   #copyright

Economy of Africa

2007 Schools Wikipedia Selection. Related subjects: Economics

   CAPTION: Economy of Africa
   During 2003 unless otherwise stated

   Population:              887 million (14%)
   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

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

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

Regional variation

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

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

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

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

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

History

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

   South of the Sahara conditions were different. Internal trade within
   the continent, hindered by thick forests and massive deserts, was
   always difficult. Prosperity in sub-Saharan Africa was rare, excepting
   Nubia, Ethiopia, Mali and Ghana, which had trade routes north to the
   Mediterranean world and Middle East.
   Once a departure point for trans-Saharan caravans, the market of Douz,
   Tunisia is today popular with Western tourists.
   Enlarge
   Once a departure point for trans-Saharan caravans, the market of Douz,
   Tunisia is today popular with Western tourists.

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

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

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

   Although Europeans were ostensibly committed to developing their
   colonies, colonial rulers employed a laissez-faire strategy during the
   first decades. It was hoped that European companies would prosper if
   given a secure operating environment. This only occurred in a few areas
   with rich resources; the colonial economies hardly grew from the 1890s
   through the 1920s. The colonies had to pay their own way, receiving
   little or no development money from Europe. Only in the 1930s, with the
   rise of Keynesian economics, did the colonial administrations seriously
   encourage development. However, new projects could not transpire until
   after the Great Depression and the Second World War.

   African economies boomed during the 1950s as growth and international
   trade multiplied beyond their pre-war levels. The insatiable demand for
   raw materials in the rebuilding economies of Asia and Europe and the
   strong growth in North America inflated the price of raw materials. By
   the end of the colonial era in the 1960s, there was great hope for
   African self-sufficience and prosperity. However, sporadic growth
   continued as the newly independent nations borrowed heavily from
   abroad.

   The world economic decline of the 1970s, rising oil prices, corruption,
   and political instability hit Africa hard. In subsequent decades Africa
   has steadily become poorer compared to the rest of the world; South
   America experienced solid growth, and East Asia spectacular growth,
   during that same period. According to the World Economic Forum, ten
   percent of the world's poor were African In 1970; by 2000, that figure
   had risen to fifty percent. Between 1974 and 2000 the average income
   declined by $200. Beginning in 1976, the Lomé agreements and Cotonou
   agreement between the EU and ACP countries, including Sub-Saharan
   Africa, have structured economic relations between the two regions.

Sectors

Agriculture

   The African economy relies more on agriculture, which employs 60% of
   labourers, than any other sector. About three-fifths of African farmers
   are subsistence farmers. They till small plots of land to feed their
   families, selling a minimal surplus for other goods. They make enough
   to stay alive but not enough to gain anymore wealth. Larger farms 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.

   Exporting crops to the West while millions on the continent starve has
   been blamed on Japan, the European Union and the United States. These
   countries protect their agricultural sector by high import tariffs.
   Subsidies to their own farmers leads to overproducing such commodities
   as grain, cotton and milk. This lowers the global price of such
   products until Africans are unable to compete, except for cash crops
   that do not grow easily in a northern climate.

   Due to these market forces, in Africa excess capacity is devoted to
   growing crops for export; thus, when civil unrest or a bad harvest
   occurs, there is no food saved and people starve. Excess foodstuffs
   grown in developed nations are often destroyed, as it is not
   economically viable to transport it across the oceans to a market poor
   in capital. Ideally, cash crops can expand a nation's wealth, but not
   when their production leads to famine.

Mining and drilling

   Africa's most valuable exports are minerals and petroleum. A few
   countries possess and export the vast majority of these resources. The
   southern nations have large reserves of gold, diamonds, and copper.
   Petroleum is concentrated in Nigeria, its neighbours, and Libya.

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

   In some cases, these resources have turned out to be a curse. Although
   Congo is rich in minerals, the country remains one of the poorest
   countries in the world. This is historically due to ownership fights
   over these minerals, tracing back to the early 1900s. After Congo's
   independence from Belgium, the colonial government hesitated to leave
   behind these resources. Congo solicited UN help against Belgium, but
   that turned out to be a bad idea. In an attempt to get out of the
   quagmire, Congo sought Soviet assistance. This led the country into
   deeper trouble, as the country separated into two and a long proxy war
   between the West and East began.

Manufacturing

   Africa is the least industrialized continent; only South Africa has a
   substantial manufacturing sector. Despite readily available cheap
   labour, nearly all of the continent's natural resources are exported
   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 their financiers require political stability before
   erecting an expensive factory. An educated populace, good
   infrastructure and a stable source of electricity are essential to
   investments. These factors are rare in Africa. Other developing regions
   of the world such as India and China have been more attractive to
   companies looking to build a new factory or invest in a local
   enterprise.

   Many African states used to limit foreign investment to ensure local
   majority ownership. Close governmental control over industry further
   discouraged international investment. Attempts to foster local industry
   have been hampered by insufficient technology, training, and investment
   money. The paucity of local markets and the difficulty of transporting
   goods from major African centres to world markets contribute to the
   lack of manufacturing outside of South Africa.

Investment and banking

   Banking in Africa has long been problematic. Because local banks are
   often unstable and corrupt, governments and industry rely on
   international banks. South Africa alone has a thriving banking sector,
   aided by the international sanctions of the apartheid era, which forced
   out the once-dominant British banks. In the years after independence,
   African governments heavily regulated the banking sector and placed
   strict limits on international competition. In recent decades, banking
   reform has been a priority of the IMF and World Bank. One important
   reform was obtaining permission for increased penetration by foreign
   banks. South Africa has been the most successful in attracting local
   operation of foreign banks.

   Encouraging foreign investment in Africa has been difficult. Even
   Africans are reluctant to invest locally; about forty percent of
   sub-Saharan African savings are invested in other markets. Foreign
   governments who invest may have ulterior motives not in the best
   interest of the African economies. The IMF and World Bank only lend
   money after imposing stringent conditions such as austerity policies.

   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.

Determinants

   The intractable nature of Africa's poverty runs counter to modern
   economic theory, leading to debate concerning its root causes. 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, hampering its economy. In the
   centre of the continent, on the western side, an almost impenetrable
   rainforest impedes the transit of people and goods. Wealthy parts of
   South Africa are blocked from the rest of Africa by the Kalahari
   Desert, and the Sahara creates an obvious barrier to trade from the
   north. Although Africa has great river systems such as the Nile, Niger,
   Congo, and Zambezi, they do not link the continent into trade routes
   effectively as happens in Europe and China. Rapids and cataracts block
   African rivers, requiring development projects to allow navigation. The
   wet terrain of the interior complicates transport. Few roads are paved
   and during the wet season unpaved tracks become impassable mud.

   Countries in Africa are cut off from the sea more than those on other
   continents. Africa has more landlocked nations than any other
   continent, which support a high population density compared to the
   steppes or plains of North America and Asia. The ridge running from
   Zimbabwe to Ethiopia has superb volcanic soils and the higher altitude
   produces a more temperate climate. These enable more interior
   settlement, but the lack of access to the sea makes international trade
   harder.
   A satellite composite image of Africa reveals the more inhabitable
   regions of the interior.
   Enlarge
   A satellite composite image of Africa reveals the more inhabitable
   regions of the interior.

   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 (except for the vast tracts that are dry
   and hot such as the Arabian Peninsula; cold tundra such as in North
   Asia, and tropical such as subcontinental India, Bangladesh, Thailand,
   Laos, Bhutan, Burma, Cambodia, Vietnam, Malaysia, and Singapore) was
   linked by land routes, allowing technologies and ideas to spread from
   one area over time, aiding innovation. The agricultural techniques and
   medicines designed to work in the northern climes may fail in the
   tropics. This theory could partly explain why temperate South Africa is
   by far the wealthiest part of Africa, even though South Africa is in
   fact not temperate, and why other tropical areas in South America and
   Indonesia share Africa's poverty, though tropical Singapore and Brunei
   do not. There are no tropical countries in the OECD, apart from Mexico
   and Australia which have significant tropical sections, and only a
   handful have a GDP per capita above the world average, again apart from
   Singapore Brunei, Malaysia and Thailand. A tropical latitude is not a
   guarantee of poverty, but globally there is a definite correlation
   between wealth and climate, though this said theory is far more
   complicated than simply considering "tropical" vs. "non-tropical"
   countries or regions. Variations of this theory of geographic
   determinism date back to Montesquieu, though these theories have been
   simplistic and unscientific until they have recently been revived and
   refined by academics such as William Masters and Jeffrey Sachs and
   popular writers such as Jared Diamond.

   Africa is well-endowed with natural resources, including gold,
   diamonds, and oil reserves, but due to poor governance, few African
   countries have materially benefited from their mineral wealth. Africa
   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.

   Sub-Saharan Africans have historically not built structures from stone.
   Pre-colonial civilizations built mainly out of mud brick, leaving few
   lasting ruins except Great Zimbabwe. Finding no architectural
   monuments, European explorers and historians long concluded 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 are more hospitable to disease than the colder climates. The
   most significant illness has long been malaria. A new problem of vast
   magnitude is the rise of HIV/AIDS in Sub-Saharan Africa. AIDS, whose
   spread correlates with poverty, has nevertheless hit hardest in some of
   the wealthiest African countries, including Botswana, Swaziland, and
   South Africa. AIDS has decimated or will decimate the working-age
   population of many states.

   The healthcare costs, including those of importing anti-retroviral AIDS
   drugs from the West, is a new burden on many African states, leading to
   the challenging of drug prices and the manufacture of cheap generic
   alternatives. Tropical diseases can be just as expensive to cure,
   assuming a cure exist. Since the tropical regions are poorer,
   pharmaceutical companies are reluctant to invest in curing the diseases
   of the region. Disease not only reduces the work force and creates a
   burden on health care, but also has harms agriculture and
   transportation, as most forms of livestock cannot survive the diseases
   of the region. Historically, sub-Saharan Africans could not use pack
   animals for trade or work horses for labour, limiting the continent's
   development.

   Africa is in the midst of major AIDS epidemic. The cost of vaccines and
   medical supplies compounds the economic cost of the labour force
   becoming medical dependents. As parents die or become unable to work,
   their children must find care elsewhere, adding to the burden of
   already struggling families and states.

Colonialism

   By 1913, European powers had divided the African continent into a
   patchwork that showed little regard for ethnic or linguistic
   boundaries.
   By 1913, European powers had divided the African continent into a
   patchwork that showed little regard for ethnic or linguistic
   boundaries.

   The economic impact of the colonization of Africa has been debated.
   Africa acquired its greatest relative wealth in the 1960s, just prior
   to decolonization. African countries have yet to return to those levels
   of wealth. Some see this as evidence that colonialism helped local
   economies, while others argue that colonialism left these economies
   unable to sustain themselves.

   To achieve wealth during the colonial period, imperial overseers geared
   the economies of Africa towards exporting raw materials. Egypt produced
   cotton, Ruanda-Urundi was almost completely dedicated to growing
   coffee, and Upper Volta specialized in palm oil. Basing an entire
   nation's wealth on one commodity in this way would have debilitating
   effects later. These monocultures left national economies extremely
   vulnerable to price swings, making economic planning difficult. Some
   writers, such as Walter Rodney in his influential book How Europe
   Underdeveloped Africa, argue that these colonial policies are directly
   responsible for many of Africa's modern problems. Other post-colonial
   scholars, most notably Frantz Fanon, have argued that the true effects
   of colonialism are psychological and that domination by a foreign power
   creates a lasting sense of inferiority and subjugation that creates a
   barrier to growth and innovation.

   European culture in the late 19th century brought racism and social
   Darwinism. The elevation of the white race above blacks had lasting
   repercussions in lands with significant European immigration, notably
   South Africa and Rhodesia. Even more damaging 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.

   In those areas that were colonies rather than protectorates, colonizers
   acted quickly to ensure all the top members of society were Europeans.
   This included not only the rulers but the lawyers, doctors, and
   academics. The colonial rulers looked upon educated native populations,
   such as in the Gold Coast and the Maghreb, with great suspicion as
   probable nationalists and anti-imperialists. Colonial regimes therefore
   did not invest money or effort in creating a local elite. While they
   funded education, this was almost entirely elementary skills such as
   literacy. Once independent, African states saw an exodus of 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 gauging the effects of colonialism on the economies of
   Africa is to compare the results of different colonial policies
   implemented by the European powers. Regions where the economy was
   plundered, such as the Raubwirtschaft policies of Leopold II in the
   Congo Free State, have not prospered. The long reluctance of Portugal
   to surrender its colonies, leading to long wars of independence, had an
   obvious negative effect on Mozambique and Angola. The countries
   formerly under French control have fared much better, and those under
   British dominion were the most successful. This inequality may be due
   to other factors than economic policy. 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. The French, with
   their mighty navy, could also occupy prosperous areas, while the
   Belgians were forced to take the economically disadvantaged interior.

   Africa as a whole has not prospered compared with other colonised
   regions in Asia and South America. At the end of the Second World War
   South America was economically the strongest of the colonised regions;
   in the span of one generation, former colonies in Asia have become
   economic powerhouses.

Cultural and linguistic diversity

   In the Scramble for Africa, national boundaries in sub-Saharan Africa
   were established by Europeans using latitude and longitude rather than
   natural borders. This separated population centres from their supplies
   of food and natural resources. The artificial borders of modern African
   states cut across cultural, tribal, linguistic and religious
   boundaries, creating ethnic and religious cleavages which impede
   national unity and faciliate internal violence.

   However, those states that preserved pre-colonial boundaries have been
   no more successful. Few countries in Africa have more troubled recent
   histories than Rwanda and Burundi, although their borders are almost
   identical to those of the prosperous kingdoms from which they are
   descended. The ancient and only briefly occupied state of Ethiopia is
   one of the poorest on the continent, and ethnically unified Somalia has
   failed so completely that it no longer exists in any real sense.

   Africa is a much divided continent with many small countries.
   Successful economic growth requires regional cooperation, which
   political tensions make difficult. To be effective, foreign aid must be
   multilateral, making it harder to base aid upon the performance of
   local governments.
   Over 67 languages are spoken by the people of Ghana.
   Enlarge
   Over 67 languages are spoken by the people of Ghana.

   The African peoples speak over 2,000 languages. In 2005, six of the
   world's ten most linguistically diverse countries were African. The
   nearly 26 million people of Tanzania alone speak 127 distinct
   languages. The primary language of government, political debate,
   academic discourse, and government is often the language of the former
   colonial powers—English, French, or Portuguese. Only an elite minority
   speak these European languages fluently enough to participate in these
   institutions without intermediaries, further disenfranchising the
   majority population.

Governance

   The political situation in Africa perpetuates the intractable nature of
   African poverty. Democracy in Africa has not been historically
   successful, almost always supplanted by centralized authoritarian rule
   such as military dictatorships. Alhough some rulers worked to improve
   the lot of their nation's citizens, others used power purely for their
   own benefit. Among 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 international measures, the economies of
   Africa generally rank among the most corrupt. Bribery and graft abound,
   due to poverty and poorly handled de-colonization, and the superpowers'
   (Soviet Union and United States) practice during the Cold War of
   supporting any ruler with the desired political alignment, regardless
   of their managerial practices or human rights records.

   Dependency theory asserts that the wealth and prosperity of the
   superpowers and their allies in Europe, North America and East Asia 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 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 and high
   import tariffs in the developed world, most notably those set by Japan,
   the European Union's Common Agricultural Policy, and the United States
   Department of Agriculture, are thought to be the cause. Although these
   subsidies and tariffs have been gradually reduced, they remain high.
   This theory, however, overlooks the heavy hand of the State in several
   African nations that can even prevent their own exports from becoming
   competitive.

   Although Africa and Asia had similar levels of income in the 1960s,
   Asia has since outpaced Africa. One school of economists argues that
   Asia's superior economic development lies in local investment.
   Corruption in Africa consists primarily of extracting economic rent and
   moving the resulting financial capital overseas instead of investingat
   home; the stereotype of African dictators with Swiss bank accounts is
   often accurate. Asian dictators such as Suharto often take a cut on
   everything, necessitating bribery, but enable development through
   infrastructure investment and the social stability created by law and
   order. University of Massachusetts researchers estimate that from 1970
   to 1996, capital flight from 30 sub-Saharan countries totalled $187bn,
   exceeding those nations' external debts. This disparity in development
   is consistent with the model theorized by economist Mancur Olson.
   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.

   Corruption encouraged social inequality, because the wealthy elite not
   only avoided investing at home, but also imported most of its
   consumption. Desirable luxury goods were generally not locally
   available. This hindered the development of national markets.
   Historically, economic development is closely linked to the creation of
   a middle class with enough income to save and invest but limited
   influence on governance. In countries without such a middle class,
   development is all but impossible, except the illusory and destructive
   development based on extracting resources like oil.

War

   Since independence, Africa has seen dozens of wars, both civil and
   international. This has contributed to poverty because states have
   spent their scarce resources on military equipment and supplies.
   Development has suffered, since warfare has scared off foreign
   investors, destroyed infrastructure, and created lasting animosities.

   Much conflict was instigated by the Cold War. The countries of the
   Western and Eastern blocs leveraged foreign aid money to coax countries
   into their camp. Aid was tied to the purchase of military weapons, and
   donor countries ignored misappropriation of the funds. Corruption
   became endemic, hampering economic development. Proxy conflicts erupted
   in Africa when each bloc would fund and assisted rebel or sectarian
   groups under the control of the opposing bloc.

   Violence in Africa has increased following the Cold War, despite the
   slashing of foreign aid spending in developed countries. Civil wars
   have raged throughout the Great Lakes region, Somalia, Sudan,
   Mozambique, Liberia, Sierra Leone, Ivory Coast, and Guinea-Bissau.
   International wars include the First and Second Congo Wars between the
   Democratic Republic of the Congo and its neighbours, and conflict
   between Ethiopia and its former province Eritrea.

Effects of widespread poverty

   High index values, indicated by lighter colors, show the relative
   poverty of African countries as ranked by the UNDP's 2004 list of
   countries by quality of life.
   High index values, indicated by lighter colors, show the relative
   poverty of African countries as ranked by the UNDP's 2004 list of
   countries by quality of life.

   Africa's economic malaise is self-perpetuating, as it engenders more of
   the disease, warfare, misgovernment, and corruption that created it in
   the first place. Other effects of poverty have similar consequences.
   The most direct consequence of low GDP is Africa's low standard of
   living and quality of life. Except for a wealthy elite and the more
   prosperous peoples 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 mines, but after years of civil war, conditions there
   remain poor. Radios, televisions, and automobiles are 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 dominate 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 because the continent sees greater
   inequality than any other region. The best educated often choose to
   leave the continent for the West or the Persian Gulf to seek a better
   life.

   Catastrophes cause deadly periods of great shortages. The most damaging
   are the famines that have regularly hit the continent, especially the
   Horn of Africa. These have been caused by disruptions due to warfare,
   years of drought, and plagues of locusts.

   An average African faced annual inflation of over 60% from 1990 until
   2002 in those few countries that account for inflation. At the high
   end, 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 reliable numbers for unemployment in most African nations,
   but it is an important problem. Major cities like Lagos and Kinshasa
   have large slums of the unemployed and underemployed.

   Environmental degradation occurs on many fronts. 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. Profits from the
   sale in the West of rare animals, ivory from elephants, and timber
   encourage illegal poaching. 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.

Liberalism

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

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

   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 limited
   liberalization.

Foreign aid

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

Debt relief

   Advocacy for debt relief has become widespread. Each year Africa sends
   more money to Western bankers in interest on its debts than it receives
   in foreign aid from these countries. Debt relief is not a panacea, but
   relieving some of the burden, especially of debts that were run up by
   regimes for their own benefit, may help the economies of Africa grow
   and prosper. However, arguments against full and unconditional debt
   relief exist.

   First, debt relief punishes nations which have managed borrowing well
   and do not need debt relief.

   Second, unconditional debt relief will not necessarily cause nations to
   spend more in social programs and services, on the one hand, or to
   solve their financial problems without stifling the economy with the
   need for more taxes, on the other hand.

   Finally, debt relief may make it more difficult for nations to receive
   credit in the future.

   It has been suggested that any debt relief policy be conditional upon a
   commensurate reduction in aid. The Heavily Indebted Poor Countries
   initiative was launched in 1996; if implemented, it would greatly
   affect Africa's economy.
   Retrieved from " http://en.wikipedia.org/wiki/Economy_of_Africa"
   This reference article is mainly selected from the English Wikipedia
   with only minor checks and changes (see www.wikipedia.org for details
   of authors and sources) and is available under the GNU Free
   Documentation License. See also our Disclaimer.
