Africa - Economy

Economy

Although it has abundant natural resources, Africa remains the world's poorest and most underdeveloped continent, the result of a variety of causes that may include the spread of deadly diseases (notably HIV/AIDS and malaria), corrupt governments that have often committed serious human rights violations, failed central planning, high levels of illiteracy, lack of access to foreign capital, and frequent tribal and military conflict (ranging from guerrilla warfare to genocide). According to the United Nations' Human Development Report in 2003, the bottom 25 ranked nations (151st to 175th) were all African.

Poverty, illiteracy, malnutrition and inadequate water supply and sanitation, as well as poor health, affect a large proportion of the people who reside in the African continent. In August 2008, the World Bank announced revised global poverty estimates based on a new international poverty line of $1.25 per day (versus the previous measure of $1.00). 80.5% of the Sub-Saharan Africa population was living on less than $2.50 (PPP) a day in 2005, compared with 85.7% for India.

The new figures confirm that sub-Saharan Africa has been the least successful region of the world in reducing poverty ($1.25 per day); some 50% of the population living in poverty in 1981 (200 million people), a figure that rose to 58% in 1996 before dropping to 50% in 2005 (380 million people). The average poor person in sub-Saharan Africa is estimated to live on only 70 cents per day, and was poorer in 2003 than he or she was in 1973 indicating increasing poverty in some areas. Some of it is attributed to unsuccessful economic liberalization programs spearheaded by foreign companies and governments, but other studies and reports have cited bad domestic government policies more than external factors.

From 1995 to 2005, Africa's rate of economic growth increased, averaging 5% in 2005. Some countries experienced still higher growth rates, notably Angola, Sudan and Equatorial Guinea, all three of which had recently begun extracting their petroleum reserves or had expanded their oil extraction capacity. The continent is believed to hold 90% of the world’s cobalt, 90% of its platinum, 50% of its gold, 98% of its chromium, 70% of its tantalite, 64% of its manganese and one-third of its uranium. The Democratic Republic of the Congo (DRC) has 70% of the world’s coltan, and most mobile phones in the world are made with elements refined from this mineral. The DRC also has more than 30% of the world’s diamond reserves. Guinea is the world’s largest exporter of bauxite. As the growth in Africa has been driven mainly by services and not manufacturing or agriculture, it has been growth without jobs and without reduction in poverty levels. In fact, the food security crisis of 2008 which took place on the heels of the global financial crisis has pushed back 100 million people into food insecurity.

In recent years, the People's Republic of China has built increasingly stronger ties with African nations. In 2007, Chinese companies invested a total of US$1 billion in Africa.

A Harvard University study led by professor Calestous Juma showed that Africa could feed itself by making the transition from importer to self-sufficiency. "African agriculture is at the crossroads," says Dr. Juma. Juma also states,"We have come to the end of a century of policies that favored Africa's export of raw materials and importation of food. Africa is starting to focus on agricultural innovation as its new engine for regional trade and prosperity."