African Economic Development

Emmanuel Nnadozie, Afeikhena Jerome, Emmanuel Nnadozie, Afeikhena Jerome

• Publisher: Emerald Publishing Limited
• Year: 2019
• ISBN:
  9781787439764
• Edition: 2
• Topic: Business
• Subtopic: Business General
• Index: Business

When it was published in 2002, the first edition of African Economic Development offered an authoritative statement about economic growth on the continent. Its multidisciplinary regional studies built an analytic framework that served as a cornerstone of the field for over a decade.
The second edition offers a new collection of authoritative articles for a new age. In a sweeping survey of African economies, leading scholars offer the latest research into the biggest current influences on African growth and development, taking account of relevant institutional contexts as well as significant or unique problems that have slowed Africa's progress. Despite recognizing the factors that have resulted in underdevelopment, however, the contributors paint a hopeful picture of the efforts being made to overcome barriers, and they suggest that a significant reduction of poverty is possible in the near future. Each chapter singles out a particular problem-be it related to demography, geography, politics, climate change, agriculture, or industrialization-and proposes pragmatic solutions that put Africans' needs and capabilities first. Balancing theory and empiricism, and eschewing vague ideological or political language, this book provides an important vantage point from which to herald Africa's elusive dawn.
For its rigorous scholarship, its unique breadth, and its actionable suggestions for the near future, the second edition of African Economic Development is a must-read for students, researchers, and practitioners of international development.

PART I
INTRODUCTION TO AFRICA AND AFRICAN ECONOMIC DEVELOPMENT

Chapter 1

Why Study African Economic Development?

Emmanuel Nnadozie

Key Terms

Growth rates

balanced growth

colonial legacy

culture

democracy

ethnic diversity

export promotion

externalities

GDP

gender gap

Geography

illiteracy rates

import substitution

indicators of development

indicators of growth

neoclassical tradition

neo-Marxist paradigm

orthodoxy

per capita income

political instability

primary school enrolment

1.1. Introduction

The problem of economic development is not new nor did it originate in Africa, as all countries of the world were at one time or the other developing countries. Yet, it is not so difficult to see why the concept of development is so essential to Africanists and the study of Africa in general. After all, African economic development involves growth and the general improvement in quality of life and overall human welfare. Yet, by many measures of human welfare, Africa has not performed well, lagging behind the rest of the world until between 2000 and the end of the commodity super cycle in 2014 when it emerged the second fastest growing region in the world after Asia.¹ For instance, Collier and Gunning (1999) estimate that, during the 1980s, Africa’s per capita gross domestic product (GDP) declined by 5% below the average for all low-income developing countries and 6.2% during the 1990–1994 period.

In reality, the concept or nature of development throughout the world does not differ; what is different is Africa’s development experience vis-‘a-vis the rest of the world and the fact that global change may have a differential impact on Africa.

Based on Africa’s unique economic performance record and because Africa is the least developed continent, with 70% of the countries being low income, it merits special attention. In the view of some researchers, Africa’s growth experience is unique because of the so-called African dummy. These researchers, using cross-country regressions that find a significant negative African dummy variable, or so-called Africa effect, have concluded that being an African country has an adverse impact on growth.² Bloom and Sachs do not find a significant African dummy and argue that Africa’s unique geographical characteristics explain its dismal growth experience (Bloom & Sachs, 1998).

1.1.1. Africa’s Development Experience

Because growth is central to development, we need to examine the growth experience of African countries. Some indicators of growth in the last decade are presented in Table 1.1. Figure 1.1 shows a great diversity of growth experience, with some countries showing sustained and rapid growth and others declining over the last decade. As Tables 1.1 and 1.2 and Figure 1.1 show, Africa’s development experience is unsatisfactory. The growth rates also reflect a great deal of inter-country diversity, with some countries achieving modest results, while others show significant losses. Overall, growth rates across Africa in the last two decades before 2000 are disappointing. However, between 2000 and the end of the commodity super cycle in 2014, Africa enjoyed unprecedented growth, and emerged as the second fastest growing region in the world after Asia. By 2014, six out of the ten highest growing countries in the world were in Africa, according to IMF’s 2014 World Economic Outlook Report.

Table 1.1: Growth Rates 2000–2016.

Figure 1.1: Average Annual Growth Rate (%) of African Countries, 2000–2016. (Based on data collected from World Bank World Development Indicators 2018, Washington, D.C.: The World Bank.).

Table 1.2: Basic Indicators (2016).

Although many countries recorded significant increases between 2000 and 2016, per capita gross national product (GNP) growth was either small or negative, which is indicative of the high population growth rates evident in Table 1.2. Growth of over 4% per year was achieved, between 2008 and 2016 for instance, by a record 20 countries (Burkina Faso, Chad, Congo Democratic Republic, Congo Republic, Djibouti, Eritrea, Gabon, Liberia, Mali, Mozambique, Niger, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, Tanzania, Togo, Uganda, and Zimbabwe). Morocco, Benin, Burkina Faso, Cape Verde, Ethiopia, The Gambia, Guinea, Guinea-Bissau, Malawi, Mali, Swaziland, Tanzania, Uganda, and Zimbabwe all showed growth rates in income per capita above 2.4%. Unfortunately, pictures of rapid decline abound on the continent. Many economists believe that “countries with more rapid growth in incomes have indeed been those with higher savings rates and more industrialization” (Stern, 1989).

Because development implies economic structural change, we take an intertemporal look at the structure of the economies as presented in Table 1.1. Here, the picture is equally mixed – a shift out of agriculture over time alongside no shifts at all. Neither the manufacturing nor service sector in Africa is well developed. Overall, manufacturing contributes the least value added to the GDP.

Figure 1.1 shows that, with the exception of the outliers – Equatorial Guinea, which grew significantly during the period under review, Congo and Sierra Leone, ravaged by civil war – the majority of African countries had growth rates within a 5-percentage-point spread. Indeed, the large majority of African countries grew by an average of less than 5% between 1990 and 1997.

Undoubtedly, this low growth explains to a large extent the lack of development on the continent. Other indicators of development show a similar picture for Sub-Saharan Africa (SSA), especially when compared with other developing regions and all developing countries in general (see Table 1.3).

Table 1.3: Indicators of Development in Sub-Saharan Africa and Other Regions.

Using the indicators of development, we can determine the development performance of African countries within the context of other developing countries. In Table 1.2, we compare some development indicators of SSA, East Asia and Pacific, Latin America and Caribbean, Middle East and North Afric, and South Asia. Table 1.3 shows that SSA has the lowest per capita income, primary school completion rate, infant mortality, prevalence of malnutrition, the widest gender gaps, and the most inadequate infrastructure reflected in mobile cellular subscription and electricity power consumption per capita. On a brighter note, SSA has the lowest greenhouse gas emissions which is indicative of a low level of industrialization and consequent pollution in Africa.

Overall, SSA has not had a successful development experience, as shown by various indicators. Africa remains the least developed of all the regions of the world. The 2018 edition of Freedom in the World indicated for the 49 countries in SSA, 8% were ranked as free, 43% as partially free, and 39% as not free.³ Until recently, Africa had made remarkable achievements in areas such as education and life expectancy, but cross-country comparisons (as well as intercontinental analysis) show that in the last 40 years, Africa has not performed as well as the rest of the world. There is, therefore, an urgent need to establish the appropriate framework to bring about development in Africa.

1.1.2. The Need for African Development

Aside from permitting us to focus on Africa’s seemingly intractable state of underdevelopment, there are many other reasons why a study of African economic development is important. Specifically, the study of the economics of African development will help us to:

• (1) Become aware of the realities and disparities that exist between African countries and the rest of the world, especially with regard to the distribution of income, resource endowment, and resource management.
• (2) Understand and grasp the economic, financial, and cultural circumstances of African countries and the causes and effects of poverty.
• (3) Understand the implications of decisions made by donor countries and institutions insofar as they affect African countries and the implications for wealthier countries of the socioeconomic difficulties of African countries within the context of international relations, geopolitical concerns, national security, military power, strategic questions, etc., which are affected by the economic development or lack of it in Africa.
• (4) Become aware of how to apply economics in our analysis and understanding of the economies of African countries.
• (5) Become fully prepared and equipped for the dynamic global economy and the tremendous interrelationships or lack thereof involved in the economic functioning of the international scene.
• (6) Prepare and train future African development practitioners for the onerous task of generating economic development on the continent of Africa.

A study of African economic development is equally important because Africa’s role and participation in the global marketplace are increasing. African countries are all members of global organizations (e.g., United Nations or World Trade Organization), albeit often in a nominal manner.

As of March 2018, membership of the WTO has increased from 76 founding members on January 1, 1995, to 164 in 2018, 84% of the 196 countries in the world. Africa has the most members that are designated as least developed, the majority of them joining the organization at its inception in January 1995. Only a few African countries are currently not part of the WTO (Algeria, Ethiopia, Equatorial Guinea, Comoros, Libya, São Tomé and Príncipe, Sudan, and South Sudan). African countries also form part of and participate in the programs of (global) multilateral organizations (World Bank, International Monetary Fund, etc.). It is important, therefore, to determine how African countries are influenced by global phenomena.

The World Bank African Pulse (2018) indicates that Africa’s debt-to-GDP ratio had been trending downward until it picked up in 2012, with an increase from 37 to 56 percent of GDP between 2012 and 2016. About one-third of African countries saw a 20 percentage point increase in their debt-to-GDP ratio. Moreover, the composition of the debt has shifted as countries have moved away from concessional sources of financing toward market-based domestic debt. A few African countries, majorly oil exporters, are responsible for this relatively high ...