Economy of Africa

Economy of Africa
During 2003 unless otherwise stated

Population:	832 million (13%)
GDP (PPP):	US$1.635 trillion
GDP (Currency):	$558 billion
GDP/capita (PPP):	$1,968
GDP/capita (Currency):	$671
Annual growth in per capita GDP:	0.74% (1990-2002)
Income of top 10%:	44.7%
Millionaires:	0.1 million (0.01%)
Population living on under $1 per day:	36.2%
External debt as a percent of GDP	60.7 (1998)
External debt payments as a percent of GDP	4.2%
Foreign aid revenue as a percent of GDP	3.2% (2001)
Estimated female income	51.8% of male
Numbers from the UNDP and AFDB. Most numbers exclude some countries for lack of information. Since these tend to be the poorest nations, these numbers tend to have an upwards bias. Numbers are mostly from 2002.
See also: Economy of the world - Economy of Africa - Economy of Asia - Economy of Europe - Economy of North America - Economy of Oceania - Economy of South America
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The economy of Africa comprises more than 800 million people 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.

The United Nations' Human Development Report 2003 (of 175 countries) found that positions 151 (Gambia) to 175 (Sierra Leone) were taken up entirely by African nations.

It has had (and in some ways is still having) a shaky and uncertain transition from colonialism, with the ensuing Cold War and increases in corruption and despotism being major contributing factors to its poor economic situation. While rapid growth in China and now India, and moderate growth in South America, has lifted millions beyond subsistence living, Africa has stagnated, even going backwards in terms of foreign trade, investment, and per capita income. This poverty has widespread effects, including low life expectancy, violence, and instability - factors intertwined with the continent's poverty. Over the decades a number of solutions have been proposed and many attempted, but no improvement scheme has shown much success.

Contents

1 Regional variation 2 History 3 Economic sectors 3.1 Agriculture 3.2 Mining and drilling 3.3 Manufacturing 3.4 Investment and banking 4 Determinants 4.1 Geography 4.2 Disease 4.3 Colonialism 4.4 Borders 4.5 Language issues 4.6 Governance 4.7 Civil and international wars 4.8 Foreign trade 5 Effects of widespread poverty 6 Attempts at promoting growth 6.1 Socialism 6.2 Liberalism 6.3 Autarky 6.4 Foreign aid 6.5 Debt relief 7 Central banks and currencies 8 By country 9 See also 10 References 11 External links

Regional variation

While not a single African nation could be considered 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. In the south, South Africa is by far the continent's wealthiest state, both in GDP per capita and in total GDP, and its neighbours to the north have shared in this wealth. The relatively small and oil-rich states of Gabon and Equatorial Guinea round out the list of the ten wealthiest states in Africa.

West Africa, with a long history of trade and a high level of development in the pre-colonial era, has tended to be wealthier and more stable than the continental average. The island nations such as the Seychelles, Cape Verde, and Mauritius, have also remained somewhat wealthier than the continental nations, but the unstable Comoros remain poor.

The poorest states are those that are engaged in or have just emerged 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 has historically been one of the wealthiest regions of sub-Saharan Africa; Ethiopia especially had a long and successful history. The current poverty of the region, and the associated famines and wars, have been a problem for several decades.

There is also 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.

History

Main article: Economic history of Africa

Historically North Africa, especially Egypt, has been one of the heartlands of human civilization. Before the advent of the Roman Empire, Ancient Egypt had been one of the most prosperous and advanced civilizations on Earth. The port of Alexandria (founded by Alexander the Great in 334 BC) was one of the hubs for Mediterranean trade for many centuries. Well into the 19th century, Egypt remained one of the most developed parts of the world outside Europe.

South of the Sahara conditions were very different. Internal trade within the continent, being cut off by thick forests and massive deserts, was always difficult. The bulk of sub-Saharan Africa has never been as prosperous as the rest of the world. The main exceptions were Nubia and Ethiopia which had trade routes north to the Mediterrenean world.

However, new technologies and the development of civilization made trading easier all over the world. For most of the first millennium AD, the Axumite Kingdom had a prosperous trade empire on the East Coast (where today we can find the states of Ethiopia and Eritrea). Axum had a powerful navy and trading links going as far as the Byzantine Empire and India. The introduction of the camel by the Arab conquerors of North Africa in the 10th century opened trade across the Sahara for the first time. The profits from trade in gold and salt led to the creation of a series of powerful empires in the western Sahel that, according to travelers' reports, were home to vast wealth, including the Kingdom of Ghana and the Mali and Kanem-Bornu Empires. Arabs also played an important role in building a prosperous maritime trade along the east coast of the continent. This region became quite prosperous as Swahili traders exported ivory and slaves across a trading region that spanned the entire Indian Ocean region.

Further south empires were less common, but there were exceptions, most notably Great Zimbabwe. One region that did see considerable state formation due to its high population and agricultural surplus was the Great Lakes region where states such as Rwanda, Burundi, and Buganda became strongly centralized.

In the 15th century, Portuguese traders circumvented the Saharan trade route and began to trade directly with Guinea. The Portuguese traders were joined by other European traders as the decades passed, and this led to a rapid rise in prosperity in that region, which soon became home to a number of flourishing states, such as the Kingdom of Benin, Dahomey, and the Ashanti Confederacy. Also common in this region were loose federations of city states such as those of the Yoruba and Hausa. However, this wealth was principally based on the slave trade; and this source of economic wealth collapsed with the abolition of slavery and the later colonization of almost the entire continent by European powers.

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 hard hit by the world economic decline of the 1970s and rising oil prices; 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.

Economic sectors

Agriculture

Africa's economy is more reliant on agriculture than that of any other continent, with around 60% of Africans working in the agricultural sector. 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 at the same time millions on the continent starve has often been criticized. Many blame the current practices of the European Union and the United States. Both massively subsidise their own farmers, leading to overproduction of such commodities as grain and milk; this lowers the global price of such products and makes Africans unable to compete with the West except in cash crops that do not grow easily in a northern climate. Thus, in Africa all excess capacity is turned over to growing crops for export; as a result, when a crisis sparked by civil unrest or a bad harvest occurs, there is no extra food being grown 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 the long distance over 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 its minerals and petroleum; these operations 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.

Manufacturing

Africa is the least industrialized continent; only South Africa has a substantial manufacturing sector. Despite large local supplies of cheap labour, almost all the 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 loaning 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.

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. While there are no tropical countries in the OECD, a handful do have a GDP per capita above the world average. A tropical latitude is not a guarantee of poverty, but around the world 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 which fosters 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.

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 cost 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.

Colonialism

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 not yet returned 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 Franz 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 colonized 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 very 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

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 an 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 successful. With only a few exceptions the countries of Africa rapidly turned to military dictatorships or other forms of centralized 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 world's 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 government's 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. Developed in the 1950s and 1960s to explain why development was failing in South America and Africa, dependency theory asserts that the West needs a source of cheap raw materials, labour, and markets in order to maintain its own wealth. Unlike classical Marxism, dependency theorists thus believe that the poor regions must break their trading ties with the developed world in order to progress.

Effects of widespread poverty

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 greater inequality 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

Thus in the 1980s the 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 only 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.

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. Many also allege that the aid that was not stolen was long misdirected. Since the end of the Cold War almost all developed countries have slashed foreign aid spending. 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 their 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. Since external debt payments flowing out of the continent are of about the same size as the external foreign aid flowing in to the continent, some have argued for an external debt relief on condition of ending at least 90% of the foreign aid.

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
Missing image Flag_of_Algeria.png Algeria  Algeria	Algerian Dinar	Bank of Algeria
Missing image Angola_flag_large.png Angola  Angola	Kwanza	National Bank of Angola
Missing image Benin_flag_large.png Benin  Benin	CFA Franc	Banque Centrale des Etats de l'Afrique de l'Ouest
Missing image Botswana_flag_large.png Botswana	Pula	Bank of Botswana
Missing image Burkina_faso_flag_large.png  Burkina Faso	CFA Franc	Banque Centrale des Etats de l'Afrique de l'Ouest
Missing image Burundi_flag_large.png  Burundi	Burundi franc	Bank of Burundi
Missing image Cameroon_flag_large.png  Cameroon	CFA Franc	Banque des Etats de l'Afrique Centrale
Missing image Cape_verde_flag_large.png  Cape Verde	Cape Verdean Escudo	Banco de Cabo Verde
Missing image Central_african_republic_flag_large.png  Central African Republic	CFA Franc	Banque des Etats de l'Afrique Centrale
Missing image Chad_flag_large.png Chad	CFA Franc	Banque des Etats de l'Afrique Centrale
Missing image Comoros_flag_large.png  Comoros	Comorian franc	Banque Centrale des Comores
Missing image Congo_democratic_flag_large.png Congo Democratic Republic of the Congo	Congolese Franc	Central Bank of Congo
Missing image Congo_republic_flag_large.png Republic of the Congo	CFA Franc	Banque des Etats de l'Afrique Centrale
Missing image Cote_d'ivoire_flag_large.png  Côte d'Ivoire	CFA Franc	Banque Centrale des Etats de l'Afrique de l'Ouest
Missing image Djibouti_flag_large.png Djibouti  Djibouti	Djiboutian franc	Banque centrale de Djibouti
Missing image Egypt_flag_300.png Egypt  Egypt	Egyptian Pound	Central Bank of Egypt
Missing image Eritrea_flag_large.png  Eritrea	Nafka	National Bank of Eritrea
Missing image Ethiopia_flag_large.png Ethiopia  Ethiopia	Birr	National Bank of Ethiopia
Missing image Equatorial_guinea_flag_large.png Equatorial Guinea	CFA Franc	Banque des Etats de l'Afrique Centrale
Missing image Gabon_flag_large.png  Gabon	CFA Franc	Banque des Etats de l'Afrique Centrale
Missing image Gambia_flag_large.png The Gambia	Dalasi	Central Bank of Gambia
Missing image Ghana_flag_large.png  Ghana	Cedi	Bank of Ghana
Missing image Guinea_flag_large.png Guinea	Guinean franc	Banque Centrale de la République de Guinée
Missing image Guinea_bissau_flag_large.png  Guinea-Bissau	CFA Franc	Banque Centrale des Etats de l'Afrique de l'Ouest
Missing image Kenya_flag_large.png  Kenya	Kenyan Shilling	Central Bank of Kenya
Missing image Lesotho_flag_large.png Lesotho	Loti	Central Bank of Lesotho
Missing image Liberia_flag_large.png Liberia  Liberia	Liberian dollar	National Bank of Liberia
Missing image Libya_flag_large.png Libya	Libyan dinar	Central Bank of Libya
Missing image Madagascar_flag_large.png Madagascar	Ariary	Banque Centrale de Madagascar
Missing image Malawi_flag_large.png Malawi  Malawi	Kwacha	Reserve Bank of Malawi
Missing image Mali_flag_large.png Mali  Mali	CFA Franc	Banque Centrale des Etats de l'Afrique de l'Ouest
Missing image Flag_of_Mauritania.png Mauritania	Mauritanian Ouguiya	Banque Centrale de Mauritanie
Missing image Mauritius_flag_large.png Mauritius	Mauritian Rupee	Bank of Mauritius
Missing image Morocco_flag_large.png Morocco  Morocco	Dirham	Bank Al-Maghrib
Missing image Mozambique_flag_large.png Mozambique  Mozambique	Metical	Banco de Moçambique
Missing image Namibia_flag_large.png  Namibia	Namibian dollar	Bank of Namibia
Missing image Niger_flag_large.png Niger	CFA Franc	Banque Centrale des Etats de l'Afrique de l'Ouest
Missing image Nigeria_flag_large.png Nigeria  Nigeria	Naira	Central Bank of Niegeria
Missing image Rwanda_flag_large.png Rwanda  Rwanda	Rwandan franc	Banque Nationale du Rwanda
Missing image Sao_tome_and_principe_flag_large.png  São Tomé and Príncipe	São Tomé and Príncipe Dobra	Banco National São Tomé and Príncipe
Missing image Senegal_flag_large.png  Senegal	CFA Franc	Banque Centrale des Etats de l'Afrique de l'Ouest
Missing image Seychelles_flag_large.png Seychelles	Seychelles rupee	Central Bank of Seychelles
Missing image Sierra_leone_flag_large.png  Sierra Leone	Leone	Bank of Sierra Leone
Missing image Somalia_flag_large.png  Somalia	Somali shilling	Bankiga Dhexe ee Soomaaliya
Missing image South_africa_flag_large.png South Africa	Rand	South African Reserve Bank
Missing image Sudan_flag_large.png Sudan	Sudanese dinar	Bank of Sudan
Missing image Swaziland_flag_large.png  Swaziland	Lilangeni	Central Bank of Swaziland
Missing image Tanzania_flag_large.png Tanzania	Tanzanian shilling	Bank of Tanzania
Missing image Togo_flag_large.png Togo Togo	CFA Franc	Banque Centrale des Etats de l'Afrique de l'Ouest
Missing image Tunisia_flag_large.png Tunisia  Tunisia	Tunisian dinar	Banque Centrale de Tunisie
Missing image Uganda_flag_large.png Uganda  Uganda	Ugandan shilling	Bank of Uganda
Missing image WesternSahara_flag_medium.png Western Sahara  Western Sahara	Dirham
Missing image Zambia_flag_large.png Zambia Zambia	Zambian Kwacha	Bank of Zambia
Missing image Zimbabwe_flag_300.png Zimbabwe Zimbabwe	Zimbabwe dollar	Reserve Bank of Zimbabwe

By country

Economy of:

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros

Congo, Democratic Republic of the Congo, Republic of the Côte d'Ivoire Djibouti Egypt Eritrea Ethiopia Equatorial Guinea Gabon Gambia Ghana

Guinea Guinea-Bissau Kenya Lesotho Liberia Libya Madagascar Malawi Mali Mauritania Mauritius

Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Príncipe Senegal Seychelles Sierra Leone Somalia

South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Western Sahara Zambia Zimbabwe

See also

• Africa
• List of African countries by GDP
• Geography of Africa
• Advance fee fraud

References

• Fage, J.D. A History of Africa (Routledge, 4th edition, 2001 ISBN 0415252474) (Hutchinson, 1978, ISBN 0091328519) (Knopf 1st American edition, 1978, ISBN 0394322770)
• Kayizzi-Mugerwa, Steve The African Economy: Policy, Institutions and the Future (Routledge, 1999, ISBN 0415183235)
• Moshomba, Richard E. Africa in the Global Economy (Lynne Rienner, 2000, ISBN 1555877184)
• Rodney, Walter. How Europe Underdeveloped Africa. (Washington: Howard UP, 1982, ISBN 0882580965)
• Sahn, David E., Paul A. Dorosh, Stephen D. Younger Structural Adjustment Reconsidered: Economic Policy and Poverty in Africa (Cambridge University Press, 1997, ISBN 0521584515)

External links

• Africa Economic Analysis
• World Economic Forum - Africa
• African Development Bank Group
• IMF World Economic Outlook (WEO) -- September 2003 -- Public Debt in Emerging Markets
• Why is Africa so Poor?
• Language and Africa

See also: Economy of Africa