Africa in postcolonial period
African economy today
Economic organizations in Africa
Problems and ways to solve them
It isn’t a secret that Republic of Armenia as well as other former socialist republics is at
I think it will be better to begin with short historical overview of the region, which is the home of one of the human races. The historians have defined four periods of African history research.
This period is 2000 B.C. up to 6-th century A.D. During that time Egyptians were researching the north of the mainland. In 6th century B.C. Carthaginians travelled along the west coast. Roman travellers went far into Libyan desert.
7-14 centuries A.D. This is a period of Arabian invasions. After conquering the north they moved to the south and reached Senegal and Niger rivers.
The third period of research is associated with the Europeans desire to find a sea way to the wealth of India. By the end of sixteenth century the continent has been outlined on maps.
This period of African history, which begins in eighteenth century is probably the most shameful part of European history. Europeans blinded with the magnificence of African wealth began sacking its territory, the same way as they did it in America.
2. Africa in postcolonial period
From this time and up to 20-th century African continent was a big colony of a number of European countries. After a century of rule by France, Algeria became independent in 1962. Angola – former Portugal colony got its freedom in 1975. Formerly the British protectorate of Bechuanaland, Botswana adopted its new name upon independence in 1966. The former French Cameroon and part of British Cameroon merged in 1961 to form the p
Zimbabweresent country. Chad was a part of France's African holdings until 1960. The French Territory of the Afars and the Issas became Djibouti in 1977. Formed from the merger of the British colony of the Gold Coast and the Togoland trust territory, Ghana in 1957 became the first country in colonial Africa to gain its independence. Basutoland was renamed the Kingdom of Lesotho upon independence from the UK in 1966. Mozambique almost five centuries was a Portuguese colony came to a close with independence in 1975. Rwanda gains its independence in 1962. The territory of Northern Rhodesia was administered by the South Africa Company from 1891 until takeover by the UK in 1923. During the 1920s and 1930s, advances in mining spurred development and immigration. The name was changed to Zambia upon independence in 1964. The UK annexed Southern Rhodesia from the South Africa Company in 1923. A 1961 constitution was formulated to keep whites in power. In 1965 the government unilaterally declared its independence, but the UK did not recognize the act and demanded voting rights for the black African majority in the country (then called Rhodesia). UN sanctions and a guerrilla uprising finally led to free elections in 1979 and independence (as Zimbabwe) in 1980. But even after formal independence most countries are heavily dependant on Europe in terms of investitions and aids. After the "lost decade" of the eighties when tumbling commodity prices, debt, economic and political mismanagement brought African economies to near bankruptcy, the majority of African countries have embarked on International Monetary Fund (IMF), World Bank and donor supported economic reform programmes. In December of year 2000, the World Bank gave US$155 million in credits to help seven African countries — Madagascar, Mali, Mauritania, Niger, Rwanda, Zambia, and Uganda — cope with an unexpected surge in oil prices and other losses in their terms of trade. These factors were causing serious hardship for the poor in terms of rising energy and transportation costs, which in turn were jeopardizing the success of the countries' reform programs. Still, poverty is higher in Africa than in any other region of the world. According to the latest data two out of five Africans subsist below a poverty line of less than $20 per month; the majority of these are women. This mean that some 300 million Africans live on barely 65 cents a day. Africa has the most unequal distribution of income of any region in the world. The richest twenty percent of Africans own 51 percent of total income, compared to 40 percent in western countries and in South Asia. The last report on Africa made by World Bank group also shows how civil conflict in the region has blunted and reversed growth prospects for war-torn countries. While the trend for many African countries during the 1990s was one of slow but steady economic improvement, those in conflict suffered negative growth and an alarming deterioration in basic conditions (Angola -0.2 percent, Burundi -2.4 percent, Democratic Republic of Congo, -4.6 percent, Rwanda, -2.1 percent, Sierra Leone, -4.6 percent). In essence, the present forecast is that the world's poverty will become even more concentrated in Africa.
But not only the economic problems were quaking the continent. Continuous warfares wouldn’t give a chance to develop national economy of that region. But what is the present situation there? It seemed like the countries stepped on a way of democracy, but as a recent World Bank report on Africa notes, "a sharp distinction should be drawn between formal and real democratisation". During the 1990s, 45 out of 50 African countries held multiparty elections, in addition to the four African countries that had such a system at the start of the decade. But in only ten elections did these lead to a change of government. With the significant exception of Senegal, the trend in the most recent elections on the continent appears to be one of even fewer changes in government. According to the OAU (Organization of African Unity), 26 African conflicts have taken place since 1963, affecting 61 percent of the population. Today, 21 percent of Africa's peoples are in war and conflict (Algeria, Angola, Burundi, Comores, Congo, DRC, Eritrea, Ethiopia, Rwanda, Sierra Leone, Somalia, Sudan and Uganda). It is comparable with Asia (Cambodia, India, Indonesia, Pakistan, Philippines, Sri Lanka, Tibet) or even Europe (Balkans, Northern Ireland, Russia or Spain). According to a recent survey on political rights and civil liberties by Freedom House, 23 out of 50 African countries are classified as "not free". But overall, over the last decade Freedom House has moved Africa’s status from "not free" to "partly free"- a significant improvement. Where there is conflict there is no democracy, there is hardly an economy, and- as we've seen in Somalia and Liberia - one may even question whether there is a state. Poverty, political instability and war go together.
3. African economy today
Economists use a number of indicators to measure a welfare of population of given country. Undoubtaly the most important of them are GDP (Gross Domestic Product) and GNP (Gross National Product). In order to make the comparision more expressive, these indexes are calculated not in absolute values but per capita. This method helps researchers to disengage themselves from the size of the country. Two of other important indicators are Life Expectancy at Birth and Illiteracy Rate.
In 1998 real GDP growth was higher in Africa than any other developing region, while inflation was slightly higher than in Asia and significantly lower than other developing regions. Half the world's ten fastest growing economies are in Africa, although growing off very low bases.
1999 was not a good year for Africa. Armed conflict increased and looks set to continue. The slow-down in the world economy affected stock markets; caused currencies to depreciate; and reduced foreign exchange income from oil, minerals and metals and agricultural products. Aid to the region is reducing and investors are having second thoughts, leaving many projects on the drawing board. Aids, malaria, cholera and other diseases are rampant. Foreign debt servicing and corruption mean that little foreign exchange trickles through to fund education, health and infrastructure. Tourism and, strangely enough, information technology provide the best hope for the dark continent.
The highest GNP per capita from the mentioned countries have Botswana($3240), Algeria($1550) and the lowest Chad($210), Rwanda($250). There’s no need to bring the whole figures in the text but I want to mention some common clauses.
All the countries in the list besides the Algeria situated in the south Africa. The rule is that the South Africa is poorer then the North. Though there is some exceptions Botswana ($3240), South African Republic ($3240).
I try to select the countries which indicators are representing the picture of southern part. Some of the other countries have the indicators lower then mentioned,Burundi ($120), Malawi ($180), Sierra Leone ($ 130) and the other higher, Seychelles ($6500), Gabon ($ 3300), South African Republic.
As it can be easily seen Algeria and Botswana per capita GDP is 3 – 6 times higher then the average on Africa. Some others have 2-6 times lower. In order to explain these exceptions one must consider the particularities of the countries. That’s why I’m bringing short overviews of the mentioned countries followed by some generalizations.
Algeria. The hydrocarbons sector is the backbone of the economy, accounting for roughly 52% of budget revenues, 25% of GDP, and over 95% of export earnings. Algeria has the fifth-largest reserves of natural gas in the world and is the second largest gas exporter; it ranks fourteenth for oil reserves. Algiers' efforts to reform one of the most centrally planned economies in the Arab world stalled in 1992 as the country became embroiled in political turmoil. Burdened with a heavy foreign debt, Algiers concluded a one-year standby arrangement with the IMF in April 1994 and the following year signed onto a three-year extended fund facility which ended 30 April 1998. Some progress on economic reform, Paris Club debt reschedulings in 1995 and 1996, and oil and gas sector expansion contributed to a recovery in growth since 1995. Still, the economy remains heavily dependent on volatile oil and gas revenues. The government has continued efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector, but has had little success in reducing high unemployment and improving living standards.
Angola. Angola is an economy in disarray because of a quarter century of nearly continuous warfare. Despite its abundant natural resources, output per capita is among the world's lowest. Subsistence agriculture provides the main livelihood for 85% of the population. Oil production and the supporting activities are vital to the economy, contributing about 45% to GDP and 90% of exports. Notwithstanding the signing of a peace accord in November 1994, violence continues, millions of land mines remain, and many farmers are reluctant to return to their fields. As a result, much of the country's food must still be imported. To take advantage of its rich resources - gold, diamonds, extensive forests, Atlantic fisheries, and large oil deposits - Angola will need to implement the peace agreement and reform government policies. Despite the increase in the pace of civil warfare in late 1998, the economy grew by an estimated 4% in 1999. The government introduced new currency denominations in 1999. Expanded oil production brightens prospects for 2000, but internal strife discourages investment outside of the petroleum sector.
Botswana. Agriculture still provides a livelihood for more than 80% of the population but supplies only about 50% of food needs and accounts for only 3% of GDP. Subsistence farming and cattle raising predominate. The sector is plagued by erratic rainfall and poor soils. Diamond mining and tourism also are important to the economy. Substantial mineral deposits were found in the 1970s and the mining sector grew from 25% of GDP in 1980 to 38% in 1998. Unemployment officially is 21% but unofficial estimates place it closer to 40%. The Orapa 2000 project, which will double the capacity of the country's main diamond mine, will be finished in early 2000. This will be the main force behind continued economic expansion.
Cameroon. Because of its oil resources and favorable agricultural conditions, Cameroon has one of the best-endowed primary commodity economies in sub-Saharan Africa. Still, it faces many of the serious problems facing other underdeveloped countries, such as a top-heavy civil service and a generally unfavorable climate for business enterprise. Since 1990, the government has embarked on various IMF and World Bank programs designed to spur business investment, increase efficiency in agriculture, improve trade, and recapitalize the nation's banks. The government, however, has failed to press forward vigorously with these programs. The latest enhanced structural adjustment agreement was signed in October 1997; the parties hope this will prove more successful, yet government mismanagement and corruption remain problems. Inflation has been brought back under control. Progress toward privatization of remaining state industry should support continued economic growth in 2000.
Chad. Landlocked Chad's economic development suffers from it's geographic remoteness, drought, lack of infrastructure, and political turmoil. About 85% of the population depends on agriculture, including the herding of livestock. Of Africa's Francophone countries, Chad benefited least from the 50% devaluation of their currencies in January 1994. Financial aid from the World Bank, the African Development Fund, and other sources is directed largely at the improvement of agriculture, especially livestock production. Due to lack of financing, the development of the Doba Basin oil fields, originally due to finish in 2000, has been substantially delayed.
Democratic Republic of Congo (Zaire). The economy of the Democratic Republic of the Congo - a nation endowed with vast potential wealth - has declined drastically since the mid-1980s. The new government instituted a tight fiscal policy that initially curbed inflation and currency depreciation, but these small gains were quickly reversed when the foreign-backed rebellion in the eastern part of the country began in August 1998. The war has dramatically reduced government revenue, and increased external debt. Foreign businesses have curtailed operations due to uncertainty about the outcome of the conflict and because of increased government harassment and restrictions. Poor infrastructure, an uncertain legal framework, corruption, and lack of openness in government economic policy and financial operations remain a brake on investment and growth. A number of IMF and World Bank missions have met with the new government to help it develop a coherent economic plan but associated reforms are on hold. Assuming moderate peace, annual growth is likely to increase to nearly 5% in 2000-01, but inflation will continue to be a problem.
Djibouti. The economy is based on service activities connected with the country's strategic location and status as a free trade zone in northeast Africa. Two-thirds of the inhabitants live in the capital city (Djibouty), the remainder being mostly nomadic herders. Scanty rainfall limits crop production to fruits and vegetables, and most food must be imported. Djibouti provides services as both a transit port for the region and an international transshipment and refueling center. It has few natural resources and little industry. The nation is, therefore, heavily dependent on foreign assistance to help support its balance of payments and to finance development projects. An unemployment rate of 40% to 50% continues to be a major problem. Inflation is not a concern, however, because of the fixed tie of the franc to the US dollar. Per capita consumption dropped an estimated 35% over the last seven years because of recession, civil war, and a high population growth rate (including immigrants and refugees). Also, renewed fighting between Ethiopia and Eritrea has disturbed normal external channels of commerce. Faced with a multitude of economic difficulties, the government has fallen in arrears on long-term external debt and has been struggling to meet the stipulations of foreign aid donors.
Ghana Well endowed with natural resources, Ghana has twice the per capita output of the poorer countries in West Africa. Even so, Ghana remains heavily dependent on international financial and technical assistance. Gold, timber, and cocoa production are major sources of foreign exchange. The domestic economy continues to revolve around subsistence agriculture, which accounts for 40% of GDP and employs 60% of the work force, mainly small landholders. In 1995-97, Ghana made mixed progress under a three-year structural adjustment program in cooperation with the IMF. On the minus side, public sector wage increases and regional peacekeeping commitments have led to continued inflationary deficit financing, depreciation of the cedi (national currency), and rising public discontent with Ghana's austerity measures. A rebound in gold prices is likely to push growth over 5% in 2000-01.
Kenya. Kenya is well placed to serve as an engine of growth in East Africa, but its economy is stagnating because of poor management and uneven commitment to reform. In 1993, the government of Kenya implemented a program of economic liberalization and reform that included the removal of import licensing, price controls, and foreign exchange controls. With the support of the World Bank, IMF, and other donors, the reforms led to a brief turnaround in economic performance following a period of negative growth in the early 1990s. Kenya's real GDP grew 5% in 1995 and 4% in 1996, and inflation remained under control. Growth slowed in 1997-99 however. Political violence damaged the tourist industry, and Kenya's Enhanced Structural Adjustment Program lapsed due to the government's failure to maintain reform or address public sector corruption. A new economic team was put in place in 1999 to revitalize the reform effort, strengthen the civil service, and curb corruption, but wary donors continue to question the government's commitment to sound economic policy. Long-term barriers to development include electricity shortages, the government's continued and inefficient dominance of key sectors, endemic corruption, and the country's high population growth rate.
Lesotho. Small, landlocked, and mountainous, Lesotho's only important natural resource is water. Its economy is based on subsistence agriculture, livestock, and remittances from miners employed in South Africa. The number of such mine workers has declined steadily over the past several years. In 1996 their remittances added about 33% to GDP compared with the addition of roughly 67% in 1990. A small manufacturing base depends largely on farm products which support the milling, canning, leather, and jute industries. Agricultural products are exported primarily to South Africa. Proceeds from membership in a common customs union with South Africa form the majority of government revenue. Although drought has decreased agricultural activity over the past few years, completion of a major hydropower facility in January 1998 now permits the sale of water to South Africa, generating royalties that will be an important source of income for Lesotho. The pace of parastatal privatization has increased in recent years. Civil disorder in September 1998 destroyed 80% of the commercial infrastructure in Maseru and two other major towns. Most firms were not covered by insurance, and the rebuilding of small and medium business has been a significant challenge in terms of both economic growth and employment levels. Output dropped 10% in 1998 and recovered slowly in 1999.
Mozambique. Before the peace accord of October 1992, Mozambique's economy was devastated by a protracted civil war and socialist mismanagement. In 1994, it ranked as one of the poorest countries in the world. Since then, Mozambique has undertaken a series of economic reforms. Almost all aspects of the economy have been liberalized to some extent. More than 900 state enterprises have been privatized. Pending are tax and much needed commercial code reform, as well as greater private sector involvement in the transportation, telecommunications, and energy sectors. Since 1996, inflation has been low and foreign exchange rates stable. Albeit from a small base, Mozambique's economy grew at an annual 10% rate in 1997-99, one of the highest growth rates in the world. Still, the country depends on foreign assistance to balance the budget and to pay for a trade imbalance in which imports outnumber exports by five to one or more. The medium-term outlook for the country looks bright, as trade and transportation links to South Africa and the rest of the region are expected to improve and sizable foreign investments materialize. Among these investments are metal production (aluminum, steel), natural gas, power generation, agriculture (cotton, sugar), fishing, timber, and transportation services. Additional exports in these areas should bring in needed foreign exchange. In addition, Mozambique is on track to receive a formal cancellation of a large portion of its external debt through a World Bank initiative.
Rwanda. Rwanda is a rural country with about 90% of the population engaged in (mainly subsistence) agriculture. It is the most densely populated country in Africa; is landlocked; and has few natural resources and minimal industry. Primary exports are coffee and tea. The 1994 genocide decimated Rwanda's fragile economic base, severely impoverished the population, particularly women, and eroded the country's ability to attract private and external investment. However, Rwanda has made significant progress in stabilizing and rehabilitating its economy. GDP has rebounded, and inflation has been curbed. In June 1998, Rwanda signed an Enhanced Structural Adjustment Facility (ESAF) with the IMF. Rwanda has also embarked upon an ambitious privatization program with the World Bank. Continued growth in 2000 depends on the maintenance of international aid levels and the strengthening of world prices of coffee and tea.
Zambia. Despite progress in privatization and budgetary reform, Zambia's economy has a long way to go. The recent privatization of the huge government-owned Zambia Consolidated Copper Mines (ZCCM) should greatly improve Zambia's prospects for international debt relief, as the government will no longer have to cover the mammoth losses generated by that sector. Inflation and unemployment rates remain high, however.
Zimbabwe. The government of Zimbabwe faces a wide variety of difficult economic problems as it struggles to consolidate earlier progress in developing a market-oriented economy. Its involvement in the war in the Democratic Republic of the Congo, for example, has already drained hundreds of millions of dollars from the economy. Badly needed support from the IMF suffers delays in part because of the country's failure to meet budgetary goals. Inflation rose from an annual rate of 32% in 1998 to 59% in 1999. The economy is being steadily weakened by AIDS; Zimbabwe has the highest rate of infection in the world. Per capita GDP, which is twice the average of the poorer sub-Saharan nations, will increase little if any in the near-term, and Zimbabwe will suffer continued frustrations in developing its agricultural and mineral resources.
So the generalization is obvious. The countries which have the highest GDP per capita are oil, gas as well as other raw materials exporters. Almost none of the countries has stable source of incomes. Oil exporters are in a better condition then the last, but it has a number of negative consequences. The first is that their economy are heavily dependant on the oil prices. The next is that even the richest resources may be easily wasted if the incomes are not managed properly. The corruption in a government, continuous possibility of warfare wouldn’t let foreign capital flow easily into these countries. Even the oil fields couldn’t attract investitions if there’s no political stability. Though the most population of these countries are involved in agriculture the most of them couldn’t provide enough food for themselves. The reason is simple lack of water resources. A number of countries having a lot of resources are not able to use them efficently because of continuous warfares, which are draining budgets. These are the major negative facts considering African economy, but there are a lot of positive ones.
According to ECA’s "Africa Economic Report 2000" shows, for five years running, Africa's GDP has grown faster than its population, reversing the falling living standards of the previous 15 years. While growth trends for the region as a whole remain depressed, some African countries are doing well. Fourteen countries have grown on average by 4 percent a year during the 1990s, with rising annual incomes of 2-3 percent and even higher, with another 10 countries following close behind with growth rates above 3 percent a year. Some countries have grown at 7 percent a year or higher (Mozambique, 7 percent, and Uganda, 7.1 percent). "These figures show us that economic reforms over recent years have slowly but surely improved growth in many African countries and allowed the private sector to take root," says Alan Gelb, Chief Economist of the World Bank's Africa region. "However, despite this rising trend, countries are still vulnerable to conflict and external shocks in world markets, such as the recent rapid increase in oil prices and fallout from the East Asia crisis. These two forces have together produced highly unfavorable terms of trade for oil importers."
Now shortly about the social indicators. Although life expectancy has risen slightly in Africa, this is happening at a slower rate than elsewhere and, since 1990 the HIV/AIDS epidemic has caused it to decline, especially in countries with high adult infection rates. In Zimbabwe, for example, life expectancy has fallen by five years, while in Botswana, it has fallen by over ten. Life Expectancy at birth is ranging between 37 year (Sierra Leonne) and 71.8 year (Seychelles). The rule is that Africans living in countries beset by conflict are more likely to have shorter life expectancy at birth and have higher infant mortality rates than other more stable countries. Sierra Leone is a striking illustration of this trend with the region's lowest life expectancy rate at just 37 years, and its highest infant mortality rate at 169 deaths per one thousand. Child mortality is a particularly acute problem for many countries in Africa. Infant mortality is close to 10 percent, and on average 151 of every 1,000 children die before the age of 5, although in many countries the mortality rate exceeds 200 per 1,000. Illiteraci level is extremelly high for the whole territory of Africa. Population per physician oscillates in the following range lowest: 827 (Seychelles), highest: 53986 (Niger). There’s no use to say that population per hospital bed is also in very poor condition. Despite major strides that had been made in the eradication of malaria, the disease is on the rise again throughout Africa. Elsewhere in the world HIV/AIDS is on the decline. In Africa, HIV/AIDS has reached pandemic proportions, threatening to wipe out Africa’s fragile social and economic gains. Two-thirds of the world’s 34 million AIDS sufferers are in sub-Saharan Africa. Today in 21 African countries more than 7 percent of adults live with HIV/AIDS, with the highest absolute number of cases found in South Africa, where one in every five adults has contracted the virus. Countries like Niger, Sudan, and Mauritania, which have some of the lowest incidence of AIDS in the region, offer great potential for control.Yet as countries like Senegal and Uganda show, with the necessary political will and resources, the AIDS pandemic can be rolled back. A little bit better situaion is observed in the sphere of education. The new report shows that Africa has made more progress in education than in health with literacy rates improving for both men and women. At 41 percent, the illiteracy rate in the region is still high compared to rest of the world, but it is at its lowest point ever. Of particular significance is the advance being made in girls' education. While this represents welcome progress, far more needs to be done. Half of Africa's children of school going age are out of school; this is even lower in rural areas and among girls.
The statistical data may vary depending on source due to the insufficent automatization of statistical institutions of the region. That’s why World Bank approved a grant to transfer systems to six Southern African countries (Mozambique, Botswana, South Africa, Lesotho, Tanzania, and Zambia) to strengthen their statistical reporting capabilities. "The quality of development data depends on the source. Our goal is to empower statistical offices in Africa, and help them to move from hand-written National Account tables to a modern system that is easy to adopt, maintain, and capable of delivering quality data," says Ziad Badr, the team leader of African Development Indicators 2001, and a senior World Bank economist in its Africa region. "This will bring statistical institutions in Africa into the new millennium, and provide a reliable system to measure development progress and identify remaining challenges."
In summary, macro balances, or getting the prices right, is not economic reform just as casting a ballot is not democracy. The hallmarks of a capable state are strong institutions of governance; a sharp focus on the needs of the poor; powerful watchdogs; the rule of law; intolerance of corruption; transparency and accountability in the management of public affairs; respect for human rights; participation by all citizens in the decisions that affect their lives; as well as the creation of an enabling environment for the private sector and civil society.
4. Economic organizations in Africa
The main economic power of Africa south of the Sahara Desert is South African Republic. Through its well developed infrastructure and deepwater ports, South Africa handles much of the trade for the whole southern African region. In 1970 its immediate neighbours, Botswana, Swaziland and Lesotho, and latterly Namibia, signed the Southern African Customs Union (SACU) enabling them to share in the customs revenue from their trade passing through South African ports. In order to counter the economic dominance of South Africa in the southern African region, the countries to the north of it organised themselves into the Southern African Development Conference (SADC). Member states include those of the SACU as well as Angola, situated north of Namibia, and it's oil-rich enclave of Cabinda, and Mozambique on the east coast, and the countries of south-central Africa, Zimbabwe, Zambia and Malawi. Kenya, Uganda and Tanzania signed Treaty for Enhanced East African Co-operation in order to allow free flow of goods and people. The small landlocked central African countries of Rwanda and Burundi form part of an economic union of countries in the central African region. Other members of the Economic Community of Central African States are Cameroon, the Central African Republic, Chad, Equatorial Guinea, the oil-rich Congo and Gabon and the vast country of the Democratic Republic of Congo. The Economic Community of West African States (ECOWAS) is a solid geographical bloc of 15 states from Nigeria in the east to Mauritania in the west. The countries of Mauritania, Mali and Niger are located in the southern stretch of the Sahara Desert while the remaining countries are splayed out along the coast line. As a result of their respective colonial histories, these countries are divided into French and English-speaking states. The francophone countries include the republics of Benin, Burkina Faso, Togo, the Ivory Coast (Cфte d'Ivoire), Guinea and Senegal while the remaining states of Nigeria, Ghana, Liberia, Sierra Leone, and the Gambia have English as their official language. The Republic of Guinea Bissau is a Portuguese-speaking state to the south of Senegal.
5. Problems and ways to solve them
The biggest challenge to doing business in Africa is the lack of quality information about Africa. Some of the other challenges of Africa are:
bureaucratic red tape, which is slowly getting easier to wade through
graft and corruption
wars and unrest, though the changes in South Africa are starting to create a ripple of peace and democracy throughout the region
lack of local capital
monopolies such as marketing boards, state trading firms, foreign exchange restrictions, trade taxes and quotas and concentration on limited commodities all place a disincentive on exports, thus delinking Africa from the world economy.
lack of infrastructure, though in areas such as telecommunications and energy, Africa is able to use new technologies to leapfrog more advanced economies
However, none of these challenges is insurmountable; in fact, some entrepreneurs would contend that African risk is lower than that even of North America.
There is hardly could be a person, who is able to resolve all the problems considering the challenges in the list. But there are a number of tasks to be completed in order to improve the quality of life and gain stable economic growth.
Resource mobilization To halve poverty by 2015 countries must reach the 8 percent growth in GDP each year, instead of present 4.4 %. To reach this rate investments must be 40 percent of gross domestic product. Even with major increase in domestic savings, there are still huge financing gaps. Africa’s rate of return on Foreign Direct Investment is 29 percent per year, higher than any other region of the world. Annual average foreign investment flows have increased from $1.9 billion in 1983-87 to $6 billion in 1993-97. But this is just 4 percent of the total investment pouring into developing countries. In the face of global financial volatility, Africa's nascent capital markets have also remained buoyant. Yet institutional investors remain resistant to the possibilities in Africa. African countries have undertaken significant economic reforms, but investment has not come.
Regional co-operation Regional integration is the key to Africa's success in the 21st century. The challenge is for the subregional initiatives to march together and in step with the World Trade Organization.
Information technology Information and communication technologies present some of the most exciting possibilities for Africa in the new millennium. “With new ways to communicate we can leapfrog through several stages of development; cut the cost of doing business; and narrow the gap of huge distances. …At ECA, we want to make sure that Africans are drivers, not passengers, on the information highway…” says Dr. K.Y. Amoko, executive secretary, Economic Comission for Africa. at the National Summit on Africa held in Washington D.C. 17 February 2000. There was registered a significant growth in Internet spreading through the continent. E-Commerce, television and radio are also developing rapidly.
Governance Ensuring and sustaining good governance must be an African responsibility, first and foremost.
Social investment. Social spending has become a major casualty of recent budget cuts in many African countries. To expect that Africa can progress when investment in its human capital is declining is a classic case of being penny wise and pound foolish. Social investment challenges of health, education, housing, water supplies and sanitation are enormous and demand the creativity and partnership of all caring parties.
Gender equality Excluding Islamic countries, Africa is the most remarkable region in terms of discrimination against women. Since the UN's Fourth World Conference on Women in Beijing in 1995, the world better understands the need to free women to become equal participants in development. This is not just a matter of rights but of good economic sense. “It is past time to lead by rhetoric; it is time to lead by example.” (from the National Summit on Africa documents”)
Preventing conflict The world has learned expensively that it is cheaper and far more humane to prevent conflict than to fight a war. So it is one of the most actual problems for African countries. To quote the UN Secretary General, "in the past twenty years we have understood the need for military intervention where governments grossly violate human rights and the international order. In the next twenty years we must learn how to prevent conflicts, as well as intervene in them." Peace can no longer be just about peace making and peace keeping. It is also about peace building.
African diaspora must also take part in ongoing processes. A lot of Africans live in European countries as well as in United States. They are able to help their historical homes in three major ways.
First, Become an Advocate for Africa: For every devastating image of Africa they see on television, not far from that camera there is an image of people striving to develop. As a start, they should visit Africa, spread the word about it, become a personal lobbyists for Africa. They must lobby for African products in their stores; lobby for strong US-Africa ties.
Second, Invest in Africa: Investing in Africa could be profitable. Now is the time for African-Americans to put their money where their mouths are. They can invest in Africa, through such convenient ways as the mutual funds that concentrate on Africa. Members of other diasporas have accelerated development in their ancestral homelands through widespread individual investments. Surely African-Americans can do it, too.
Third, Invest politically in Africa, 40 percent of United Nations assistance is currrently going to Africa. When the US and other flourishing countries pay their UN dues, when someone pays voluntary contributions to United Nations he/she helps Africa. Foreign aid helps building schools as well as improving governance in terms of efficancy.
While many write off Africa as the continent of despair, other enterprising individuals and organisations have recognised the huge, untapped potential of Africa and are actively pursuing business ventures across the continent.
African Development Indicators show clearly where the regions greatest social challenges and opportunities lie. Indeed, Africa's future economic growth will depend less on exploiting its natural resources, which are being depleted and are subject to long-run price declines, and more on its labor skills and its ability to accelerate a demographic transition.
Africa's opportunities, which range in risk from investing in emerging market funds or one of the listed multinationals active in Africa to trading with African partners, include:
oil and gas (Angola and Libya);
mining (West and Central Africa);
privatisations (South Africa and Nigeria);
international trade (oil producers and SADC);
infrastructure (pipelines, roads, telecommunications);
stock exchanges that are mushrooming in many countries
using educated English and French speaking African nationals
and leisure (big game + beaches + golf + climate + satellite + Internet + cell + low cost structure = huge telecommuting opportunity).
However, perhaps Africa's greatest opportunity lies in its biodiversity, which ranges from Sahara desert to tropical jungle, from snow-capped volcanic Mount Kilamanjaro to the beaches of East and West Africa. Then there is the excitement of stalking big game in the African bush to the thrill of whitewater rafting through the gorges below Victoria Falls or the awe of seeing the Egyptian pyramids at sunrise. Africa is going to become the telecommuting centre of the world, in the short to medium term, ecotourism provides the opportunity to develop leisure complexes which can take advantage of game parks, golf courses, beaches and beautiful scenery one day. “We need to stop thinking of ourselves as a single engine train, but rather a jumbo jet, with several engines revving up for take off, and several more back ups in case of engine failure.” said K.Y. Amoako Executive Secretary of ECA at the 40th Anniversary of Africa Confidential.
At the end few words comparing Armenia with the African region. The main difference is different natural resources of these regions. Africans may get started their economic growth with incomes from exporting oil, gas, precious metals and jewels. Alas, Armenia have no this option. Our country have no significant resources to exploit them or not to exploit, meanwhile for Africa devastation of resources may stimulate the economy in the case of peace and efficient government. There are also a lot of differences in terms of agriculture. Arfican countries cover wide territory, but they have problems with irrigation. In the case of Armenia it is important to note, that the situation is just the opposite. Even the most severe droughts can not be compared with deserted areas of black continent, but the land is highly limited. I think that the last point of comparison, which is as important as the previous ones, is the labour force. Labour force is one of the main differences between former USSR republics and the developing countries of African region. As a result of USSR educational system Armenia has educational level which can be easily compared even with the most developed countries.The level of literacy is 99%, which is higher than in African countries. Armenian in spheres of programming, medicine, science highly priced all over the world. The main problem in these sphere is brain drain. So the primary task for government is to stop this process. With the foreign investitions Armenia is able to establish advanced technology production, which is not available for Africans. This could be a good impulse to become a new “tiger”.
So our regions have different prerequisits, different ways of developing, but same aim, and unfortunately obstacles in terms of government and unstable peace.