Is Africa Next in Line for an Economic Revolution?

Article by Travis Denham

Africa has long been considered to be the birthplace of mankind by many scientists and religious officials alike. However, even with this “head start” in human development, the planet’s second largest continent has found itself both economically and politically stuck. While the surrounding continents and civilizations have been able to progress, Africa has often times struggled to keep up, which is to be expected given its troubled history of exploitation by neighbors both near and far.

Over a third of the continent lives in abject poverty, surviving on less than one US dollar a day.  Of the 47 African countries where such data is tracked, only 3 of them rank in the top 100 countries for life expectancy, with much of the data being skewed due to Africa’s high infant mortality rate caused by famine and disease.

While Asia’s share of global GDP has skyrocketed over the last 50 years, Africa’s share has remained constant at 5% over the same period. In addition, following the Rio games, Africa now remains the only continent – besides Antarctica – yet to host an Olympic games .

However, Africa does have several well diversified economies such as South Africa, Egypt, Tunisia, and other Mediterranean countries with easy access to trade with Europe. Other African countries’ undiversified economies, such as Nigeria, survive almost entirely on the production and sales of oil.

Though the present situation may seem bleak, some believe that Africa is priming itself for an economic revolution, as China and the US have both taken an interest in increasing business with the struggling continent.

From 2003 to 2013, US and Chinese trade with the continent has increased nearly five-fold from $55 billion to over $250 billion. Over the last 20 years, tariffs have dropped from approximately 18 percent to around two percent, opening the door for increased trade.

With wealthier nations seeking new avenues for profit, and Africa seemingly rolling out the welcome mat, it’s easy to see how some can come to the conclusion that Africa may expect an economic boom in the near future. Even though the pieces seem to be falling into place, Africa still has many obstacles to overcome before such a boom could occur.

Africa is a land of rich diversity and culture and it is estimated that there are nearly 2000 different languages used throughout the continent. Each country has its own policies and approaches to government, but nearly all seem to have one thing in common: rampant corruption.

The corruption itself is often diverse as well. Bribes from local and foreign countries, theft of tax dollars by those in power and misuse of public funds have detrimental consequences for ordinary civilians, most often negatively affecting basic education and health care.

A particularly frustrating example of this corruption in practice is that of Equatorial Guinea, a small country located on Africa’s west coast. Equatorial Guinea is home to about 750,000 people, and is very rich in oil reserves. Ninety-seven percent of the country’s exports are energy related, with crude oil making up 75 percent of those exports.

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Image Credit: Emma Line

This provides the country with billions in corporate income tax dollars annually. However, the average citizen never sees any benefits that the tax dollars are meant to provide.

Equatorial Guinea’s current President, Teodoro Obiang Nguema Mbasogo, originally seized leadership of the government in a violent coup in the late 1970’s, and is currently one of the wealthiest world leaders. With an estimated net worth totalling over half a billion dollars, Obiang has been accused of lining his own pockets with tax dollars and bribes related to the sale and distribution of crude oil, while letting the people of Equatorial Guinea suffer. Citizens of the country lack access to basic education and healthcare, resulting in one of the lowest life expectancies in the world of just over 58 years.

Compare this to a similar country such as Qatar. Qatar is a small middle-eastern country so rich in oil that the resource makes up 95 percent of its exports. Qatar also has the highest wealth per capita in the world and is able to provide its citizens with ample education and healthcare facilities, resulting in an average life expectancy over 20 years longer than that of Equatorial Guinea.

Though Qatar has its other issues, like human rights violations during preparation for the 2018 World Cup, comparing it to Equatorial Guinea shows that small countries rich with a resource like oil are certainly capable of providing basic services that will improve the length and quality of the lives of their citizens – at least if those in power are willing to justly allocate those public services.

Equatorial Guinea is a good example of what frightens many companies from investing large amounts of money into a place so rich with resources in human capital. A frustrating trend common with many African nations is that after the deaths of oppressive leaders, new leaders are often appointed, not through democratic process, but through bloody civil war and other political strife.

The lack of stability and the risk of potentially losing their investment scares companies away, resulting in jobs and wages for ordinary citizens being taken away as well. A company could spend years building a relationship with a country’s leaders and populace, but if that leader suddenly finds themselves removed from power via coup or death, it remains unclear if the new leader will be willing to cooperate with foreign companies and investors. With Obiang approaching his mid 70s, this is another potential issue that could stand in the way of Equatorial Guinea’s economic development.

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The chart below shows the percentage split of the world’s real GDP split by continents and illustrates that the share of the world’s real GDP in the Asian region grew considerably faster than all other continents from 16.8% in 1960 to 45.4% in 2015. Image Credit: Worldeconomics.com

Though the situation in Equatorial Guinea is not uncommon, there is hope for many African nations. Both Ghana and Botswana have adopted functional democratic systems of government, allowing for greater stability and improvement to their economies and the citizens’ quality of life.

Rwanda has also made many strides under the leadership of  Paul Kagame, who happens to be a rare example of a benevolent dictator. Kagame was the leader of the Rwandan Patriotic Front in the early 1990s and helped bring an end to the Rwandan Genocide, which saw an estimated 1,000,000 people of the Tutsi and Hutu population of the country slaughtered by Hutu extremists. After seizing power following his victory, Kagame has done an excellent job of providing stability to Rwanda, especially through increased access to education.

These improvements in Africa’s political climate have not gone unnoticed by the outside world.  China has recently begun outsourcing labor to eastern Africa, as it is becoming increasingly more expensive to produce products in Asia due to the steady rise of China’s middle class over the last several decades.

Unfortunately, this sudden Chinese interest may only be offering false hope. China’s primary interests in Africa lie in Burundi and the Congo, two nations rich in valuable natural resources such as diamonds and gold. China’s present strategy is to build roads inland only in order to more easily access the resources they desire, but the roads are often of poor quality and governments largely allow this type of behavior to continue because of bribes and corruption.

Even more unfortunate for Africa is the fact that China is bringing in their own materials and laborers to construct these roads, creating very few jobs for African citizens and providing very little economic benefit as well.

Though China has also been increasing its manufacturing presence in eastern Africa, any positive benefit to the economic condition of the continent will most likely have to wait several decades, as sweatshop-style labor is slowly introduced in greater numbers.

The foreseeable future for Africa will most likely still be one of constant struggle, but with countries such as Ghana and Rwanda making strides in improving their political climates, it is clear that the continent is slowly moving toward economic improvement.

Corruption has crippled Africa’s development for many years, but if other African countries can follow Ghana’s and Botswana’s lead, Africa could overcome their past struggles and begin their development into a stronger continental power.

A special thank you to Professor Paul Kagundu for offering assistance and providing valuable information that helped me to write this article.

 

 

Feature Image: The African mountains stand out as areas with favorable climatic and ecological conditions, in contrast to the surrounding lowlands that are generally much drier. As a consequence of this, the total average population density in all African mountains is more than double the density of the lowlands. The driving economic forces now have better knowledge about and access to the rich natural resources in the mountains, including hydropower, minerals, timber and agricultural soils. Image Credit: ©FAO/Matthias Mugisha

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