Playing Catch-Up: Africa's Economy
Africa is the second largest continent in the world by both size and population. The land in Africa is lush with many natural resources and the labor pool is massive. Yet, the economies and governments of most African countries are underdeveloped compared to the rest of the world. How is it that a continent so large and rich in resources is the least industrialized continent on Earth?
Much of Africa’s economic woes are due to its chaotic past. Along with European colonization in the 19th century, Africa has been suppressed by civil wars, genocide, corrupt governments, and the current HIV/AIDS epidemic. Africa contains over 20 of the 26 countries listed as Highly Indebted Poor Countries (HIPC) by the International Monetary Fund (IMF).
So the question is: “Will Africa join other promising markets with rapid, stable growth?”
The overall consensus is that a select few African nations are poised to have steady growth (Rwanda and Uganda for example), while other markets are more likely to remain stagnant (Nigeria and Niger). Why are some countries more likely to have economic progress than others?
Development in Africa requires strong political and economic institutions. These are hard to come by in an area where investment is discouraged by governments and local chiefs, along with the added burden of conflict and war. Ethnic fragmentation from colonization boundaries also creates cultural conflicts and discourages growth. But the good news is that several African nations seem to be building the framework necessary for investment stability.
With a place so rich in natural resources, you would think that economic growth is inevitable. Right?
Africa has a wealth of natural resources, including coffee, cotton, rubber, and cocoa. The most valuable resources are petroleum and minerals, such as gold, diamonds, and copper. In 2009, 87% of Africa’s economy as a whole was from exportation. This just goes to show how important these resources are to Africa’s development. As the global demand for resources increases, market growth in most African countries is virtually inevitable. The dynamics of catch-up growth alone could propel the region forward.
The growth of African markets would be tremendously beneficial to the world economy, as well as saving the lives of millions of African’s that live in poverty and are affected by conflicts due to a sluggish economy. Building a nation’s economy, let alone a whole continent’s economy, takes time and only time will tell if these markets will be able to succeed in the long run.