force. Colonial interests created new industries to feed European appetites for goods such as palm oil, rubber, cotton, precious metals, spices, cash crops other goods, and integrated especially the coastal areas with the Atlantic economy. A significant factor on economic development was the gain of human capital by the elite. Between the 14th and 20th century there can be observed that in regions with more elite violence and hence higher chances to die at a younger age the elite did not invest much in education. Therefore their numeracy (as a measure of human capital) tend to be lower than in less safe countries and vice versa. This can explain the difference in economic development between the African regions.


20th century upheaval

Following the independence of African countries during the 20th century, economic, political and social upheaval consumed much of the continent. An economic rebound among some countries has been evident in recent years, however. The dawn of the African economic boom (which is in place since the 2000s) has been compared to the Chinese economic boom that had emerged in
Asia Asia (, ) is one of the world's most notable geographical regions, which is either considered a continent in its own right or a subcontinent of Eurasia, which shares the continental landmass of Afro-Eurasia with Africa. Asia covers an area ...
since late 1970s. In 2013, Africa was home to seven of the world's fastest-growing economies. As of 2018,
Nigeria Nigeria ( ), , ig, Naìjíríyà, yo, Nàìjíríà, pcm, Naijá , ff, Naajeeriya, kcg, Naijeriya officially the Federal Republic of Nigeria, is a country in West Africa. It is situated between the Sahel to the north and the Gulf o ...
is the biggest economy in Africa by nominal GDP, followed by
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
; in terms of PPP,
Egypt Egypt ( ar, مصر , ), officially the Arab Republic of Egypt, is a transcontinental country spanning the northeast corner of Africa and southwest corner of Asia via a land bridge formed by the Sinai Peninsula. It is bordered by the Mediter ...
is second biggest after Nigeria.
Equatorial Guinea Equatorial Guinea ( es, Guinea Ecuatorial; french: Guinée équatoriale; pt, Guiné Equatorial), officially the Republic of Equatorial Guinea ( es, link=no, República de Guinea Ecuatorial, french: link=no, République de Guinée équatoria ...
has Africa's highest GDP per capita. Oil-rich countries such as
Algeria ) , image_map = Algeria (centered orthographic projection).svg , map_caption = , image_map2 = , capital = Algiers , coordinates = , largest_city = capital , relig ...
,
Libya Libya (; ar, ليبيا, Lībiyā), officially the State of Libya ( ar, دولة ليبيا, Dawlat Lībiyā), is a country in the Maghreb region in North Africa. It is bordered by the Mediterranean Sea to the north, Egypt to Egypt–Libya bo ...
and
Gabon Gabon (; ; snq, Ngabu), officially the Gabonese Republic (french: République gabonaise), is a country on the west coast of Central Africa. Located on the equator, it is bordered by Equatorial Guinea to the northwest, Cameroon to the north ...
, and mineral-rich
Botswana Botswana (, ), officially the Republic of Botswana ( tn, Lefatshe la Botswana, label=Setswana, ), is a landlocked country in Southern Africa. Botswana is topographically flat, with approximately 70 percent of its territory being the Kalahar ...
have emerged among the top economies since the 21st century, while
Zimbabwe Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and Mozam ...
and the
Democratic Republic of Congo The Democratic Republic of the Congo (french: République démocratique du Congo (RDC), colloquially "La RDC" ), informally Congo-Kinshasa, DR Congo, the DRC, the DROC, or the Congo, and formerly and also colloquially Zaire, is a country in ...
are potentially among the world's richest nations by natural resources, but have sunk into the list of the world's poorest nations due to pervasive political corruption, warfare, end
emigration Emigration is the act of leaving a resident country or place of residence with the intent to settle elsewhere (to permanently leave a country). Conversely, immigration describes the movement of people into one country from another (to permanentl ...
.
Botswana Botswana (, ), officially the Republic of Botswana ( tn, Lefatshe la Botswana, label=Setswana, ), is a landlocked country in Southern Africa. Botswana is topographically flat, with approximately 70 percent of its territory being the Kalahar ...
stands out for its sustained strong and stable growth since independence.


Current conditions

The
United Nations The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and international security, security, develop friendly relations among nations, achieve international cooperation, and be ...
predicts Africa's economic growth will reach 3.5% in 2018 and 3.7% in 2019. As of 2007, growth in Africa had surpassed that of
East Asia East Asia is the eastern region of Asia, which is defined in both geographical and ethno-cultural terms. The modern states of East Asia include China, Japan, Mongolia, North Korea, South Korea, and Taiwan. China, North Korea, South Korea and ...
. Data suggest parts of the continent are now experiencing fast growth, thanks to their resources and increasing political stability and 'has steadily increased levels of peacefulness since 2007'. The
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
reports the economy of Sub-Saharan African countries grew at rates that match or surpass global rates. According to the
United Nations Department of Economic and Social Affairs The United Nations Department of Economic and Social Affairs (UN DESA) is part of the United Nations Secretariat and is responsible for the follow-up to major United Nations Summits and Conferences, as well as services to the United Nations Econ ...
, the improvement in the region's aggregate growth is largely attributable to a recovery in
Egypt Egypt ( ar, مصر , ), officially the Arab Republic of Egypt, is a transcontinental country spanning the northeast corner of Africa and southwest corner of Asia via a land bridge formed by the Sinai Peninsula. It is bordered by the Mediter ...
,
Nigeria Nigeria ( ), , ig, Naìjíríyà, yo, Nàìjíríà, pcm, Naijá , ff, Naajeeriya, kcg, Naijeriya officially the Federal Republic of Nigeria, is a country in West Africa. It is situated between the Sahel to the north and the Gulf o ...
and
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
, three of Africa's largest economies. Sub-Saharan Africa was severely harmed when government revenue declined from 22% of GDP in 2011 to 17% in 2021. 15 African nations hold significant debt risk, and 7 are currently in financial crisis according to the IMF. The region went on to receive IMF Special Drawing Rights of $23 billion in 2021 to assist critical public spending. The economies of the fastest growing African nations experienced growth significantly above the global average rates. The top nations in 2007 include
Mauritania Mauritania (; ar, موريتانيا, ', french: Mauritanie; Berber: ''Agawej'' or ''Cengit''; Pulaar: ''Moritani''; Wolof: ''Gànnaar''; Soninke:), officially the Islamic Republic of Mauritania ( ar, الجمهورية الإسلامية ...
with growth at 19.8%,
Angola , national_anthem = " Angola Avante"() , image_map = , map_caption = , capital = Luanda , religion = , religion_year = 2020 , religion_ref = , coordina ...
at 17.6%,
Sudan Sudan ( or ; ar, السودان, as-Sūdān, officially the Republic of the Sudan ( ar, جمهورية السودان, link=no, Jumhūriyyat as-Sūdān), is a country in Northeast Africa. It shares borders with the Central African Republic t ...
at 9.6%,
Mozambique Mozambique (), officially the Republic of Mozambique ( pt, Moçambique or , ; ny, Mozambiki; sw, Msumbiji; ts, Muzambhiki), is a country located in southeastern Africa bordered by the Indian Ocean to the east, Tanzania to the north, Malawi ...
at 7.9% and
Malawi Malawi (; or aláwi Tumbuka: ''Malaŵi''), officially the Republic of Malawi, is a landlocked country in Southeastern Africa that was formerly known as Nyasaland. It is bordered by Zambia to the west, Tanzania to the north and northeast ...
at 7.8%. Other fast growers include
Rwanda Rwanda (; rw, u Rwanda ), officially the Republic of Rwanda, is a landlocked country in the Great Rift Valley of Central Africa, where the African Great Lakes region and Southeast Africa converge. Located a few degrees south of the Equator ...
,
Mozambique Mozambique (), officially the Republic of Mozambique ( pt, Moçambique or , ; ny, Mozambiki; sw, Msumbiji; ts, Muzambhiki), is a country located in southeastern Africa bordered by the Indian Ocean to the east, Tanzania to the north, Malawi ...
,
Chad Chad (; ar, تشاد , ; french: Tchad, ), officially the Republic of Chad, '; ) is a landlocked country at the crossroads of North and Central Africa. It is bordered by Libya to the north, Sudan to the east, the Central African Republic ...
,
Niger ) , official_languages = , languages_type = National languagesBurkina Faso Burkina Faso (, ; , ff, 𞤄𞤵𞤪𞤳𞤭𞤲𞤢 𞤊𞤢𞤧𞤮, italic=no) is a landlocked country in West Africa with an area of , bordered by Mali to the northwest, Niger to the northeast, Benin to the southeast, Togo and Ghana to the ...
,
Ethiopia Ethiopia, , om, Itiyoophiyaa, so, Itoobiya, ti, ኢትዮጵያ, Ítiyop'iya, aa, Itiyoppiya officially the Federal Democratic Republic of Ethiopia, is a landlocked country in the Horn of Africa. It shares borders with Eritrea to the ...
. Nonetheless, growth has been dismal, negative or sluggish in many parts of Africa including
Zimbabwe Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and Mozam ...
, the
Democratic Republic of the Congo The Democratic Republic of the Congo (french: République démocratique du Congo (RDC), colloquially "La RDC" ), informally Congo-Kinshasa, DR Congo, the DRC, the DROC, or the Congo, and formerly and also colloquially Zaire, is a country in ...
, the
Republic of the Congo The Republic of the Congo (french: République du Congo, ln, Republíki ya Kongó), also known as Congo-Brazzaville, the Congo Republic or simply either Congo or the Congo, is a country located in the western coast of Central Africa to the w ...
and
Burundi Burundi (, ), officially the Republic of Burundi ( rn, Repuburika y’Uburundi ; Swahili language, Swahili: ''Jamuhuri ya Burundi''; French language, French: ''République du Burundi'' ), is a landlocked country in the Great Rift Valley at the ...
. Many international agencies are increasingly interested in investing in emerging African economies, especially as Africa continues to maintain high economic growth despite current global economic recession. The rate of return on investment in Africa is currently the highest in the developing world. Debt relief is being addressed by some international institutions in the interests of supporting economic development in Africa. In 1996, the UN sponsored the
Heavily Indebted Poor Countries The heavily indebted poor countries (HIPC) are a group of 39 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund (IMF) and the World Bank. The HIPC ...
(HIPC) initiative, subsequently taken up by the IMF,
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
and the African Development Fund
AfDF
in the form of the
Multilateral Debt Relief Initiative Multilateral Debt Relief Initiative (MDRI) was approved on June, 2005, by the finance ministers of the G8 during the 31st G8 Summit, held at Gleneagles, Scotland. MDRI is different to HIPC, but operationally related. Countries in the termination p ...
(MDRI). As of 2013, the initiative has given partial debt relief to 30 African countries. In early 2021, the
European Investment Bank The European Investment Bank (EIB) is the European Union's investment bank and is owned by the EU Member States. It is one of the largest supranational lenders in the world. The EIB finances and invests both through equity and debt solutions ...
, with the help of the Making Finance Work for Africa Partnership (MFW4A), surveyed 78 banks in Sub-Saharan Africa for the EIB Banking in Africa study. The banks that took part control nearly 30% of the continent's assets. Almost two-thirds of Banks surveyed tightened lending rules, but more than 80% expanded their use of restructuring or loan moratoriums. Few banks were required to modify their employee levels, while slightly under one-third adjusted their prices. Approximately half of the answering banks had employee guarantees, the majority of which came from the central bank, the government, or an international financial institution. Fiscal stimulus packages in African countries through to mid-2020 amounted to roughly 1–2% of GDP, with monetary stimulus amounting to about 2% of GDP. This is close to the IMF's global average for low-income developing nations, which is around 2% of 2020 GDP over a one-year period from the start of the
COVID-19 pandemic The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identif ...
. At the same time, developing markets adopted a package worth around 4% of GDP, whereas advanced countries executed a package worth approximately 16% of GDP. As African nations struggled to address the health and economic repercussions of the pandemic, the average fiscal deficit throughout Africa increased from 5% of GDP in 2019 to over 8% in 2020. Due to a lack of fiscal headroom, the deficit resulted in increasing borrowing, which African countries have less capacity to absorb than other developed economies. Northern and Southern African countries have taken the most total measures to address the financial sector crisis resulting from the pandemic, with an average of 14 measures per country. 34 African nations have adopted steps to increase
liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liqui ...
and lower borrowing costs, mostly through lowering the policy rate.
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
, for example, has decreased policy rates by 200 basis points or more. The most used measure has been to modify the handling of nonperforming loans by lowering provisioning requirements. To help banks get through the
COVID-19 Coronavirus disease 2019 (COVID-19) is a contagious disease caused by a virus, the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The first known case was COVID-19 pandemic in Hubei, identified in Wuhan, China, in December ...
crisis, authorities have limited
dividend A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-in ...
s or other uses of earnings, permitted the temporary release of capital buffers, eased capital or liquidity requirements, or made other temporary adjustments to prudential standards. Despite the COVID-19 pandemic, African private investment was steady in 2020, rising to $4.3 billion from $3.9 billion in 2019 as pipeline and current transactions were closed. For resource-intensive nations, real per capita GDP is anticipated to stay below pre-pandemic levels until at least 2024, with growth of barely 1% per year in 2022 and 2023. Before the pandemic, 2% or more of growth had been anticipated.


Trade growth

Trade has driven much of the growth in Africa's economy in the early 21st century.
China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
and
India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the so ...
are increasingly important trade partners; 12.5% of Africa's exports are to China, and 4% are to India, which accounts for 5% of China's imports and 8% of India's. The Group of Five (
Indonesia Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania between the Indian and Pacific oceans. It consists of over 17,000 islands, including Sumatra, Java, Sulawesi, and parts of Borneo and New Guine ...
,
Malaysia Malaysia ( ; ) is a country in Southeast Asia. The federation, federal constitutional monarchy consists of States and federal territories of Malaysia, thirteen states and three federal territories, separated by the South China Sea into two r ...
,
Saudi Arabia Saudi Arabia, officially the Kingdom of Saudi Arabia (KSA), is a country in Western Asia. It covers the bulk of the Arabian Peninsula, and has a land area of about , making it the fifth-largest country in Asia, the second-largest in the A ...
,
Thailand Thailand ( ), historically known as Siam () and officially the Kingdom of Thailand, is a country in Southeast Asia, located at the centre of the Indochinese Peninsula, spanning , with a population of almost 70 million. The country is bo ...
, and the
United Arab Emirates The United Arab Emirates (UAE; ar, اَلْإِمَارَات الْعَرَبِيَة الْمُتَحِدَة ), or simply the Emirates ( ar, الِْإمَارَات ), is a country in Western Asia (The Middle East). It is located at th ...
) are another increasingly important market for Africa's exports.


Future

Africa's economy—with expanding trade, English language skills (official in many Sub-Saharan countries), improving literacy and education, availability of splendid resources and cheaper labour force—is expected to continue to perform better into the future. Trade between Africa and China stood at US$166 billion in 2011. Africa will only experience a "demographic dividend" by 2035, when its young and growing labour force will have fewer children and retired people as dependents as a proportion of the population, making it more demographically comparable to the US and
Europe Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a Continent#Subcontinents, subcontinent of Eurasia ...
. It is becoming a more educated labour force, with nearly half expected to have some secondary-level education by 2020. A consumer class is also emerging in Africa and is expected to keep booming. Africa has around 90 million people with household incomes exceeding $5,000, meaning that they can direct more than half of their income towards discretionary spending rather than necessities. This number could reach a projected 128 million by 2020. During the President of the United States
Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the U ...
's visit to Africa in July 2013, he announced a
US$ The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
7 billion plan to further develop infrastructure and work more intensively with African heads of state. A new program named
Trade Africa Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct exchan ...
, designed to boost trade within the continent as well as between Africa and the U.S., was also unveiled by Obama. With the introduction of the new economic growth and development plan introduced by the African Union members about 27 of its members who average some of the most developing economies of the continent will further boost economic social and political integration of the continent. The
African Continental Free Trade Area The African Continental Free Trade Area (AfCFTA) is a free trade area encompassing most of Africa. It was established in 2018 by the African Continental Free Trade Agreement, which has 43 parties and another 11 signatories, making it the larg ...
will boost business activities between member states and within the continent. This will further reduce too much reliance on importation of finished products and raw materials in to the continent. The gap between rich and poor countries is predicted to continue to grow over the coming decades.


Entrepreneurship

Entrepreneurship is a key to growth. Governments will need to ensure business friendly regulatory environments in order to help foster innovation. In 2019,
venture capital Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which ha ...
startup funding grew to 1.3 billion dollars, increasing rapidly. The causes are as of yet unclear, but education is certainly a factor.The Economist, "The African century", 28 March 2020.


Causes of the economic underdevelopment over the years

The seemingly intractable nature of Africa's poverty has led to debate concerning its root causes.
Endemic warfare __NOTOC__ Ritual warfare (sometimes called endemic warfare) is a state of continual or frequent warfare, such as is found in some tribal societies (but is not limited to tribal societies). Description Ritual fighting (or ritual battle or ritual ...
and unrest, widespread corruption, and despotic regimes are both causes and effects of the continued economic problems. The
decolonization of Africa The decolonisation of Africa was a process that took place in the Scramble for Africa, mid-to-late 1950s to 1975 during the Cold War, with radical government changes on the continent as Colonialism, colonial governments made the transition to So ...
was fraught with instability aggravated by cold war conflict. Since the mid-20th century, the
Cold War The Cold War is a term commonly used to refer to a period of geopolitical tension between the United States and the Soviet Union and their respective allies, the Western Bloc and the Eastern Bloc. The term '' cold war'' is used because the ...
and increased
corruption Corruption is a form of dishonesty or a criminal offense which is undertaken by a person or an organization which is entrusted in a position of authority, in order to acquire illicit benefits or abuse power for one's personal gain. Corruption m ...
, poor governance, disease and
despotism Despotism ( el, Δεσποτισμός, ''despotismós'') is a form of government in which a single entity rules with absolute power. Normally, that entity is an individual, the despot; but (as in an autocracy) societies which limit respect and ...
have also contributed to Africa's poor economy. According to The Economist, the most important factors are government corruption, political instability, socialist economics, and protectionist trade policy.


Infrastructure

According to the researchers at the
Overseas Development Institute ODI (formerly the 'Overseas Development Institute') is a global affairs think tank, founded in 1960. Its mission is "to inspire people to act on injustice and inequality through collaborative research and ideas that matter for people and the p ...
, the lack of infrastructure in many
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
represents one of the most significant limitations to
economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...
and achievement of the
Millennium Development Goals The Millennium Development Goals (MDGs) were eight international development goals for the year 2015 that had been established following the Millennium Summit of the United Nations in 2000, following the adoption of the United Nations Millenniu ...
(MDGs).Christian K.M. Kingombe 2011
Mapping the new infrastructure financing landscape
. London:
Overseas Development Institute ODI (formerly the 'Overseas Development Institute') is a global affairs think tank, founded in 1960. Its mission is "to inspire people to act on injustice and inequality through collaborative research and ideas that matter for people and the p ...
Infrastructure investments and maintenance can be very expensive, especially in such areas as landlocked, rural and sparsely populated countries in
Africa Africa is the world's second-largest and second-most populous continent, after Asia in both cases. At about 30.3 million km2 (11.7 million square miles) including adjacent islands, it covers 6% of Earth's total surface area ...
. It has been argued that infrastructure investments contributed to more than half of Africa's improved growth performance between 1990 and 2005 and increased investment is necessary to maintain growth and tackle poverty. The returns to investment in infrastructure are very significant, with on average 30–40% returns for
telecommunications Telecommunication is the transmission of information by various types of technologies over wire, radio, optical, or other electromagnetic systems. It has its origin in the desire of humans for communication over a distance greater than that fe ...
(ICT) investments, over 40% for
electricity Electricity is the set of physical phenomena associated with the presence and motion of matter that has a property of electric charge. Electricity is related to magnetism, both being part of the phenomenon of electromagnetism, as described ...
generation, and 80% for
roads A road is a linear way for the conveyance of traffic that mostly has an improved surface for use by vehicles (motorized and non-motorized) and pedestrians. Unlike streets, the main function of roads is transportation. There are many types of ...
. In Africa, it is argued that to meet the MDGs by 2015, infrastructure investments would need to reach about 15% of GDP (around $93 billion a year). Currently, the source of financing varies significantly across sectors. Some sectors are dominated by state spending, others by overseas
development aid Development aid is a type of aid, foreign/international/overseas aid given by governments and other agencies to support the economic, environmental, social, and political International development, development of developing countries. Closely-rel ...
(ODA) and yet others by private investors. In sub-Saharan Africa, the state spends around $9.4 billion out of a total of $24.9 billion. In irrigation, SSA states represent almost all spending; in transport and energy a majority of investment is state spending; in
Information and communication technologies Information and communications technology (ICT) is an extensional term for information technology (IT) that stresses the role of unified communications and the integration of telecommunications (telephone lines and wireless signals) and computers, ...
and water supply and sanitation, the private sector represents the majority of capital expenditure. Overall, aid, the private sector and non-
OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate e ...
financiers between them exceed state spending. The private sector spending alone equals state capital expenditure, though the majority is focused on ICT infrastructure investments. External financing increased from $7 billion (2002) to $27 billion (2009).
China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
, in particular, has emerged as an important investor.


Colonialism

The principal aim of colonial rule in Africa by European colonial powers was to exploit natural wealth in the African continent at a low cost. Some writers, such as
Walter Rodney Walter Anthony Rodney (23 March 1942 – 13 June 1980) was a Guyanese historian, political activist and academic. His notable works include ''How Europe Underdeveloped Africa'', first published in 1972. Rodney was assassinated in Georgetow ...
in his book ''
How Europe Underdeveloped Africa ''How Europe Underdeveloped Africa'' is a 1972 book written by Walter Rodney that describes how Africa was deliberately exploited and underdeveloped by European colonial regimes. One of his main arguments throughout the book is that Africa develop ...
'', argue that these colonial policies are directly responsible for many of Africa's modern problems. Critics of colonialism charge colonial rule with injuring African pride, self-worth and belief in themselves. Other post-colonial scholars, most notably
Frantz Fanon Frantz Omar Fanon (, ; ; 20 July 1925 – 6 December 1961), also known as Ibrahim Frantz Fanon, was a French West Indian psychiatrist, and political philosopher from the French colony of Martinique (today a French department). His works have be ...
continuing along this line, 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. Such arguments posit that a new generation of Africans free of colonial thought and mindset is emerging and that this is driving economic transformation. Historians L. H. Gann and Peter Duignan have argued that Africa probably benefited from colonialism on balance. Although it had its faults, colonialism was probably "one of the most efficacious engines for cultural diffusion in world history". These views, however, are controversial and are rejected by some who, on balance, see colonialism as bad. The economic historian
David Kenneth Fieldhouse David Kenneth Fieldhouse, FBA (7 June 1925 – 28 October 2018) was an English historian of the British Empire who between 1981 and 1992 held the Vere Harmsworth Professorship of Imperial and Naval History at the University of Cambridge. Arguabl ...
has taken a kind of middle position, arguing that the effects of colonialism were actually limited and their main weakness wasn't in deliberate
underdevelopment Underdevelopment, in the context of international development, reflects a broad condition or phenomena defined and critiqued by theorists in fields such as economics, development studies, and postcolonial studies. Used primarily to distinguish sta ...
but in what it failed to do.
Niall Ferguson Niall Campbell Ferguson FRSE (; born 18 April 1964)Biography
Niall Ferguson
agrees with his last point, arguing that colonialism's main weaknesses were ''sins of omission''. Analysis of the economies of African states finds that independent states such as Liberia and Ethiopia did not have better economic performance than their post-colonial counterparts. In particular the economic performance of former British colonies was better than both independent states and former French colonies. Africa's relative poverty predates colonialism.
Jared Diamond Jared Mason Diamond (born September 10, 1937) is an American geographer, historian, ornithologist, and author best known for his popular science books ''The Third Chimpanzee'' (1991); ''Guns, Germs, and Steel'' (1997, awarded a Pulitzer Prize); ...
argues in ''
Guns, Germs, and Steel ''Guns, Germs, and Steel: The Fates of Human Societies'' (subtitled ''A Short History of Everybody for the Last 13,000 Years'' in Britain) is a 1997 transdisciplinary non-fiction book by Jared Diamond. In 1998, it won the Pulitzer Prize for gen ...
'' that Africa has always been poor due to a number of ecological factors affecting historical development. These factors include low population density, lack of domesticated livestock and plants and the north–south orientation of Africa's geography. However Diamond's theories have been criticized by some including
James Morris Blaut James Morris Blaut (October 20, 1927 – November 11, 2000) was an American professor of anthropology and geography at the University of Illinois at Chicago. His studies focused on the agricultural microgeography (geographical activity of villag ...
as a form of
environmental determinism Environmental determinism (also known as climatic determinism or geographical determinism) is the study of how the physical environment predisposes societies and states towards particular development trajectories. Jared Diamond, Jeffrey Herbst, ...
. Historian
John K. Thornton John K. Thornton is an Americans, American historian specializing in the history of Africa, the African Diaspora and the Atlantic world. He is a professor in the history department at Boston University. Biography Early life and education Thor ...
argues that sub-Saharan Africa was relatively wealthy and technologically advanced until at least the seventeenth century. Some scholars who believe that Africa was generally poorer than the rest of the world throughout its history make exceptions for certain parts of Africa. Acemoglue and Robinson, for example, argue that most of Africa has always been relatively poor, but "
Aksum Axum, or Aksum (pronounced: ), is a town in the Tigray Region of Ethiopia with a population of 66,900 residents (as of 2015). It is the site of the historic capital of the Aksumite Empire, a naval and trading power that ruled the whole region ...
,
Ghana Ghana (; tw, Gaana, ee, Gana), officially the Republic of Ghana, is a country in West Africa. It abuts the Gulf of Guinea and the Atlantic Ocean to the south, sharing borders with Ivory Coast in the west, Burkina Faso in the north, and To ...
, Songhay,
Mali Mali (; ), officially the Republic of Mali,, , ff, 𞤈𞤫𞤲𞥆𞤣𞤢𞥄𞤲𞤣𞤭 𞤃𞤢𞥄𞤤𞤭, Renndaandi Maali, italics=no, ar, جمهورية مالي, Jumhūriyyāt Mālī is a landlocked country in West Africa. Mali ...
, ndGreat
Zimbabwe Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and Mozam ...
 ... were probably as developed as their contemporaries anywhere in the world." A number of people including Rodney and
Joseph E. Inikori Joseph is a common male given name, derived from the Hebrew Yosef (יוֹסֵף). "Joseph" is used, along with "Josef", mostly in English, French and partially German languages. This spelling is also found as a variant in the languages of the mo ...
have argued that the poverty of Africa at the onset of the colonial period was principally due to the demographic loss associated with the
slave trade Slavery and enslavement are both the state and the condition of being a slave—someone forbidden to quit one's service for an enslaver, and who is treated by the enslaver as property. Slavery typically involves slaves being made to perf ...
as well as other related societal shifts. Others such as
J. D. Fage John Donnelly Fage (3 June 1921–6 August 2002) was a British historian who was among the earliest academic historians specialising in African history, especially of the pre-colonial period, in the United Kingdom and West Africa. He publ ...
and David Eltis have rejected this view.


Language diversity

African countries suffer from communication difficulties caused by language diversity. Greenberg's diversity index is the chance that two randomly selected people would have different
mother tongue A first language, native tongue, native language, mother tongue or L1 is the first language or dialect that a person has been exposed to from birth or within the critical period. In some countries, the term ''native language'' or ''mother tongu ...
s. Out of the most diverse 25 countries according to this index, 18 (72%) are African. This includes 12 countries for which Greenberg's diversity index exceeds 0.9, meaning that a pair of randomly selected people will have less than 10% chance of having the same mother tongue. However, the primary language of government, political debate, academic discourse, and administration is often the language of the former colonial powers;
English English usually refers to: * English language * English people English may also refer to: Peoples, culture, and language * ''English'', an adjective for something of, from, or related to England ** English national ide ...
, French, or
Portuguese Portuguese may refer to: * anything of, from, or related to the country and nation of Portugal ** Portuguese cuisine, traditional foods ** Portuguese language, a Romance language *** Portuguese dialects, variants of the Portuguese language ** Portu ...
.


Trade-based theories

Dependency theory Dependency theory is the notion that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states, enriching the latter at the expense of the former. A central contention of dependency theory is that poor s ...
asserts that the wealth and prosperity of the superpowers and their allies in
Europe Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a Continent#Subcontinents, subcontinent of Eurasia ...
,
North America North America is a continent in the Northern Hemisphere and almost entirely within the Western Hemisphere. It is bordered to the north by the Arctic Ocean, to the east by the Atlantic Ocean, to the southeast by South America and the Car ...
and
East Asia East Asia is the eastern region of Asia, which is defined in both geographical and ethno-cultural terms. The modern states of East Asia include China, Japan, Mongolia, North Korea, South Korea, and Taiwan. China, North Korea, South Korea and ...
is dependent upon the poverty of the rest of the world, including Africa. Economists who subscribe to this theory believe that poorer regions must break their trading ties with the developed world in order to prosper. Less radical theories suggest that economic
protectionism Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. ...
in developed countries hampers Africa's growth. When developing countries have harvested agricultural produce at low cost, they generally do not export as much as would be expected. Abundant
farm subsidies An agricultural subsidy (also called an agricultural incentive) is a government incentive paid to agribusinesses, agricultural organizations and farms to supplement their income, manage the supply of agricultural commodities, and influence t ...
and high
import tariffs A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...
in the developed world, most notably those set by
Japan Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north ...
, the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
's
Common Agricultural Policy The Common Agricultural Policy (CAP) is the agricultural policy of the European Union. It implements a system of agricultural subsidies and other programmes. It was introduced in 1962 and has since then undergone several changes to reduce the ...
, and the
United States Department of Agriculture The United States Department of Agriculture (USDA) is the United States federal executive departments, federal executive department responsible for developing and executing federal laws related to farming, forestry, rural economic development, ...
, are thought to be the cause. Although these subsidies and tariffs have been gradually reduced, they remain high. Local conditions also affect exports; state over-regulation in several African nations can prevent their own exports from becoming competitive. Research in Public Choice economics such as that of Jane Shaw suggest that protectionism operates in tandem with heavy State intervention combining to depress economic development. Farmers subject to import and export restrictions cater to localized markets, exposing them to higher market volatility and fewer opportunities. When subject to uncertain market conditions, farmers press for governmental intervention to suppress competition in their markets, resulting in competition being driven out of the market. As competition is driven out of the market, farmers innovate less and grow less food further undermining economic performance.


Governance

Although Africa and Asia had similar levels of income in the 1960s, Asia has since outpaced Africa, with the exception of a few extremely poor and war-torn countries like
Afghanistan Afghanistan, officially the Islamic Emirate of Afghanistan,; prs, امارت اسلامی افغانستان is a landlocked country located at the crossroads of Central Asia and South Asia. Referred to as the Heart of Asia, it is bordere ...
and
Yemen Yemen (; ar, ٱلْيَمَن, al-Yaman), officially the Republic of Yemen,, ) is a country in Western Asia. It is situated on the southern end of the Arabian Peninsula, and borders Saudi Arabia to the Saudi Arabia–Yemen border, north and ...
. One school of economists argues that Asia's superior
economic development In the economics study of the public sector, economic and social development is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and o ...
lies in local investment. Corruption in Africa consists primarily of extracting
economic rent In economics, economic rent is any payment (in the context of a market transaction) to the owner of a factor of production in excess of the cost needed to bring that factor into production. In classical economics, economic rent is any payment m ...
and moving the resulting
financial capital Financial capital (also simply known as capital or equity in finance, accounting and economics) is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide ...
overseas instead of investing at home; the stereotype of African dictators with Swiss bank accounts is often accurate.
University of Massachusetts Amherst The University of Massachusetts Amherst (UMass Amherst, UMass) is a public research university in Amherst, Massachusetts and the sole public land-grant university in Commonwealth of Massachusetts. Founded in 1863 as an agricultural college, it ...
researchers estimate that from 1970 to 1996,
capital flight Capital flight, in economics, occurs when assets or money rapidly flow out of a country, due to an event of economic consequence or as the result of a political event such as regime change or economic globalization. Such events could be an increas ...
from 30
sub-Saharan Sub-Saharan Africa is, geographically, the area and regions of the continent of Africa that lies south of the Sahara. These include West Africa, East Africa, Central Africa, and Southern Africa. Geopolitically, in addition to the African co ...
countries totalled $187bn, exceeding those nations' external debts. Authors Leonce Ndikumana and James K. Boyce estimate that from 1970 to 2008, capital flight from 33 sub-Saharan countries totalled $700bn. This disparity in development is consistent with the model theorized by economist
Mancur Olson Mançur Lloyd Olson Jr. (; January 22, 1932 – February 19, 1998) was an American economist and political scientist who taught at the University of Maryland, College Park. His most influential contributions were in institutional economics, and i ...
. Because governments were politically unstable and new governments often confiscated their predecessors' assets, officials would stash their wealth abroad, out of reach of any future
expropriation Nationalization (nationalisation in British English) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization usually refers to pri ...
. Congolese dictator
Mobutu Sese Seko Mobutu Sese Seko Kuku Ngbendu Wa Za Banga (; born Joseph-Désiré Mobutu; 14 October 1930 – 7 September 1997) was a Congolese politician and military officer who was the president of Zaire from 1965 to 1997 (known as the Democratic Republic o ...
became notorious for
corruption Corruption is a form of dishonesty or a criminal offense which is undertaken by a person or an organization which is entrusted in a position of authority, in order to acquire illicit benefits or abuse power for one's personal gain. Corruption m ...
,
nepotism Nepotism is an advantage, privilege, or position that is granted to relatives and friends in an occupation or field. These fields may include but are not limited to, business, politics, academia, entertainment, sports, fitness, religion, an ...
, and the
embezzlement Embezzlement is a crime that consists of withholding assets for the purpose of conversion of such assets, by one or more persons to whom the assets were entrusted, either to be held or to be used for specific purposes. Embezzlement is a type ...
of between US$4 billion and $15 billion during his reign.
Socialist Socialism is a left-wing economic philosophy and movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to private ownership. As a term, it describes the e ...
governments influenced by
Marxism Marxism is a Left-wing politics, left-wing to Far-left politics, far-left method of socioeconomic analysis that uses a Materialism, materialist interpretation of historical development, better known as historical materialism, to understand S ...
, and the
land reform Land reform is a form of agrarian reform involving the changing of laws, regulations, or customs regarding land ownership. Land reform may consist of a government-initiated or government-backed property redistribution, generally of agricultural ...
they have enacted, have also contributed to economic stagnation in Africa. For example, the regime of
Robert Mugabe Robert Gabriel Mugabe (; ; 21 February 1924 – 6 September 2019) was a Zimbabwean revolutionary and politician who served as Prime Minister of Zimbabwe from 1980 to 1987 and then as President from 1987 to 2017. He served as Leader of the ...
in
Zimbabwe Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and Mozam ...
, particularly the land seizures from white farmers, led to the collapse of the country's agricultural economy, which had formerly been one of Africa's strongest; Mugabe had been previously supported by the
USSR The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
and
China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
during the
Zimbabwe War of Liberation The Rhodesian Bush War, also called the Second as well as the Zimbabwe War of Liberation, was a civil conflict from July 1964 to December 1979 in the List of states with limited recognition, unrecognised country of Rhodesia (later Zimbabwe-Rh ...
.
Tanzania Tanzania (; ), officially the United Republic of Tanzania ( sw, Jamhuri ya Muungano wa Tanzania), is a country in East Africa within the African Great Lakes region. It borders Uganda to the north; Kenya to the northeast; Comoro Islands and ...
was left as one of the world's poorest and most aid-dependent nations, and has taken decades to recover. Since the abolition of the socialist
one-party state A one-party state, single-party state, one-party system, or single-party system is a type of sovereign state in which only one political party has the right to form the government, usually based on the existing constitution. All other parties ...
in 1992 and the transition to democracy, Tanzania has experienced rapid economic growth, with growth of 6.5% in 2017.


Foreign aid

Food shipments in case of dire local shortage are generally uncontroversial; but as
Amartya Sen Amartya Kumar Sen (; born 3 November 1933) is an Indian economist and philosopher, who since 1972 has taught and worked in the United Kingdom and the United States. Sen has made contributions to welfare economics, social choice theory, econom ...
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 An agricultural subsidy (also called an agricultural incentive) is a government incentive paid to agribusinesses, agricultural organizations and farms to supplement their income, manage the supply of agricultural commodities, and influence the ...
. Historically, food aid is more highly correlated with excess supply in
Western countries The Western world, also known as the West, primarily refers to the various nations and states in the regions of Europe, North America, and Oceania.
than with the needs of
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
. Foreign aid has been an integral part of African economic development since the 1980s. The aid model has been criticized for supplanting trade initiatives. Growing evidence shows that foreign aid has made the continent poorer. One of the biggest critics of the aid development model is economist
Dambisa Moyo Dambisa Felicia Moyo, Baroness Moyo (born 2 February 1969)Moyo showed a copy of an official document with her date and place of birth as part of a lecture she gave at TEDGlobal 2013, Edinburgh, Scotland. is a Zambian-born economist and author, ...
(a Zambian economist based in the US), who introduced the Dead Aid model, which highlights how Humanitarianism in Africa, foreign aid has been a deterrent for local development. Today, Africa faces the problem of attracting foreign aid in areas where there is potential for high income from demand. It is in need of more economic policies and active participation in the world economy. As globalization has heightened the competition for foreign aid among developing countries, Africa has been trying to improve its struggle to receive foreign aid by taking more responsibility at the regional and international level. In addition, Africa has created the ‘Africa Action Plan’ in order to obtain new relationships with development partners to share responsibilities regarding discovering ways to receive aid from foreign investors.


Trade blocs and multilateral organizations

The African Union is the largest international economic grouping on the continent. The confederation's goals include the creation of a free trade area, a customs union, a single market, a central bank, and a common currency (see African Monetary Union), thereby establishing economic and monetary union. The current plan is to establish an African Economic Community with a single currency by 2023. The African Investment Bank is meant to stimulate development. The AU plans also include a transitional African Monetary Fund leading to an African Central Bank. Some parties support development of an even more unified United States of Africa. International monetary and banking unions include: * Central Bank of West African States * Bank of Central African States * Common Monetary Area Major economic unions are shown in the chart below.


Regional economic organizations

During the 1960s, Ghanaian politician Kwame Nkrumah promoted economic and political union of African countries, with the goal of independence. Since then, objectives, and organizations, have multiplied. Recent decades have brought efforts at various degrees of regional economic integration. Trade between African states accounts for only 11% of Africa's total commerce as of 2012, around five times less than in Asia. Most of this intra-Africa trade originates from South Africa and most of the trade exports coming out of South Africa goes to abutting countries in Southern Africa. There are currently eight regional organizations that assist with economic development in Africa:


Economic variants and indicators

After an initial rebound from the 2009 world economic crisis, Africa's economy was undermined in the year 2011 by the Arab uprisings. The continent's growth fell back from 5% in 2010 to 3.4% in 2011. With the recovery of North African economies and sustained improvement in other regions, growth across the continent is expected to accelerate to 4.5% in 2012 and 4.8% in 2013. Short-term problems for the world economy remain as Europe confronts its debt crisis. Commodity prices—crucial for Africa—have declined from their peak due to weaker demand and increased supply, and some could fall further. But prices are expected to remain at levels favourable for African exporter.


Regions

Economic activity has rebounded across Africa. However, the pace of recovery was uneven among groups of countries and subregions. Oil-exporting countries generally expanded more strongly than oil-importing countries. West Africa and East Africa were the two best-performing subregions in 2010. Intra-African trade has been slowed by protectionist policies among countries and regions, and remains low at 17 percent, compared to Europe, where intra-regional trade is at 69 percent. Despite this, trade between countries belonging to the Common Market for Eastern and Southern Africa (COMESA), a particularly strong economic region, grew six-fold over the past decade up to 2012. Ghana and Kenya, for example, have developed markets within the region for construction materials, machinery, and finished products, quite different from the mining and agriculture products that make up the bulk of their international exports. The African Ministers of Trade agreed in 2010 to create a Pan-Africa Free Trade Zone. This would reduce countries' tariffs on imports and increase intra-African trade, and it is hoped, the diversification of the economy overall.


African nations


Economic sectors and industries

Because Africa's export portfolio remains predominantly based on raw material, its export earnings are contingent on commodity price fluctuations. This exacerbates the continent's susceptibility to external shocks and bolsters the need for export diversification. Trade in services, mainly travel and tourism, continued to rise in year 2012, underscoring the continent's strong potential in this sphere.John J. Saul and Colin Leys
Sub-Saharan Africa in Global Capitalism
''Monthly Review'', 1999, Volume 51, Issue 03 (July–August)
Fred Magdoff
Twenty-First-Century Land Grabs: Accumulation by Agricultural Dispossession
''Monthly Review'', 2013, Volume 65, Issue 06 (November)


Agriculture

The situation whereby African nations export crops to the West while millions on the continent starve has been blamed on the economic policies of the developed countries. These advanced nations protect their own agricultural sectors with high import tariffs and offer government subsidies to their farmers. which many contend leads the overproduction of such commodities as grain, cotton and milk. The impact of agricultural subsidies in developed countries upon developing-country farmers and international development is well documented. Agricultural subsidies can help drive prices down to benefit consumers, but also mean that unsubsidised developing-country farmers have a more difficult time competing in the world market; and the effects on poverty are particularly negative when subsidies are provided for crops that are also grown in developing countries since developing-country farmers must then compete directly with subsidised developed-country farmers, for example in cotton and sugar.Agricultural Subsidies in the WTO Green Box
, ICTSD, September 2009.
The International Food Policy Research Institute, IFPRI has estimated in 2003 that the impact of subsidies costs developing countries $24 billion in lost incomes going to agricultural and agro-industrial production; and more than $40Bn is displaced from net agricultural exports. The result of this is that the global price of such products is continually reduced until Africans are unable to compete, except for cash crops that do not grow easily in a northern climate. In recent years countries such as Brazil, which has experienced progress in agricultural production, have agreed to share technology with Africa to increase agricultural production in the continent to make it a more viable trade partner. Increased investment in African agricultural technology in general has the potential to reduce poverty in Africa. The demand market for African cocoa has experienced a price boom in 2008. The Nigerian, South African and Ugandan governments have targeted policies to take advantage of the increased demand for certain agricultural products and plan to stimulate agricultural sectors. The African Union has plans to heavily invest in African agriculture and the situation is closely monitored by the UN. Ticks are a constant pressure on the continent's livestock. Although acaricides have been commonly used by farmers here, they are acaricide resistance, becoming less effective. Tick vaccines are under development and may fill this void.


Energy

Africa has significant resources for generating energy in several forms (Hydroelectricity, hydroelectric, reserves of petroleum and gas, coal production, uranium production, renewable energy such as solar, wind and geothermal). The lack of development and infrastructure means that little of this potential is actually in use today. The largest consumers of electric power in Africa are South Africa, Libya, Namibia, Egypt, Tunisia, and Zimbabwe, which each consume between 1000 and 5000 KWh/m2 per person, in contrast with African states such as Ethiopia, Eritrea, and Tanzania, where electricity consumption per person is negligible. Petroleum and petroleum products are the main export of 14 African countries. Petroleum and petroleum products accounted for a 46.6% share of Africa's total exports in 2010; the second largest export of Africa as a whole is natural gas, in its gaseous state and as Liquefied natural gas, liquified natural gas, accounting for a 6.3% share of Africa's exports. Only South Africa is using nuclear power commercially.


Infrastructure

Lack of infrastructure creates barriers for African businesses. Although it has many ports, a lack of supporting transportation infrastructure adds 30–40% to costs, in contrast to Asian ports. Railway projects were important in mining districts from the late 19th century. Large railway and road projects characterize the late 19th century. Railroads were emphasized in the colonial era, and roads in 'post-colonial' times. Jedwab & Storeygard find that in 1960–2015 there were strong correlations between transportation investments and economic development. Influential political include pre-colonial centralization, ethnic fractionalization, European settlement, natural resource dependence, and democracy. Many large infrastructure projects are underway across Africa. By far, most of these projects are in the production and transportation of electric power. Many other projects include paved highways, railways, airports, and other construction. Telecommunications infrastructure is also a growth area in Africa. Although Internet penetration lags other continents, it has still reached 9%. As of 2011, it was estimated that 500,000,000 mobile phones of all types were in use in Africa, including 15,000,000 "smart phones".


Mining and drilling

The mineral industry of Africa is one of the largest mineral industries in the world. Africa is the second biggest continent, with 30 million km2 of land, which implies large quantities of resources. For many African countries, mineral exploration and production constitute significant parts of their economies and remain keys to future economic growth. Africa is richly endowed with mineral reserves and ranks first or second in quantity of world reserves of bauxite, cobalt, industrial diamond, phosphate rock, platinum-group metals (PGM), vermiculite, and zirconium. African mineral reserves rank first or second for bauxite, cobalt, diamonds, phosphate rocks, platinum-group metals (PGM), vermiculite, and zirconium. Many other minerals are also present in quantity. The 2005 share of world production from African soil is the following: bauxite 9%; aluminium 5%; chromite 44%; cobalt 57%; copper 5%; gold 21%; iron ore 4%; steel 2%; lead (Pb) 3%; manganese 39%; zinc 2%; cement 4%; natural diamond 46%; graphite 2%; phosphate rock 31%; coal 5%; mineral fuels (including coal) & petroleum 13%; uranium 16%.


Manufacturing

Both the African Union and the
United Nations The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and international security, security, develop friendly relations among nations, achieve international cooperation, and be ...
have outlined plans in modern years on how Africa can help itself industrialize and develop significant manufacturing sectors to levels proportional to the African economy in the 1960s with 21st-century technology. This focus on growth and diversification of manufacturing and industrial production, as well as Agricultural diversification, diversification of agricultural production, has fueled hopes that the 21st century will prove to be a century of economic and technological growth for Africa. This hope, coupled with the rise of new leaders in Africa in the future, inspired the term "the African Century", referring to the 21st century potentially being the century when Africa's vast untapped labor, capital, and resource potentials might become a world player. This hope in manufacturing and industry is helped by the boom in communications technology and local mining industry in much of sub-Saharan Africa. Namibia has attracted industrial investments in recent years and South Africa has begun offering tax incentives to attract foreign direct investment projects in manufacturing. Countries such as Mauritius have plans for developing new "green technology" for manufacturing. Developments such as this have huge potential to open new markets for African countries as the demand for alternative "green" and clean technology is predicted to soar in the future as global oil reserves dry up and fossil fuel-based technology becomes less economically viable. Nigeria in recent years has been embracing industrialization, It currently has an indigenous vehicle manufacturing company, ''Innoson Vehicle Manufacturing (IVM)'' which manufactures Bus rapid transit, Rapid Transit Buses, Trucks and SUVs with an upcoming introduction of Cars. Their various brands of vehicle are currently available in Nigeria, Ghana and other West African Nations. Nigeria also has few Electronic manufacturers like Zinox, the first Branded Nigerian Computer and Electronic gadgets (like tablet PCs) manufacturers. In 2013, Nigeria introduced a policy regarding import duty on vehicles to encourage local manufacturing companies in the country. In this regard, some foreign vehicle manufacturing companies like Nissan have made known their plans to have manufacturing plants in Nigeria. Apart from Electronics and vehicles, most consumer, pharmaceutical and cosmetic products, building materials, textiles, home tools, plastics and so on are also manufactured in the country and exported to other west African and African countries. Nigeria is currently the largest manufacturer of cement in Sub-saharan Africa. and Dangote Cement, Dangote Cement Factory, Obajana is the largest cement factory in sub-saharan Africa. Ogun State, Ogun is considered to be Nigeria's industrial hub (as most factories are located in Ogun and even more companies are moving there), followed by Lagos. The manufacturing sector is small but growing in East Africa. The main industries are textile and clothing, leather processing, agribusiness, chemical products, electronics and vehicles. East African countries like Uganda also produce motorcycles for the domestic market.


Investment and banking

Africa's US$107 billion financial services industry will log impressive growth for the rest of the decade as more banks target the continent's emerging middle class. The banking sector has been experiencing record growth, among others due to various technological innovations. China and India have showed increasing interest in emerging African economies in the 21st century. Reciprocal investment between Africa and China increased dramatically in recent years amidst the current world financial crisis. The increased investment in Africa by China has attracted the attention of the European Union and has provoked talks of competitive investment by the EU. Members of the African diaspora abroad, especially in the EU and the United States, have increased efforts to use their businesses to invest in Africa and encourage African investment abroad in the European economy. Remittances from the African diaspora and rising interest in investment from the West will be especially helpful for Africa's least developed and most devastated economies, such as Burundi, Togo and Comoros. However, experts lament the high fees involved in sending remittances to Africa due to a duopoly of Western Union and MoneyGram that is controlling Africa's remittance market, making Africa is the most expensive cash transfer market in the world. According to some experts, the high processing fees involved in sending money to Africa are hampering African countries' development. Angola has announced interests in investing in the EU, Portugal in particular. South Africa has attracted increasing attention from the United States as a new frontier of investment in manufacture, financial markets and small business, as has Liberia in recent years under their new leadership. There are two African currency unions: the West African Banque Centrale des États de l'Afrique de l'Ouest (BCEAO) and the Central African Banque des États de l'Afrique Centrale (BEAC). Both use the CFA franc as their legal tender. The idea of a single currency union across Africa has been floated, and plans exist to have it established by 2020, though many issues, such as bringing continental inflation rates below 5 percent, remain hurdles in its finalization.


Stock exchanges

As of 2012, Africa has 23 stock exchanges, twice as many as it had 20 years earlier. Nonetheless, African stock exchanges still account for less than 1% of the world's stock exchange activity. The top ten stock exchanges in Africa by stock capital are (amounts are given in billions of United States dollars): * South Africa (82.88)(2014) * Egypt ($73.04 billion (30 November 2014 est.)) * Morocco (5.18) * Nigeria (5.11) (Actually has a market capitalisation value of $39.27 Bln) * Kenya (1.33) * Tunisia (0.88) * BRVM (regional stock exchange whose members include Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo: 6.6) * Mauritius (0.55) * Botswana (0.43) * Ghana (.38) Between 2009 and 2012, a total of 72 companies were launched on the stock exchanges of 13 African countries.


See also

* United Nations Economic Commission for Africa * Africa–China economic relations * African Economic Community * African Economic Outlook * Demographics of Africa * Economic history of Africa * Land grabbing * Languages of Africa * List of countries by percentage of population living in poverty * List of countries by Human Development Index * Central banks and currencies of Africa * List of countries by credit rating * List of countries by future gross government debt * List of countries by public debt * List of countries by leading trade partners * List of countries by industrial production growth rate * List of countries by GDP (nominal) * List of countries by GDP (nominal) per capita * List of countries by GDP (PPP) * List of countries by GDP (PPP) per capita * List of countries by GNI (nominal) per capita * List of countries by tax revenue as percentage of GDP * List of countries by GDP growth


Citations


General and cited references

* Fage, J. D. ''A History of Africa'' (Routledge, 4th edition, 2001 ) (Hutchinson, 1978, ) (Knopf 1st American edition, 1978, ) * Goldsmith, Arthur A
"Foreign Aid and Statehood in Africa"
The MIT Press 55.1 (2001): 123–48. JSTOR. Web. 25 March 2012. * Kayizzi-Mugerwa, Steve
The African Economy: Policy, Institutions and the Future
' (Routledge, 1999, ) * Laouisset, Djamel (2009). A Retrospective Study of the Algerian Iron and Steel Industry. New York City: Nova Publishers. * Moshomba, Richard E.
Africa in the Global Economy
' (Lynne Rienner, 2000, ) * OECD.
African Economic Outlook 2006/2007
' (OECD, 2007, ) * Rodney, Walter. ''How Europe Underdeveloped Africa''. (Washington: Howard UP, 1982, ) * Sahn, David E., Paul A. Dorosh, Stephen D. Younger, ''Structural Adjustment Reconsidered: Economic Policy and Poverty in Africa'' (Cambridge University Press, 1997, )


External links

*


Holding the door open for multinationals to extract Africa's wealth
''Foreign Policy in Focus''

by Jan Joost Teunissen and Age Akkerman
Africa: Living on the Fringe
''Monthly Review''. Samir Amin offers a Marxist analysis of Africa's continued economic crisis
BBC: Africa's Economy

OECD work on African economy

Africa Economic Analysis

World Economic Forum – Africa

African Development Bank Group


* [https://web.archive.org/web/20030803140603/http://damnsw.net/~matt/pdf/africa.pdf Language and Africa]
Africa's economy: A glimmer of light at last?
– ''The Economist''
Africa and the Knowledge Economy
– World Bank Institute report.
Economic analysis of Middle Africa

From Aid to Trade with Africa
News and analysis by Inter Press Service
African Development Hindered by Vast US Corporate Interests in Continent’s Resources
– video report by ''Democracy Now!''
Africa: Going Forward or Backward?
from th
Dean Peter Krogh Foreign Affairs Digital Archives
{{DEFAULTSORT:Economy Of Africa Economy of Africa, Economies by continent, Africa