Real Peculiarities of African Economies

Topics: Economics, Economic growth, Economy Pages: 9 (2721 words) Published: June 27, 2012
Real Peculiarities of African Economies:

It is clear that Africa suffers from chronic failure of economic growth. A set of factors have frequently been raised to account for Africa`s poor economic performance, they include, but not limited to;

* External conditions emanating from the legacy of centuries of slave trading and colonial rule as well as manipulation of African politics during the cold war.

* Heavy dependence on a small number of primary exports coupled with declines and volatility of terms of trade

* Internal politics characterized by authoritarian, corrupt and political instability

* Adverse economic policies in the shape of protectionism, statism and fiscal misalignments.

* Social conditions and demographic challenges that includes and not limited to deep ethnic diversity, indicated by high ethnolinquistics and religious diversity, and high population growth rate

Since 1980`s aggregate per Capita GDP in SSA has declined at almost 1% per annum. This is widespread and 32 countries are poorer today than in 1980. It is clear that Afric`s poor economic growth has been chronic rather than episodic. No wonder it is labeled the Dark Continent.

Circumstances in Developed countries in their early stages of economic development are substantially different from those of countries in SSA. Developed countries used a broad range of economic approaches in their development strategies. Countries in SSA more often than not, try to use economic policies prescribed by the developed countries without posing to evaluate the compatibility of this policies with their current circumstances.

The above factors form the real peculiarities of African economies which pre-dispose it to slow growth, they can be summarized as:

* Lack of openness to International trade
* Adverse Geographical characteristics
* Demographic Challenges
* Poor Institutional quality
* High Ethnic diversity
* Low savings rat

Thus, there is need to appreciate the real peculiarities when forming short-term and long-term economic policies and economies in SSA should design and implement development policies via its unique characteristics. Going by trends in Asia (China and India), South America (Brazil) and other developing countries, their economic growth and development is attributable to the fact that they chose appropriate strategies rather than economic policies prescribed by those driving globalization. Jeffrey Sachs, Paul Collier and Udry, in Peculiarities of Geography: Africa, point out that the World Bank Initiated Structural Adjustment programs (SAPs) biggest irony was the fact that it promoted no structural change at all.

Trends in Kenya

The performance of the economy during the first decade of independence in 1963 was Impressive. The growth of real GDP averaged 6.6% per year over the period 1964 –1973, And compared favorably with some of the newly industrialized countries (NICs) of East Asia. This remarkable performance is attributed to consistency of economic policy, Promotion of smallholder agricultural farming, high domestic demand, and expansion of markets for domestic output within the East African region. The second decade marked the end of easy growth options and the emergence of powerful external shocks which, together with imprudent fiscal and monetary management, ushered in an era of slow and persistent economic decline with average real GDP falling to 5.2% over the period. In the third decade, the effects of expansionary fiscal policy of the previous decade, which led to the establishment of highly protected but grossly inefficient private industries and state corporations, began to cause serious strain on the economy’s scarce resources. Budget deficits increased rapidly, exports and imports fell, and the economy performed poorly with average real GDP falling further to 4.2% over the period. The downward spiral continued in the fourth decade of independence. A combination...

References: 1. David E. Bloom, Jeffrey D. Sachs, Paul Collier, Christopher Udry from Brookings Papers on Economic Activity, Vol. 1998, No. 2, (1998), pp. 207-295 on “Geography, Demography, and Economic Growth in Africa”
2. Gordon P. Hagbert from the Annals’ of American Academy of political and social science 1961, Vol 335 on “The peculiarities of Geography: Africa”
3. Jeffrey D. Sachs and Andrew M. Warner from the journal of African economies, December 1997, Volume 6, Number 3, pp. 335-376 the “sources of slow growth in African Economies”
4. Paul Collier and Jan Willem Gunning from the Journal of Economic Perspectives, Vol. 13, No. 3, (summer 1999) on “why Africa has Grown Slowly)
5. Winford H. Masanjala and Chris Papageorgiou from the Department of Economics, Louisania State University working Paper 2006-01 on “initial conditions, European Colonialism and Africa`s growth”
6. World Bank Report, December 2011, edition 5, on “The state of Kenyan Economy”
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