SUB-SAHARAN AFRICAN ECONOMIES

'Sub-Saharan African Economies are characterised by Positive Growth Rates since the Mid-2000s'



'Sub-Saharan African Economies are characterised by Positive Growth Rates since the Mid-2000s'

Introduction

Africa's growth performance since gaining independence from colonial rule in the 1960s has been quite disappointing. So used are we to this assessment that we forget that Africa was, at least in the first decade of independence, growing faster than other developing regions in the world. However, the late 1970s dramatically set back the continent and led to stagnation and regression through the 1980s and 1990s. Africa's role in the global economy is largely responsible for this, expressed most visibly in insufficient resource mobilization and capital formation, and the continent's lopsided trade relations (Coe & Alexander, 1999, pp. 228).

After discussing sub-Saharan Africa's (SSA) growth performance in more detail in the first section, resource mobilization for development is addressed in the second, particularly capital formation and the role of foreign and domestic sources of capital in financing development in Africa. The key challenge that emerges is the need to reverse SSA's exports of capital. In the third section, the trade and development nexus is analysed: of central concern is the region's ongoing reliance on primary commodity exports. Locked into extractive resource industries, with few linkages to the rest of the national or regional economy, and facing associated “Dutch disease” problems, SSA countries have not been able to sufficiently diversify their export base, while the falling terms of trade for generic, low-skill, labour-intensive manufactures with few horizontal linkages to the rest of the economy limit the developmental impact of such industrialization (Easterly, 2000, pp. 135).

Capital and resource flows and mobilization, as well as trade patterns, reveal crucial weaknesses of African economies that undermine their growth prospects: structural dependence on primary product exports, limited export variety and diversification of exports, underinvestment in domestic infrastructure, particularly for both agriculture and manufacturing, and little domestic value added to extracted resources.

African Growth in a Changing Policy Environment

Between 1970 and 2000, real income growth failed to keep pace with population growth in SSA. After posting a modest average annual growth rate in real per capita income of about 0.7 per cent during the 1970s, these rates turned negative during the 1980s and 1990s, falling 1 per cent and 0.5 per cent, respectively. Since 2000, SSA countries have posted improved growth rates, largely thanks to primary commodity-driven recoveries, and most seem to have recovered relatively quickly from the global economic crisis. Even so, average real per capita income is still barely higher than in 1970 and SSA fell behind all other regions on most development indicators (see table 1). The regional average also conceals vast differences within the continent, where countries affected by violent conflict and political instability were the worst performers, and mainly resource-rich countries have profited from the commodities boom since 2000 (see appendix tables A1 and A2) (Elbadawi & Francis , 2000, pp. 415). Furthermore, the weak and often erratic growth performances have been accompanied by regressive trends in income ...