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Economy of Africa

Economy of Africa

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The economy of Africa consists of the trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...

, industry
Industry
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...

, and resources of the people of Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...

. , approximately 922 million people  were living in 54 different countries. Africa is by far the world's poorest inhabited continent. Though parts of the continent have made significant gains over the last few years, of the 175 countries reviewed in the United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...

' Human Development Report
Human Development Report
The Human Development Report is an annual milestone publication by the Human Development Report Office of the United Nations Development Programme .-History:...

 2003, 25 African nations ranked lowest amongst the nations of the world. This is partly due to its turbulent history. The decolonization of Africa
Decolonization of Africa
The decolonization of Africa followed World War II as colonized peoples agitated for independence and colonial powers withdrew their administrators from Africa.-Background:...

 was fraught with instability aggravated by cold war conflict. Since the mid-20th century, the Cold War
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...

 and increased corruption
Political corruption
Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...

 and despotism
Despotism
Despotism is a form of government in which a single entity rules with absolute power. That entity may be an individual, as in an autocracy, or it may be a group, as in an oligarchy...

 have also contributed to Africa's poor economy.

The biggest contrast in terms of development has been between Africa and the economy of Europe
Economy of Europe
The economy of Europe comprises more than 731 million people in 48 different states. Like other continents, the wealth of Europe's states varies, although the poorest are well above the poorest states of other continents in terms of GDP and living standards. The difference in wealth across...

. The African Economic Outlook
African Economic Outlook
The African Economic Outlook is an annual reference book-journal which focuses on the economics of most African countries. It reviews the recent economic situation and predicts the short-term interrelated economic, social, and political evolution of most of African country economies...

 report specifically mentions that Africa’s trade with China has multiplied by 10 since 2001, reaching over USD 100 billion in 2008. The economies of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...

 and India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

 have grown rapidly, while Latin America
Latin America
Latin America is a region of the Americas where Romance languages  – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...

 has also experienced moderate growth, lifting millions above subsistence living. By contrast, much of Africa has stagnated and even regressed in terms of foreign trade
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...

, investment, per capita income
Per capita income
Per capita income or income per person is a measure of mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate and dividing it by the total population...

, and other economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

 measures. Poverty has had widespread effects, including low life expectancy
Life expectancy
Life expectancy is the expected number of years of life remaining at a given age. It is denoted by ex, which means the average number of subsequent years of life for someone now aged x, according to a particular mortality experience...

, violence, and instability, which in turn have perpetuated the continent's growth problems. Over the decades, there have been many unsuccessful attempts to improve the economies of individual African countries. However, in recent years this has begun to change in many countries. Data suggest some parts of the continent are now experiencing fast growth. The World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

 reports the economy of Sub-Saharan African countries grew at rates that match global rates. The economies of the fastest growing African nations experienced growth significantly above the global average rates. The top nations in 2007 include Mauritania
Mauritania
Mauritania is a country in the Maghreb and West Africa. It is bordered by the Atlantic Ocean in the west, by Western Sahara in the north, by Algeria in the northeast, by Mali in the east and southeast, and by Senegal in the southwest...

 with growth at 19.8%, Angola
Angola
Angola, officially the Republic of Angola , is a country in south-central Africa bordered by Namibia on the south, the Democratic Republic of the Congo on the north, and Zambia on the east; its west coast is on the Atlantic Ocean with Luanda as its capital city...

 at 17.6%, Sudan
Sudan
Sudan , officially the Republic of the Sudan , is a country in North Africa, sometimes considered part of the Middle East politically. It is bordered by Egypt to the north, the Red Sea to the northeast, Eritrea and Ethiopia to the east, South Sudan to the south, the Central African Republic to the...

 at 9.6%, Mozambique
Mozambique
Mozambique, officially the Republic of Mozambique , is a country in southeastern Africa bordered by the Indian Ocean to the east, Tanzania to the north, Malawi and Zambia to the northwest, Zimbabwe to the west and Swaziland and South Africa to the southwest...

 at 7.9% and Malawi
Malawi
The Republic of Malawi is a landlocked country in southeast Africa that was formerly known as Nyasaland. It is bordered by Zambia to the northwest, Tanzania to the northeast, and Mozambique on the east, south and west. The country is separated from Tanzania and Mozambique by Lake Malawi. Its size...

 at 7.8%. Many international agencies are gaining increasing interest in emerging modernizing African economies, especially as Africa continues to maintain high economic growth despite current global economic recession.

Regional variation


While no African nation has joined the ranks of the developed nations in the Organization for Economic Co-operation and Development (OECD) yet, the entire continent is not utterly impoverished and there is considerable variation in its wealth. North Africa
North Africa
North Africa or Northern Africa is the northernmost region of the African continent, linked by the Sahara to Sub-Saharan Africa. Geopolitically, the United Nations definition of Northern Africa includes eight countries or territories; Algeria, Egypt, Libya, Morocco, South Sudan, Sudan, Tunisia, and...

 has long been closely linked to the economies of Europe
Economy of Europe
The economy of Europe comprises more than 731 million people in 48 different states. Like other continents, the wealth of Europe's states varies, although the poorest are well above the poorest states of other continents in terms of GDP and living standards. The difference in wealth across...

 and the Middle East
Economy of the Middle East
The Economy of the Middle East is very diverse. Composed of Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, the Palestinian territories, Qatar, Saudi Arabia, Syria, Turkey, United Arab Emirates, and Yemen the individual economies range from hydrocarbon exporting rentier...

. South Africa
Economy of South Africa
The economy of South Africa is the largest in Africa, accounts for 24% of its Gross Domestic Product in terms of PPP, and is ranked as an upper-middle income economy by the World Bank, which makes the country one of only four countries in Africa represented in this category...

 is by far the continent's wealthiest state in total GDP, accounting for 30% of the continent's GDP in nominal terms and 24% by PPP. The small but oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

-rich states of Gabon
Gabon
Gabon , officially the Gabonese Republic is a state in west central Africa sharing borders with Equatorial Guinea to the northwest, Cameroon to the north, and with the Republic of the Congo curving around the east and south. The Gulf of Guinea, an arm of the Atlantic Ocean is to the west...

 and Equatorial Guinea
Equatorial Guinea
Equatorial Guinea, officially the Republic of Equatorial Guinea where the capital Malabo is situated.Annobón is the southernmost island of Equatorial Guinea and is situated just south of the equator. Bioko island is the northernmost point of Equatorial Guinea. Between the two islands and to the...

 round out the list of the ten wealthiest states in Africa.

The temperate northern and southern ends of the continent are wealthier than tropical sub-Saharan Africa. Within the tropics, East Africa, with its long pre-colonial history of trade and development, has tended to be wealthier and more stable than elsewhere. Islands such as the Seychelles
Seychelles
Seychelles , officially the Republic of Seychelles , is an island country spanning an archipelago of 115 islands in the Indian Ocean, some east of mainland Africa, northeast of the island of Madagascar....

, Réunion
Réunion
Réunion is a French island with a population of about 800,000 located in the Indian Ocean, east of Madagascar, about south west of Mauritius, the nearest island.Administratively, Réunion is one of the overseas departments of France...

, Mauritius
Mauritius
Mauritius , officially the Republic of Mauritius is an island nation off the southeast coast of the African continent in the southwest Indian Ocean, about east of Madagascar...

, and Cape Verde
Cape Verde
The Republic of Cape Verde is an island country, spanning an archipelago of 10 islands located in the central Atlantic Ocean, 570 kilometres off the coast of Western Africa...

 have remained wealthier than the continental nations, although the unstable Comoros
Comoros
The Comoros , officially the Union of the Comoros is an archipelago island nation in the Indian Ocean, located off the eastern coast of Africa, on the northern end of the Mozambique Channel, between northeastern Mozambique and northwestern Madagascar...

 remains poor.

The poorest states are those engaged in or just emerging from civil wars. These include the Democratic Republic of the Congo, Sierra Leone
Sierra Leone Civil War
The Sierra Leone Civil War began on 23 March 1991 when the Revolutionary United Front , with support from the special forces of Charles Taylor’s National Patriotic Front of Liberia , intervened in Sierra Leone in an attempt to overthrow the Joseph Momoh government...

, and Burundi
Burundi Civil War
The Burundi Civil War was an armed conflict lasting from 1993 to 2005. The civil war was the result of long standing ethnic divisions between the Hutu and the Tutsi tribes in Burundi...

. In recent times, the poorest region has been the Horn of Africa
Horn of Africa
The Horn of Africa is a peninsula in East Africa that juts hundreds of kilometers into the Arabian Sea and lies along the southern side of the Gulf of Aden. It is the easternmost projection of the African continent...

, although it had historically been one of the wealthiest regions of sub-Saharan Africa
Sub-Saharan Africa
Sub-Saharan Africa as a geographical term refers to the area of the African continent which lies south of the Sahara. A political definition of Sub-Saharan Africa, instead, covers all African countries which are fully or partially located south of the Sahara...

. Ethiopia
Economy of Ethiopia
The economy of Ethiopia is based on agriculture, which accounts for half of gross domestic product , 43% of exports, and 85% of total employment....

 in particular had a long and successful history. The poverty of the region, and the associated famine
Famine
A famine is a widespread scarcity of food, caused by several factors including crop failure, overpopulation, or government policies. This phenomenon is usually accompanied or followed by regional malnutrition, starvation, epidemic, and increased mortality. Every continent in the world has...

s and wars, have been a problem for decades.

There is considerable internal variation within countries. Urban
Urban area
An urban area is characterized by higher population density and vast human features in comparison to areas surrounding it. Urban areas may be cities, towns or conurbations, but the term is not commonly extended to rural settlements such as villages and hamlets.Urban areas are created and further...

 areas, especially capital cities, are generally wealthier than rural zones. Inequality
Social equality
Social equality is a social state of affairs in which all people within a specific society or isolated group have the same status in a certain respect. At the very least, social equality includes equal rights under the law, such as security, voting rights, freedom of speech and assembly, and the...

 is pronounced in most African countries; the upper class
Upper class
In social science, the "upper class" is the group of people at the top of a social hierarchy. Members of an upper class may have great power over the allocation of resources and governmental policy in their area.- Historical meaning :...

 has a much higher income than the majority of the population.
Country
Country
A country is a region legally identified as a distinct entity in political geography. A country may be an independent sovereign state or one that is occupied by another state, as a non-sovereign or formerly sovereign political division, or a geographic region associated with a previously...

Total GDP (nominal) in 2006
(billion US$)
GDP (PPP) per capita in 2005
(US$)
HDI in 2005
 Algeria 5,985
 Angola 3,533
 Benin 1,390
 Botswana 12,057
 Burkina Faso 1,140
 Burundi 699
 Cameroon 1,995
 Cape Verde 2,831
 Central African Republic 675
 Chad 1,749
 Comoros 1,063
 Democratic Republic of the Congo 264
 Republic of the Congo 3,621
 Côte d'Ivoire 1,575
 Djibouti 1,964
 Egypt 5,051
 Equatorial Guinea 11,999
 Eritrea 689
 Ethiopia 591
 Gabon 12,742
 The Gambia 726
 Ghana 1,225
 Guinea 946
 Guinea-Bissau 569
 Kenya 1,359
 Lesotho 1,415
 Liberia 383 ? N/A
 Libya 10,727
 Madagascar 988
 Malawi 691
 Mali 1,027
 Mauritania 1,691
 Mauritius 10,155
 Morocco 4,800
 Mozambique 743
 Namibia 4,547
 Niger 613
 Nigeria 1,892
 Réunion (France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...

)
19,233 (nominal) (in 2003)
 Rwanda 813
 São Tomé and Príncipe 1,460
 Senegal 1,676
 Seychelles 13,887
 Sierra Leone 790
 Somalia 199 ? N/A
 South Africa 8,477
 Sudan 2,249
 Swaziland 4,384
 Tanzania 1,018
 Togo 888
 Tunisia 6,461
 Uganda 991
 Zambia 1,175
 Zimbabwe 538

History


Ancient Egypt
Ancient Egypt
Ancient Egypt was an ancient civilization of Northeastern Africa, concentrated along the lower reaches of the Nile River in what is now the modern country of Egypt. Egyptian civilization coalesced around 3150 BC with the political unification of Upper and Lower Egypt under the first pharaoh...

 was one of the world's most prosperous and advanced civilizations, which began around 3150 BC with the political unification of Upper and Lower Egypt
Upper and Lower Egypt
Ancient Egypt was divided into two regions, namely Upper Egypt and Lower Egypt. To the north was Lower Egypt where the Nile stretched out with its several branches to form the Nile Delta. To the south was Upper Egypt, stretching to Syene. The two kingdoms of Upper and Lower Egypt were united c....

 under the first pharaoh, and it developed over the next three millennia. The port of Alexandria
Alexandria
Alexandria is the second-largest city of Egypt, with a population of 4.1 million, extending about along the coast of the Mediterranean Sea in the north central part of the country; it is also the largest city lying directly on the Mediterranean coast. It is Egypt's largest seaport, serving...

, 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 in the world. Prosperity in the rest of Africa existed in nation states and regions such as the Ghana Empire
Ghana Empire
The Ghana Empire or Wagadou Empire was located in what is now southeastern Mauritania, and Western Mali. Complex societies had existed in the region since about 1500 BCE, and around Ghana's core region since about 300 CE...

, Nubia
Nubia
Nubia is a region along the Nile river, which is located in northern Sudan and southern Egypt.There were a number of small Nubian kingdoms throughout the Middle Ages, the last of which collapsed in 1504, when Nubia became divided between Egypt and the Sennar sultanate resulting in the Arabization...

, Ethiopia
Ethiopia
Ethiopia , officially known as the Federal Democratic Republic of Ethiopia, is a country located in the Horn of Africa. It is the second-most populous nation in Africa, with over 82 million inhabitants, and the tenth-largest by area, occupying 1,100,000 km2...

, and the Mali Empire
Mali Empire
The Mali Empire or Mandingo Empire or Manden Kurufa was a West African empire of the Mandinka from c. 1230 to c. 1600. The empire was founded by Sundiata Keita and became renowned for the wealth of its rulers, especially Mansa Musa I...

, which had trade routes north to the Mediterranean world and Middle East.

Africans have historically built structures from stone mainly in the Nile Valley in cities like Meroe
Meroë
Meroë Meroitic: Medewi or Bedewi; Arabic: and Meruwi) is an ancient city on the east bank of the Nile about 6 km north-east of the Kabushiya station near Shendi, Sudan, approximately 200 km north-east of Khartoum. Near the site are a group of villages called Bagrawiyah...

, Thebes
Thebes, Egypt
Thebes is the Greek name for a city in Ancient Egypt located about 800 km south of the Mediterranean, on the east bank of the river Nile within the modern city of Luxor. The Theban Necropolis is situated nearby on the west bank of the Nile.-History:...

, Napata
Napata
Napata was a city-state of ancient Nubia on the west bank of the Nile River, at the site of modern Karima, Northern Sudan.During the 8th to 7th centuries BC, Napata was the capital of the Nubian kingdom of Kush, whence the 25th, or Nubian Dynasty conquered Egypt...

, and Axum
Axum
Axum or Aksum is a city in northern Ethiopia which was the original capital of the eponymous kingdom of Axum. Population 56,500 . Axum was a naval and trading power that ruled the region from ca. 400 BC into the 10th century...

 by former Nubian, Egyptian and Ethiopian kingdoms. Most Sub Saharan African pre-colonial civilizations did not use stone (except Great Zimbabwe
Great Zimbabwe
Great Zimbabwe is a ruined city that was once the capital of the Kingdom of Zimbabwe, which existed from 1100 to 1450 C.E. during the country’s Late Iron Age. The monument, which first began to be constructed in the 11th century and which continued to be built until the 14th century, spanned an...

), leaving fewer lasting ruins. Finding fewer architectural monuments in most parts of the region, some European explorers and historians long concluded that pre-colonial sub-Saharan Africa was devoid of civilization (see Sub-Saharan Africa
Sub-Saharan Africa
Sub-Saharan Africa as a geographical term refers to the area of the African continent which lies south of the Sahara. A political definition of Sub-Saharan Africa, instead, covers all African countries which are fully or partially located south of the Sahara...

 critic of the term). Racism also blinded some of the European explorers and historians to conclude that pre-colonial Africa was devoid of civilization for example J. Theodore Bent
James Theodore Bent
James Theodore Bent was an English explorer, archaeologist and author.-Biography:James Theodore Bent was the son of James Bent of Baildon House, near Bradford, Yorkshire, where he was born. He was educated at Repton School and Wadham College, Oxford, where he graduated in 1875. In 1877 he married...

, who researched the origins of the Great Zimbabwe
Great Zimbabwe
Great Zimbabwe is a ruined city that was once the capital of the Kingdom of Zimbabwe, which existed from 1100 to 1450 C.E. during the country’s Late Iron Age. The monument, which first began to be constructed in the 11th century and which continued to be built until the 14th century, spanned an...

 stated in The Ruined Cities of Mashonaland (1891) that the ruins revealed either the Phoenicians or the Arabs as builders. Other European researchers favored a legend that the structures were built to replicate the palace of the Queen of Sheba in Jerusalem. Other theories as to their origin abounded among white settlers and academics, with one racist element in common: they were probably not made by Africans.

New technologies and increasing scales of production 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
Ethiopia
Ethiopia , officially known as the Federal Democratic Republic of Ethiopia, is a country located in the Horn of Africa. It is the second-most populous nation in Africa, with over 82 million inhabitants, and the tenth-largest by area, occupying 1,100,000 km2...

 and Eritrea
Eritrea
Eritrea , officially the State of Eritrea, is a country in the Horn of Africa. Eritrea derives it's name from the Greek word Erethria, meaning 'red land'. The capital is Asmara. It is bordered by Sudan in the west, Ethiopia in the south, and Djibouti in the southeast...

 lie. Axum
Axum
Axum or Aksum is a city in northern Ethiopia which was the original capital of the eponymous kingdom of Axum. Population 56,500 . Axum was a naval and trading power that ruled the region from ca. 400 BC into the 10th century...

 had a powerful navy and traded as far as the Byzantine Empire
Byzantine Empire
The Byzantine Empire was the Eastern Roman Empire during the periods of Late Antiquity and the Middle Ages, centred on the capital of Constantinople. Known simply as the Roman Empire or Romania to its inhabitants and neighbours, the Empire was the direct continuation of the Ancient Roman State...

, India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

, and possibly China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...

. The profits from the gold and salt trades created powerful empires in the western Sahel
Sahel
The Sahel is the ecoclimatic and biogeographic zone of transition between the Sahara desert in the North and the Sudanian Savannas in the south.It stretches across the North African continent between the Atlantic Ocean and the Red Sea....

 including the Kingdom of Ghana and the Mali
Mali Empire
The Mali Empire or Mandingo Empire or Manden Kurufa was a West African empire of the Mandinka from c. 1230 to c. 1600. The empire was founded by Sundiata Keita and became renowned for the wealth of its rulers, especially Mansa Musa I...

 and Kanem-Bornu Empires
Kanem Empire
The Kanem Empire was located in the present countries of Chad, Nigeria and Libya. At its height it encompassed an area covering not only much of Chad, but also parts of southern Libya , eastern Niger and north-eastern Nigeria...

, where travellers reported vast wealth. Arabs helped build a maritime trade along Africa's east coast, which prospered as Swahili
Swahili people
The Swahili people are a Bantu ethnic group and culture found in East Africa, mainly in the coastal regions and the islands of Kenya, Tanzania and north Mozambique. According to JoshuaProject, the Swahili number in at around 1,328,000. The name Swahili is derived from the Arabic word Sawahil,...

 traders exported ivory and slaves across the Indian Ocean
Indian Ocean
The Indian Ocean is the third largest of the world's oceanic divisions, covering approximately 20% of the water on the Earth's surface. It is bounded on the north by the Indian Subcontinent and Arabian Peninsula ; on the west by eastern Africa; on the east by Indochina, the Sunda Islands, and...

.

Further south empires were less common, with the notable exception of Great Zimbabwe
Great Zimbabwe
Great Zimbabwe is a ruined city that was once the capital of the Kingdom of Zimbabwe, which existed from 1100 to 1450 C.E. during the country’s Late Iron Age. The monument, which first began to be constructed in the 11th century and which continued to be built until the 14th century, spanned an...

. In the Great Lakes region, states such as Rwanda
Rwanda
Rwanda or , officially the Republic of Rwanda , is a country in central and eastern Africa with a population of approximately 11.4 million . Rwanda is located a few degrees south of the Equator, and is bordered by Uganda, Tanzania, Burundi and the Democratic Republic of the Congo...

, Burundi
Burundi
Burundi , officially the Republic of Burundi , is a landlocked country in the Great Lakes region of Eastern Africa bordered by Rwanda to the north, Tanzania to the east and south, and the Democratic Republic of the Congo to the west. Its capital is Bujumbura...

, and Buganda
Buganda
Buganda is a subnational kingdom within Uganda. The kingdom of the Ganda people, Buganda is the largest of the traditional kingdoms in present-day Uganda, comprising all of Uganda's Central Region, including the Ugandan capital Kampala, with the exception of the disputed eastern Kayunga District...

 became strongly centralized, due to its high population and agricultural surplus.

In the 15th century, Portuguese
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...

 traders circumvented the Saharan trade route and began to trade directly with Guinea
Guinea (region)
Guinea is a traditional name for the region of Africa that lies along the Gulf of Guinea. It stretches north through the forested tropical regions and ends at the Sahel.-History:...

. Other European traders followed, rapidly boosting prosperity in Western Africa. States flourished, including the Kingdom of Benin, Dahomey
Dahomey
Dahomey was a country in west Africa in what is now the Republic of Benin. The Kingdom of Dahomey was a powerful west African state that was founded in the seventeenth century and survived until 1894. From 1894 until 1960 Dahomey was a part of French West Africa. The independent Republic of Dahomey...

, and the Ashanti Confederacy. Loose federations of city states such as those of the Yoruba
Yoruba people
The Yoruba people are one of the largest ethnic groups in West Africa. The majority of the Yoruba speak the Yoruba language...

 and Hausa
Hausa people
The Hausa are one of the largest ethnic groups in West Africa. They are a Sahelian people chiefly located in northern Nigeria and southeastern Niger, but having significant numbers living in regions of Cameroon, Ghana, Cote d'Ivoire, Chad and Sudan...

 were common. However, this wealth was principally based on the slave trade
African slave trade
Systems of servitude and slavery were common in many parts of Africa, as they were in much of the ancient world. In some African societies, the enslaved people were also indentured servants and fully integrated; in others, they were treated much worse...

, 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
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....

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
Keynesian economics
Keynesian economics is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the...

, did the colonial administrations seriously encourage development. However, new projects could not transpire until after the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

 and the Second World War
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

.

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-sufficiency 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
South America
South America is a continent situated in the Western Hemisphere, mostly in the Southern Hemisphere, with a relatively small portion in the Northern Hemisphere. The continent is also considered a subcontinent of the Americas. It is bordered on the west by the Pacific Ocean and on the north and east...

 experienced solid growth, and East Asia
East Asia
East Asia or Eastern Asia is a subregion of Asia that can be defined in either geographical or cultural terms...

 spectacular growth, during that same period. According to the World Economic Forum
World Economic Forum
The World Economic Forum is a Swiss non-profit foundation, based in Cologny, Geneva, best known for its annual meeting in Davos, a mountain resort in Graubünden, in the eastern Alps region of Switzerland....

, ten percent of the world's poor were African in 1970; by 2000, that figure had risen to 50 percent. Between 1974 and 2000 the average income declined by $200. Beginning in 1976, the Lomé Convention
Lomé Convention
The Lomé Convention is a trade and aid agreement between the European Community and 71 African, Caribbean, and Pacific countries, first signed in February 1975 in Lomé, Togo.- History :...

 and Cotonou Agreement
Cotonou Agreement
The Cotonou Agreement is a treaty between the European Union and the African, Caribbean and Pacific Group of States . It was signed in June 2000 in Cotonou, the largest city in Benin, by 78 ACP countries and the then fifteen Member States of the European Union...

 between the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

 and ACP countries
ACP countries
The African, Caribbean and Pacific Group of States is a group of countries , created by the Georgetown Agreement in 1975. The group's main objectives are sustainable development and poverty reduction within its member states, as well as their greater integration into the world's economy...

, including Sub-Saharan Africa, have structured economic relations between the two regions.

Sectors


It is through the sectors of Africa's work industry that the economy can be maintained. Most of this is contributed to exporting of goods. This is due to the smaller amount of secondary industries available in the continent. In 2009, 87% of Africa's economy was from exportation alone.

Agriculture


Around 60 percent of African workers are employed by the agricultural sector, with about three-fifths of African farmers being subsistence farmers. Subsistence farms provide a source of food and a relatively small income for the family, but generally fail to produce enough to make re-investment possible. Larger farms tend to grow cash crop
Cash crop
In agriculture, a cash crop is a crop which is grown for profit.The term is used to differentiate from subsistence crops, which are those fed to the producer's own livestock or grown as food for the producer's family...

s such as coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...

, cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....

, cocoa, and rubber
Rubber
Natural rubber, also called India rubber or caoutchouc, is an elastomer that was originally derived from latex, a milky colloid produced by some plants. The plants would be ‘tapped’, that is, an incision made into the bark of the tree and the sticky, milk colored latex sap collected and refined...

. These farms, normally operated by large corporations, cover tens of square kilometres and employ large numbers of labourers.

The situation whereby African nations export crops to the West while millions on the continent starve has been blamed on developed countries including Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...

, the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

 and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

. These countries protect their own agricultural sectors with high import tariffs and offer subsidies to their farmers, which many contend leads the overproduction of such commodities as grain, cotton and milk. The result of this is that the global price of such products is continually reduced until Africans are unable to compete, except for cash crops that do not grow easily in a northern climate.

Because of 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 often very little food saved and many starve. Ironically, excess foodstuffs grown in developed nations are regularly destroyed, as it is not economically viable to transport it across the oceans to a market poor in capital. Although cash crops can expand a nation's wealth, there is often a risk that focusing on them rather than staples will lead to food shortages and hunger.

In modern years countries such as Brazil, which has experienced great progress in agricultural production, have agreed to share technology with Africa to greatly increase agricultural production in the continent to make it a more viable trade partner. Increased investment in African agricultural technology in general has the potential to greatly decrease poverty in Africa. The demand market for African cocoa is currently experiencing an enjoyable price boom. The South African and Ugandan governments have targeted policies to take advantage of the increased demand for certain agricultural products and plan to stimulate agricultural sectors. The African Union has plans to heavily invest in African agriculture and the situation is closely monitored by the UN.

Mining and drilling


Oil production by country
(with other key actors of African or oil economy)
Rank Area bb/day Year Like...
_ W: World 85540000 2007 est.
01 E: Russia 9980000 2007 est.
02 Ar: Saudi Arb 9200000 2008 est.
05 As: China 3725000 2008 est. Iran
10 Af: Nigeria/Africa 2352000 2011 est. Norway
15 Af: Algeria 2173000 2007 est.
16 Af: Angola 1910000 2008 est.
17 Af: Libya 1845000 2007 est.
27 Af: Egypt 664000 2007 est. Australia
31 Af: Sudan 466100 2007 est. Ecuador
33 Af: Eq.Guinea 368500 2007 est. Vietnam
38 Af: DR Congo
Democratic Republic of the Congo
The Democratic Republic of the Congo is a state located in Central Africa. It is the second largest country in Africa by area and the eleventh largest in the world...

 
261000 2008 est.
39 Af: Gabon 243900 2007 est.
40 Af: Sth Africa 199100 2007 est.
45 Af: Chad 156000 2008 est. Germany
53 Af: Cameroon 87400 2008 est. France
56 E: France 71400 2007
60 Af: Ivory Coast 54400 2008 est.
_ Af: Africa 10780400 2011 Russia
Source: CIA.gov, World Facts Book > Oil exporters.


Africa's most valuable exports are mineral
Mineral
A mineral is a naturally occurring solid chemical substance formed through biogeochemical processes, having characteristic chemical composition, highly ordered atomic structure, and specific physical properties. By comparison, a rock is an aggregate of minerals and/or mineraloids and does not...

s and petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

. A few countries possess and export the vast majority of these resources. The southern nations have large reserves of gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...

, diamond
Diamond
In mineralogy, diamond is an allotrope of carbon, where the carbon atoms are arranged in a variation of the face-centered cubic crystal structure called a diamond lattice. Diamond is less stable than graphite, but the conversion rate from diamond to graphite is negligible at ambient conditions...

s, and copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...

. Petroleum is concentrated in Nigeria
Nigeria
Nigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...

, Angola
Angola
Angola, officially the Republic of Angola , is a country in south-central Africa bordered by Namibia on the south, the Democratic Republic of the Congo on the north, and Zambia on the east; its west coast is on the Atlantic Ocean with Luanda as its capital city...

, its neighbors, and Libya
Libya
Libya is an African country in the Maghreb region of North Africa bordered by the Mediterranean Sea to the north, Egypt to the east, Sudan to the southeast, Chad and Niger to the south, and Algeria and Tunisia to the west....

.

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 mega-projects that return little value.

In some cases, these resources have turned out to be detrimental to economic development. Although DR 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 DR Congo's independence from Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...

, the colonial government hesitated to leave behind these resources.DR Congo solicited UN help against Belgium, but that turned out to be a bad idea. In an attempt to get out of the quagmire, DR 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. However, countries such as Angola and Uganda are experiencing booms in drilling and oil drilling and manufacture.

Manufacturing


Africa is the least industrialized continent; only South Africa
South Africa
The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...

, Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...

, Morocco
Morocco
Morocco , officially the Kingdom of Morocco , is a country located in North Africa. It has a population of more than 32 million and an area of 710,850 km², and also primarily administers the disputed region of the Western Sahara...

 and Tunisia
Tunisia
Tunisia , officially the Tunisian RepublicThe long name of Tunisia in other languages used in the country is: , is the northernmost country in Africa. It is a Maghreb country and is bordered by Algeria to the west, Libya to the southeast, and the Mediterranean Sea to the north and east. Its area...

 in general have substantial manufacturing sectors. Despite readily available cheap labour, nearly all of the continent's natural resources are exported for secondary refining and manufacturing. According to the AFDB
African Development Bank
The African Development Bank Group is a development bank established in 1964 with the intention of promoting economic and social development in Africa...

, about 15% of workers are employed in the industrial sector.

The multinational corporation
Multinational corporation
A multi national corporation or enterprise , is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation...

s that control most of the world's major industries and their financiers require political stability before erecting an expensive factory and risk losing that investment through nationalization
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...

. An educated populace, good infrastructure and a stable source of electricity are essential to investments. These factors are rare in most countries 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 and Egypt.

Both the African Union
African Union
The African Union is a union consisting of 54 African states. The only all-African state not in the AU is Morocco. Established on 9 July 2002, the AU was formed as a successor to the Organisation of African Unity...

 and the United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...

 have outline plans in modern years on how Africa can help itself industrialize and develop significant manufacturing sectors to levels proportional to the African economy in the 1960s with 21st century technology. This focus on growth and diversification of manufacturing and industrial production, as well as diversification
Agricultural diversification
In the agricultural context, diversification can be regarded as the re-allocation of some of a farm's productive resources, such as land, capital, farm equipment and paid labour, into new activities...

 of agricultural production, has fueled hopes that the 21st century will prove to be a century of economic and technological growth for Africa. This hope coupled with the rise of new leaders in Africa in the future inspired the term "the African Century
African Century
African Century is a term that is used to express belief or hope that the 21st century will bring peace, prosperity and cultural revival to Africa, or is used to draw attention to the need for such an evolution. Among those who have used it in this way are South African politicians Thabo Mbeki and...

" referring to the 21st century potentially being the century when Africa's vast untapped labor, capital and resource potentials might become a world player. This hope in manufacturing and industry is helped by the boom in communications technology and local mining industry in much of sub-Saharan Africa. Namibia has attracted industrial investments in recent years and South Africa has begun offering tax incentives to attract foreign direct investment projects in manufacturing.

Countries such as Mauritius have plans for developing new "green technology" for manufacturing. Developments such as this have huge potential to open new markets for African countries as the demand for alternative "green" and clean technology is predicted to soar in the future as global oil reserves dry up and fossil fuel-based technology becomes more economically unviable.

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 and Egypt alone have a thriving banking sector, aided by the international sanctions of the apartheid era, which forced out the once-dominant British banks for the former. 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 International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

 (IMF) and World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

. One important reform was obtaining permission for increased penetration by foreign banks. South Africa and Egypt have been the most successful in attracting local operation of foreign banks. In 2007, Egypt surpassed South Africa as the biggest recipient of FDI recording $11.1 bn. This trend continued in 2008, where Egypt attracted $13.2 bn in FDI.

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. The IMF and World Bank only lend money after imposing stringent and controversial conditions such as austerity
Austerity
In economics, austerity is a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided. Austerity policies are often used by governments to reduce their deficit spending while sometimes coupled with increases in taxes to pay back creditors to...

 policies. However, China and India have showed exponentially increasing interest in emerging African economies in the 21st century. Investment in Africa by China and African trade with China has increased dramatically in recent years, even regardless of the current world financial crisis. The increased investment in Africa by China has attracted the attention of the European Union and has provoked talks of competitive investment by the EU. Members of the African diaspora
African diaspora
The African diaspora was the movement of Africans and their descendants to places throughout the world—predominantly to the Americas also to Europe, the Middle East and other places around the globe...

 abroad, especially in the EU and the United States, have increased efforts to use their businesses to invest in Africa and encourage African investment abroad in the European economy. Remittances from the African diaspora and rising interest in investment from the West will be especially helpful for Africa's least developed and most devastated economies, such as Burundi, Togo and Comoros.

Angola has announced interests in investing in the EU, Portugal in particular. South Africa has attracted increasing attention from the United States as a new frontier of investment in manufacture, financial markets and small business, as has Liberia in recent years with new leadership.

There are two African currency union
Currency union
A currency union is where two or more states share the same currency, though without there necessarily having any further integration such as an Economic and Monetary Union, which has in addition a customs union and a single market.There are three types of currency unions:#Informal - unilateral...

s: 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
CFA franc
The CFA franc is the name of two currencies used in Africa which are guaranteed by the French treasury. The two CFA franc currencies are the West African CFA franc and the Central African CFA franc...

 as their legal tender.

Communication and information technology


Mobile telephones in Africa has the largest growth rate of subscribers in the world. African markets are expanding nearly twice as fast as Asia
Asia
Asia is the world's largest and most populous continent, located primarily in the eastern and northern hemispheres. It covers 8.7% of the Earth's total surface area and with approximately 3.879 billion people, it hosts 60% of the world's current human population...

n markets. The African cell phone has created a base for cellular banking. Namibia has attracted international attention with new phone services and liberalization of regulatory controls in Kenya is producing a boom in Internet services demand and demand for modern communication technology.

While mobile phones and the required infrastructure have seen impressive growth, Africa still needs more laptops, PCs and fibre optic cables for faster internet connections for a comprehensive ICT revolution. The global financial crisis led to a decline in investment and there are also signs of a market saturation in several countries mobile phone markets. Internet access and the necessary infrastructure is far lower in Africa than in the rest of the world. Increasing price competition has lowered the ability of companies to invest in infrastructure needed for new technologies, such as third generation (3G) networks
3G
3G or 3rd generation mobile telecommunications is a generation of standards for mobile phones and mobile telecommunication services fulfilling the International Mobile Telecommunications-2000 specifications by the International Telecommunication Union...

. There are, however, many international projects involving a variety of international and African capital (bother private and public) designed to improve the infrastructure. Such projects include the East African Submarine Cable System (EASSy) started in 2003 supported with a €2.6 million subsidy from the EU-Africa Infrastructure Trust Fund's. It went into service in July 2010 and provides high-speed Internet access to 20 Eastern and Central African countries.

Determinants


The seemingly intractable nature of Africa's poverty runs counter to modern economic theory, leading to debate concerning its root causes. Endemic warfare
Endemic warfare
Endemic warfare is the state of continual, low-threshold warfare in a tribal warrior society. Endemic warfare is often highly ritualized and plays an important function in assisting the formation of a social structure among the tribes' men by proving themselves in battle.Ritual fighting permits...

 and unrest, widespread corruption, and despotic regimes are both causes and effects of the continued economic problems.

Geography



Variations of the controversial theory of geographic determinism
Geographic determinism
Geographic determinism is the theory that the human habits and characteristics of a particular culture are shaped by geographic conditions. Coined by Ellsworth Huntington, the theory looked at the rise and fall of the Roman Empire from 400-500. Much of the fall of the empire had to do with a...

 date back to Montesquieu
Charles de Secondat, baron de Montesquieu
Charles-Louis de Secondat, baron de La Brède et de Montesquieu , generally referred to as simply Montesquieu, was a French social commentator and political thinker who lived during the Enlightenment...

, 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
Jeffrey Sachs
Jeffrey David Sachs is an American economist and Director of The Earth Institute at Columbia University. One of the youngest economics professors in the history of Harvard University, Sachs became known for his role as an adviser to Eastern European and developing country governments in the...

 and popular writers such as Jared Diamond
Jared Diamond
Jared Mason Diamond is an American scientist and author whose work draws from a variety of fields. He is currently Professor of Geography and Physiology at UCLA...

.

Africa has the largest hot desert and the second largest tropical forest in the world that hinder building transcontinental means of transportations, hampering its economy. In the centre of the continent, on the western side, an almost impenetrable rainforest
Rainforest
Rainforests are forests characterized by high rainfall, with definitions based on a minimum normal annual rainfall of 1750-2000 mm...

 impedes the transit of people and goods. The Sahara creates an obvious barrier to trade from the north. Although Africa has great river systems such as the Nile
Nile
The Nile is a major north-flowing river in North Africa, generally regarded as the longest river in the world. It is long. It runs through the ten countries of Sudan, South Sudan, Burundi, Rwanda, Democratic Republic of the Congo, Tanzania, Kenya, Ethiopia, Uganda and Egypt.The Nile has two major...

, Niger
Niger River
The Niger River is the principal river of western Africa, extending about . Its drainage basin is in area. Its source is in the Guinea Highlands in southeastern Guinea...

, Congo
Congo River
The Congo River is a river in Africa, and is the deepest river in the world, with measured depths in excess of . It is the second largest river in the world by volume of water discharged, though it has only one-fifth the volume of the world's largest river, the Amazon...

, and Zambezi
Zambezi
The Zambezi is the fourth-longest river in Africa, and the largest flowing into the Indian Ocean from Africa. The area of its basin is , slightly less than half that of the Nile...

, 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 steppe
Steppe
In physical geography, steppe is an ecoregion, in the montane grasslands and shrublands and temperate grasslands, savannas, and shrublands biomes, characterized by grassland plains without trees apart from those near rivers and lakes...

s or plain
Plain
In geography, a plain is land with relatively low relief, that is flat or gently rolling. Prairies and steppes are types of plains, and the archetype for a plain is often thought of as a grassland, but plains in their natural state may also be covered in shrublands, woodland and forest, or...

s 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.

The majority of the world's population and wealth is found in the temperate zone. Historically the vast expanse of Eurasia
Eurasia
Eurasia is a continent or supercontinent comprising the traditional continents of Europe and Asia ; covering about 52,990,000 km2 or about 10.6% of the Earth's surface located primarily in the eastern and northern hemispheres...

, 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, and why other tropical areas in South America and Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...

 share Africa's poverty. Exceptions exist, Singapore and Brunei among them; however these are isolated spots of wealth. There are no tropical countries in the OECD, apart from Mexico and Australia which have significant tropical sections (in the case of Australia, although having significant tropical area, the majority of the population lives in the temperate zone), and only a handful have a GDP per capita above the world average, again apart from Mexico, Australia, Singapore, Brunei, Malaysia and Thailand. Globally there is a correlation between wealth and climate although it does not fully explain all instances of poverty in Africa.

Africa is well-endowed with natural resource
Natural resource
Natural resources occur naturally within environments that exist relatively undisturbed by mankind, in a natural form. A natural resource is often characterized by amounts of biodiversity and geodiversity existent in various ecosystems....

s, including gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...

, diamond
Diamond
In mineralogy, diamond is an allotrope of carbon, where the carbon atoms are arranged in a variation of the face-centered cubic crystal structure called a diamond lattice. Diamond is less stable than graphite, but the conversion rate from diamond to graphite is negligible at ambient conditions...

s, and oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

 reserves, but due to several factors including poor governance and global trade policies which place tariffs on finished goods from Africa, 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.

Infrastructure


According to researchers at the Overseas Development Institute
Overseas Development Institute
The Overseas Development Institute is one of the leading independent think tanks on international development and humanitarian issues. Based in London, its mission is "to inspire and inform policy and practice which lead to the reduction of poverty, the alleviation of suffering and the achievement...

, the lack of infrastructure in many developing countries represents one of the most significant limitations to economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

 and achievement of the Millennium Development Goals
Millennium Development Goals
The Millennium Development Goals are eight international development goals that all 193 United Nations member states and at least 23 international organizations have agreed to achieve by the year 2015...

 (MDGs). Infrastructure investments and maintenance can be very expensive, especially in such areas as landlocked, rural and sparsely populated countries in Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...

.
It has been argued that infrastructure investments contributed to more than half of Africa's improved growth performance between 1990 and 2005 and increased investment is necessary to maintain growth and tackle poverty. The returns to investment in infrastructure are very significant, with on average 30–40% returns for telecommunications (ICT) investments, over 40% for electricity
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...

 generation and 80% for roads.

In Africa, it is argued that to meet the MDGs by 2015, infrastructure investments would need to reach about 15% of GDP (around $93 billion a year). Currently, the source of financing varies significantly across sectors. Some sectors are dominated by state spending, others by overseas development aid
Development aid
Development aid or development cooperation is aid given by governments and other agencies to support the economic, environmental, social and political development of developing countries.It is distinguished...

 (ODA) and yet others by private investors. In sub-Saharan Africa, the state spends around $9.4 billion out of a total of $24.9 billion. In irrigation, SSA states represent almost all spending; in transport and energy a majority of investment is state spending; in Information and communication technologies
Information and communication technologies
Information and communications technology or information and communication technology, usually abbreviated as ICT, is often used as an extended synonym for information technology , but is usually a more general term that stresses the role of unified communications and the integration of...

 and water supply and sanitation, the private sector represents the majority of capital expenditure. Overall, aid, the private sector and non-OECD financiers between them exceed state spending. The private sector spending alone equals state capital expenditure, though the majority is focused on ICT infrastructure investments. External financing increased from $7 billion (2002) to $27 billion (2009). China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...

, in particular, has emerged as an important investor.

Disease


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
Malaria
Malaria is a mosquito-borne infectious disease of humans and other animals caused by eukaryotic protists of the genus Plasmodium. The disease results from the multiplication of Plasmodium parasites within red blood cells, causing symptoms that typically include fever and headache, in severe cases...

. Since the tropical regions are poorer, pharmaceutical companies are reluctant to invest in curing the diseases of the region. Disease reduces productivity and creates a health care cost burden.

A new problem of vast magnitude is the rise of HIV
HIV
Human immunodeficiency virus is a lentivirus that causes acquired immunodeficiency syndrome , a condition in humans in which progressive failure of the immune system allows life-threatening opportunistic infections and cancers to thrive...

/AIDS
AIDS
Acquired immune deficiency syndrome or acquired immunodeficiency syndrome is a disease of the human immune system caused by the human immunodeficiency virus...

 in Sub-Saharan Africa. AIDS, whose spread correlates with poverty, has nevertheless hit hardest in some of the wealthiest African countries, including Botswana
Botswana
Botswana, officially the Republic of Botswana , is a landlocked country located in Southern Africa. The citizens are referred to as "Batswana" . Formerly the British protectorate of Bechuanaland, Botswana adopted its new name after becoming independent within the Commonwealth on 30 September 1966...

, Swaziland
Swaziland
Swaziland, officially the Kingdom of Swaziland , and sometimes called Ngwane or Swatini, is a landlocked country in Southern Africa, bordered to the north, south and west by South Africa, and to the east by Mozambique...

, and South Africa
South Africa
The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...

. AIDS has decimated or will decimate the working-age population of many states. As parents die or become unable to work, their children must find care elsewhere, adding to the burden of already struggling families and states.

The costs of HIV/AIDS, including importation of anti-retroviral AIDS drugs
Antiretroviral drug
Antiretroviral drugs are medications for the treatment of infection by retroviruses, primarily HIV. When several such drugs, typically three or four, are taken in combination, the approach is known as Highly Active Antiretroviral Therapy, or HAART...

 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
Generic drug
A generic drug is a drug defined as "a drug product that is comparable to brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use." It has also been defined as a term referring to any drug marketed under its...

.

Colonialism





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 by creating a cyclical economic link with the ruling colonial power, and with independence this link was broken.

To achieve wealth during the colonial period, imperial overseers geared the economies of Africa towards exporting raw materials. Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...

 produced cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....

, Ruanda-Urundi
Ruanda-Urundi
Ruanda-Urundi was a Belgian suzerainty from 1916 to 1924, a League of Nations Class B Mandate from 1924 to 1945 and then a United Nations trust territory until 1962, when it became the independent states of Rwanda and Burundi.- Overview :...

 was almost completely dedicated to growing coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...

, and Upper Volta
French Upper Volta
Upper Volta was a colony of French West Africaestablished on March 1, 1919, from territories that had been part of the colonies of Upper Senegal and Niger and the Côte d'Ivoire...

 specialized in palm oil
Palm oil
Palm oil, coconut oil and palm kernel oil are edible plant oils derived from the fruits of palm trees. Palm oil is extracted from the pulp of the fruit of the oil palm Elaeis guineensis; palm kernel oil is derived from the kernel of the oil palm and coconut oil is derived from the kernel of the...

. Basing an entire nation's wealth on one commodity in this way would have debilitating effects later. These monoculture
Monoculture
Monoculture is the agricultural practice of producing or growing one single crop over a wide area. It is also known as a way of farming practice of growing large stands of a single species. It is widely used in modern industrial agriculture and its implementation has allowed for large harvests from...

s left national economies extremely vulnerable to price swings, making economic planning difficult. Some writers, such as Walter Rodney
Walter Rodney
Walter Rodney was a prominent Guyanese historian and political activist, who was assassinated in Guyana in 1980.-Career:...

 in his influential book How Europe Underdeveloped Africa
How Europe Underdeveloped Africa
How Europe Underdeveloped Africa is a book written by Walter Rodney in which he portrays the view that Africa was deliberately exploited and underdeveloped by European colonial regimes....

, argue that these colonial policies are directly responsible for many of Africa's modern problems. Other post-colonial scholars, most notably Frantz Fanon
Frantz Fanon
Frantz Fanon was a Martiniquo-Algerian psychiatrist, philosopher, revolutionary and writer whose work is influential in the fields of post-colonial studies, critical theory and Marxism...

, 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.

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
French Equatorial Africa
French Equatorial Africa or the AEF was the federation of French colonial possessions in Middle Africa, extending northwards from the Congo River to the Sahara Desert.-History:...

 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
Raubwirtschaft
Raubwirtschaft is a form of economy where the goal is to plunder the wealth and resources of a country or geographical area. Raubwirtschaft is synonymous of colonialism, where there is no intention of developing the colony economically more than strictly needed for exploitation purposes...

 policies of Leopold II
Leopold II of Belgium
Leopold II was the second king of the Belgians. Born in Brussels the second son of Leopold I and Louise-Marie of Orléans, he succeeded his father to the throne on 17 December 1865 and remained king until his death.Leopold is chiefly remembered as the founder and sole owner of the Congo Free...

 in the Congo Free State
Congo Free State
The Congo Free State was a large area in Central Africa which was privately controlled by Leopold II, King of the Belgians. Its origins lay in Leopold's attracting scientific, and humanitarian backing for a non-governmental organization, the Association internationale africaine...

, have not prospered. The long reluctance of Portugal
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...

 to surrender its colonies, leading to long wars of independence, had an obvious negative effect on Mozambique
Mozambique
Mozambique, officially the Republic of Mozambique , is a country in southeastern Africa bordered by the Indian Ocean to the east, Tanzania to the north, Malawi and Zambia to the northwest, Zimbabwe to the west and Swaziland and South Africa to the southwest...

 and Angola
Angola
Angola, officially the Republic of Angola , is a country in south-central Africa bordered by Namibia on the south, the Democratic Republic of the Congo on the north, and Zambia on the east; its west coast is on the Atlantic Ocean with Luanda as its capital city...

. 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
Scramble for Africa
The Scramble for Africa, also known as the Race for Africa or Partition of Africa was a process of invasion, occupation, colonization and annexation of African territory by European powers during the New Imperialism period, between 1881 and World War I in 1914...

, 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 the Americas. At the end of the Second World War the Americas were economically the strongest of the colonised regions; in the span of one generation, former colonies in Asia have become economic powerhouses.

Borders


In the Scramble for Africa
Scramble for Africa
The Scramble for Africa, also known as the Race for Africa or Partition of Africa was a process of invasion, occupation, colonization and annexation of African territory by European powers during the New Imperialism period, between 1881 and World War I in 1914...

, national boundaries in sub-Saharan Africa were established by Europeans using latitude
Latitude
In geography, the latitude of a location on the Earth is the angular distance of that location south or north of the Equator. The latitude is an angle, and is usually measured in degrees . The equator has a latitude of 0°, the North pole has a latitude of 90° north , and the South pole has a...

 and longitude
Longitude
Longitude is a geographic coordinate that specifies the east-west position of a point on the Earth's surface. It is an angular measurement, usually expressed in degrees, minutes and seconds, and denoted by the Greek letter lambda ....

 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 induce 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
Rwanda
Rwanda or , officially the Republic of Rwanda , is a country in central and eastern Africa with a population of approximately 11.4 million . Rwanda is located a few degrees south of the Equator, and is bordered by Uganda, Tanzania, Burundi and the Democratic Republic of the Congo...

 and Burundi
Burundi
Burundi , officially the Republic of Burundi , is a landlocked country in the Great Lakes region of Eastern Africa bordered by Rwanda to the north, Tanzania to the east and south, and the Democratic Republic of the Congo to the west. Its capital is Bujumbura...

, 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. Elsewhere, the Americas were also divided up by Europeans along arbitrary borders and yet those continents remain economically far more successful than Africa.

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.

Language diversity


African countries suffer from communication difficulties caused by language diversity. Greenberg's diversity index
Linguistic Diversity Index
Linguistic diversity index or Greenberg’s diversity index is an index to measure how diverse a country’s languages are. It is on a scale of 1 to 0 with 1 indicating total diversity 0 indicates no diversity at all...

 is the chance that two randomly selected people would have different mother tongues. Out of the most diverse 25 countries according to this index, 18 (72%) are African. This includes 12 countries for which Greenberg's diversity index exceeds 0.9, meaning that a pair of randomly selected people will have less than 10% chance of having the same mother tongue. The primary language of government, political debate, academic discourse, and administration is often the language of the former colonial powers—English
English language
English is a West Germanic language that arose in the Anglo-Saxon kingdoms of England and spread into what was to become south-east Scotland under the influence of the Anglian medieval kingdom of Northumbria...

, French
French language
French is a Romance language spoken as a first language in France, the Romandy region in Switzerland, Wallonia and Brussels in Belgium, Monaco, the regions of Quebec and Acadia in Canada, and by various communities elsewhere. Second-language speakers of French are distributed throughout many parts...

, or Portuguese
Portuguese language
Portuguese is a Romance language that arose in the medieval Kingdom of Galicia, nowadays Galicia and Northern Portugal. The southern part of the Kingdom of Galicia became independent as the County of Portugal in 1095...

. 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 dictatorship
Military dictatorship
A military dictatorship is a form of government where in the political power resides with the military. It is similar but not identical to a stratocracy, a state ruled directly by the military....

s. Although 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
Zaire
The Republic of Zaire was the name of the present Democratic Republic of the Congo between 27 October 1971 and 17 May 1997. The name of Zaire derives from the , itself an adaptation of the Kongo word nzere or nzadi, or "the river that swallows all rivers".-Self-proclaimed Father of the Nation:In...

, whose regime has been called a kleptocracy
Kleptocracy
Kleptocracy, alternatively cleptocracy or kleptarchy, is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population, often without pretense of honest...

 due to its looting of the nation's wealth. According to international measures, the economies of Africa generally rank among the most corrupt
Political corruption
Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...

. Bribery
Bribery
Bribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...

 and graft abound, due to poverty and poorly handled de-colonization
Decolonization
Decolonization refers to the undoing of colonialism, the unequal relation of polities whereby one people or nation establishes and maintains dependent Territory over another...

, and the superpower
Superpower
A superpower is a state with a dominant position in the international system which has the ability to influence events and its own interests and project power on a worldwide scale to protect those interests...

s' (Soviet Union and United States) practice during the Cold War
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...

 of supporting any ruler with the desired political alignment, regardless of their managerial practices or human rights records.

Dependency theory
Dependency theory
Dependency theory or dependencia theory is a body of social science theories predicated on the notion that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states, enriching the latter at the expense of the former...

 asserts that the wealth and prosperity of the superpowers and their allies in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...

, North America
North America
North America is a continent wholly within the Northern Hemisphere and almost wholly within the Western Hemisphere. It is also considered a northern subcontinent of the Americas...

 and East Asia
East Asia
East Asia or Eastern Asia is a subregion of Asia that can be defined in either geographical or cultural terms...

 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
Agricultural subsidy
An agricultural subsidy is a governmental subsidy paid to farmers and agribusinesses to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities...

 and high import tariffs in the developed world, most notably those set by Japan, the European Union's Common Agricultural Policy
Common Agricultural Policy
The Common Agricultural Policy is a system of European Union agricultural subsidies and programmes. It represents 48% of the EU's budget, €49.8 billion in 2006 ....

, and the United States Department of Agriculture
United States Department of Agriculture
The United States Department of Agriculture is the United States federal executive department responsible for developing and executing U.S. federal government policy on farming, agriculture, and food...

, are thought to be the cause. Although these subsidies and tariffs have been gradually reduced, they remain high.

Local conditions also affect exports. In addition to lack of mechanization or other infrastructure, state over-regulation in several African nations can prevent their own exports from becoming competitive. Research in Public Choice economics such as that of Jane Shaw suggest that protectionism operates in tandem with heavy State intervention combining to depress economic development. Farmers subject to import and export restrictions cater to localized markets, exposing them to higher market volatility and fewer opportunities. When subject to uncertain market conditions farmers press for governmental intervention to suppress competition in their markets, resulting in competition being driven out of the market. As competition is driven out of the market farmers innovate less and grow less food further undermining economic performance.

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
Economic development
Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...

 lies in local investment. Corruption in Africa consists primarily of extracting economic rent
Economic rent
Economic rent is typically defined by economists as payment for goods and services beyond the amount needed to bring the required factors of production into a production process and sustain supply. A recipient of economic rent is a rentier....

 and moving the resulting financial capital
Financial capital
Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e. retail, corporate, investment banking, etc....

 overseas instead of investing at home; the stereotype of African dictators with Swiss bank accounts is often accurate. University of Massachusetts
University of Massachusetts
This article relates to the statewide university system. For the flagship campus often referred to as "UMass", see University of Massachusetts Amherst...

 researchers estimate that from 1970 to 1996, capital flight
Capital flight
Capital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...

 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
Mancur Olson
Mancur Lloyd Olson, Jr. was a leading American economist and social scientist who, at the time of his death, worked at the University of Maryland, College Park...

. 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
Confiscation
Confiscation, from the Latin confiscatio 'joining to the fiscus, i.e. transfer to the treasury' is a legal seizure without compensation by a government or other public authority...

.

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, beyond resource extraction
Resource extraction
The related terms natural resource extraction both refer to the practice of locating, acquiring and selling natural resources....

.

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 enabled by the Cold War
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...

. 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 assist 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 African Great Lakes
African Great Lakes
The African Great Lakes are a series of lakes and the Rift Valley lakes in and around the geographic Great Rift Valley formed by the action of the tectonic East African Rift on the continent of Africa...

 region, Somalia, Sudan, Mozambique, Liberia, Sierra Leone, Ivory Coast, and Guinea-Bissau. International wars include the First
First Congo War
The First Congo War was a revolution in Zaire that replaced President Mobutu Sésé Seko, a decades-long dictator, with rebel leader Laurent-Désiré Kabila. Destabilization in eastern Zaire that resulted from the Rwandan genocide was the final factor that caused numerous internal and external actors...

 and Second Congo War
Second Congo War
The Second Congo War, also known as Coltan War and the Great War of Africa, began in August 1998 in the Democratic Republic of the Congo , and officially ended in July 2003 when the Transitional Government of the Democratic Republic of the Congo took power; however, hostilities continue to this...

s between the Democratic Republic of the Congo
Democratic Republic of the Congo
The Democratic Republic of the Congo is a state located in Central Africa. It is the second largest country in Africa by area and the eleventh largest in the world...

 and its neighbours, and conflict between Ethiopia and its former province Eritrea
Eritrea
Eritrea , officially the State of Eritrea, is a country in the Horn of Africa. Eritrea derives it's name from the Greek word Erethria, meaning 'red land'. The capital is Asmara. It is bordered by Sudan in the west, Ethiopia in the south, and Djibouti in the southeast...

.

Effects of widespread poverty



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
Standard of living
Standard of living is generally measured by standards such as real income per person and poverty rate. Other measures such as access and quality of health care, income growth inequality and educational standards are also used. Examples are access to certain goods , or measures of health such as...

 and quality of life
Quality of life
The term quality of life is used to evaluate the general well-being of individuals and societies. The term is used in a wide range of contexts, including the fields of international development, healthcare, and politics. Quality of life should not be confused with the concept of standard of...

. 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
Angola
Angola, officially the Republic of Angola , is a country in south-central Africa bordered by Namibia on the south, the Democratic Republic of the Congo on the north, and Zambia on the east; its west coast is on the Atlantic Ocean with Luanda as its capital city...

, 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
Digital divide
The Digital Divide refers to inequalities between individuals, households, business, and geographic areas at different socioeconomic levels in access to information and communication technologies and Internet connectivity and in the knowledge and skills needed to effectively use the information...

 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
Human Development Index
The Human Development Index is a composite statistic used to rank countries by level of "human development" and separate "very high human development", "high human development", "medium human development", and "low human development" countries...

. Infant mortality
Infant mortality
Infant mortality is defined as the number of infant deaths per 1000 live births. Traditionally, the most common cause worldwide was dehydration from diarrhea. However, the spreading information about Oral Re-hydration Solution to mothers around the world has decreased the rate of children dying...

 is high, while life expectancy
Life expectancy
Life expectancy is the expected number of years of life remaining at a given age. It is denoted by ex, which means the average number of subsequent years of life for someone now aged x, according to a particular mortality experience...

, 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
Persian Gulf
The Persian Gulf, in Southwest Asia, is an extension of the Indian Ocean located between Iran and the Arabian Peninsula.The Persian Gulf was the focus of the 1980–1988 Iran-Iraq War, in which each side attacked the other's oil tankers...

 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
Desert locust
Plagues of the desert locust have threatened agricultural production in Africa, the Middle East, and Asia for centuries. The livelihood of at least one-tenth of the world’s human population can be affected by this voracious insect...

.

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
Lagos
Lagos is a port and the most populous conurbation in Nigeria. With a population of 7,937,932, it is currently the third most populous city in Africa after Cairo and Kinshasa, and currently estimated to be the second fastest growing city in Africa...

, Kinshasa
Kinshasa
Kinshasa is the capital and largest city of the Democratic Republic of the Congo. The city is located on the Congo River....

, and Nairobi
Nairobi
Nairobi is the capital and largest city of Kenya. The city and its surrounding area also forms the Nairobi County. The name "Nairobi" comes from the Maasai phrase Enkare Nyirobi, which translates to "the place of cool waters". However, it is popularly known as the "Green City in the Sun" and is...

 notably 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
Bushmeat
Bushmeat initially referred to the hunting of wild animals in West and Central Africa and is a calque from the French viande de brousse. Today the term is commonly used for meat of terrestrial wild animals, killed for subsistence or commercial purposes throughout the humid tropics of the Americas,...

). Along the length of the Sahel, deforestation
Deforestation
Deforestation is the removal of a forest or stand of trees where the land is thereafter converted to a nonforest use. Examples of deforestation include conversion of forestland to farms, ranches, or urban use....

 and overgrazing has caused increased desertification
Desertification
Desertification is the degradation of land in drylands. Caused by a variety of factors, such as climate change and human activities, desertification is one of the most significant global environmental problems.-Definitions:...

 as the Sahara spreads south. Profits from the sale in the West of rare animals, ivory
Ivory
Ivory is a term for dentine, which constitutes the bulk of the teeth and tusks of animals, when used as a material for art or manufacturing. Ivory has been important since ancient times for making a range of items, from ivory carvings to false teeth, fans, dominoes, joint tubes, piano keys and...

 from elephants, and timber encourage illegal poaching
Poaching
Poaching is the illegal taking of wild plants or animals contrary to local and international conservation and wildlife management laws. Violations of hunting laws and regulations are normally punishable by law and, collectively, such violations are known as poaching.It may be illegal and in...

. 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
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...

 and steel
Steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...

 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
Marxism
Marxism is an economic and sociopolitical worldview and method of socioeconomic inquiry that centers upon a materialist interpretation of history, a dialectical view of social change, and an analysis and critique of the development of capitalism. Marxism was pioneered in the early to mid 19th...

. 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. However, there are a few successful socialist endeavors in Africa which have led to growth or increasing wealth in a small handful of African countries such as Libya and Angola.

Liberalism


Thus in the 1980s, socialist ideas were discarded throughout almost the entire continent as capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

 became seen as the route to salvation in what became known as the Washington Consensus
Washington Consensus
The term Washington Consensus was coined in 1989 by the economist John Williamson to describe a set of ten relatively specific economic policy prescriptions that he considered constituted the "standard" reform package promoted for crisis-wracked developing countries...

. By 1990, forty of the nations of Sub-Saharan Africa had agreed to follow rigorous International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

 (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
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

 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 General Agreement on Tariffs and Trade
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...

 (GATT) 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
Dependency theory
Dependency theory or dependencia theory is a body of social science theories predicated on the notion that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states, enriching the latter at the expense of the former...

 has been given limited trials in several African countries. In the 1980s, Nigeria
Nigeria
Nigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...

 banned the importation of many foodstuffs to stimulate domestic production. The Lagos Plan of Action
Lagos Plan of Action
The Lagos Plan of Action was an Organisation of African Unity-backed plan to increase Africa's self-suffiency...

 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
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...

 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
Amartya Sen
Amartya Sen, CH is an Indian economist who was awarded the 1998 Nobel Prize in Economic Sciences for his contributions to welfare economics and social choice theory, and for his interest in the problems of society's poorest members...

 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
Debt relief
Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. From antiquity through the 19th century, it refers to domestic debts, in particular agricultural debts and freeing of debt slaves...

 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.

Arguments against full and unconditional debt relief include:
  • Debt relief punishes nations which have managed borrowing well and do not need debt relief.
  • 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.
  • 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
Heavily Indebted Poor Countries
Heavily Indebted Poor Countries is a group of 40 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund and the World Bank.- History and structure :...

 initiative was launched in 1996; in the 2000s, eligible countries began receiving debt relief. Future foreign aid is planned to be more heavily weighted toward grants than loans.

International unions


The African Union
African Union
The African Union is a union consisting of 54 African states. The only all-African state not in the AU is Morocco. Established on 9 July 2002, the AU was formed as a successor to the Organisation of African Unity...

 is the largest international economic grouping on the continent. The confederation's goals include the creation of a free trade area
Free trade area
A free trade area is a trade bloc whose member countries have signed a free trade agreement , which eliminates tariffs, import quotas, and preferences on most goods and services traded between them. If people are also free to move between the countries, in addition to FTA, it would also be...

, a customs union
Customs union
A customs union is a type of trade bloc which is composed of a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas...

, a single market
Single market
A single market is a type of trade bloc which is composed of a free trade area with common policies on product regulation, and freedom of movement of the factors of production and of enterprise and services. The goal is that the movement of capital, labour, goods, and services between the members...

, a central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...

, and a common currency (see African Monetary Union
African Monetary Union
The African Monetary Union is the proposed creation of an economic and monetary union for the countries of the African Union, administered by the African Central Bank...

), thereby establishing economic and monetary union
Economic and monetary union
An economic and monetary union is a type of trade bloc which is composed of an economic union with a monetary union. It is to be distinguished from a mere monetary union , which does not involve a common market. This is the fifth stage of economic integration...

. The current plan is to establish an African Economic Community
African Economic Community
The African Economic Community is an organization of African Union states establishing grounds for mutual economic development among the majority of African states...

 with a single currency by 2023. The African Investment Bank
African Investment Bank
The African Investment Bank is one of three financial institutions of the African Union along with the African Monetary Fund and the African Central Bank...

 is meant to stimulate development. The AU plans also include a transitional African Monetary Fund
African Monetary Fund
The Africa Monetary Fund will be an African Union financial institution, though in time its responsibilities will be transferred to the African Central Bank.This institution is one of the three financial institutions of the future African Union. It will be based in Yaoundé, Cameroon. -Links:**...

 leading to an African Central Bank
African Central Bank
The African Central Bank is one of the three financial institutions of the African Union. Over time, it will take over responsibilities of the African Monetary Fund....

. Some parties support development of an even more unified United States of Africa
United States of Africa
The United States of Africa is a proposed name for the concept of a federation of some or all of the 55 sovereign states of Africa.Former Libyan leader Muammar al-Gaddafi, who was the 2009 Chairperson of the African Union , advanced the idea of a United States of Africa at two regional African...

.

International monetary and banking unions include:
  • Central Bank of West African States
    Central Bank of West African States
    The Central Bank of West African States is a central bank serving the eight west African countries which comprise the West African Economic and Monetary Union:*Benin*Burkina Faso*Cote d'Ivoire*Guinea Bissau*Mali*Niger*Senegal*Togo-See also:...

  • Bank of Central African States
    Bank of Central African States
    The Bank of Central African States is a central bank that serves six central African countries which form the Economic and Monetary Community of Central Africa:*Cameroon*Central African Republic*Chad*Equatorial Guinea*Gabon*Republic of the Congo...

  • Common Monetary Area
    Common Monetary Area
    The Common Monetary Area links South Africa, Lesotho and Swaziland into a monetary union. It is allied to the Southern African Customs Union . Namibia automatically became a member upon independence, but withdrew with the introduction of the Namibian dollar in 1993...


Major economic unions are shown in the chart below.

See also


Arab Egypt

Zaire
Zaire
The Republic of Zaire was the name of the present Democratic Republic of the Congo between 27 October 1971 and 17 May 1997. The name of Zaire derives from the , itself an adaptation of the Kongo word nzere or nzadi, or "the river that swallows all rivers".-Self-proclaimed Father of the Nation:In...



Ogaden
Ogaden
Ogaden is the name of a territory comprising the southeastern portion of the Somali Regional State in Ethiopia. The inhabitants are predominantly ethnic Somali and Muslim. The title "Somali Galbeed", which means "Western Somalia," is often preferred by Somali irredentists.The region, which is...



Madeira
Madeira
Madeira is a Portuguese archipelago that lies between and , just under 400 km north of Tenerife, Canary Islands, in the north Atlantic Ocean and an outermost region of the European Union...



External links