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Opinions of Saturday, 16 November 2013

Columnist: Frimpong, Paul

Why some countries fail to thrive in Africa

Just some few years ago, news on Africa, whether the reality or perception, has suffered from extreme mood swings, with the pendulum moving from episodes of pessimism to bouts of euphoria. But what really is the gap between the perception and reality in Africa?

Africa’s economies are consistently growing faster than those of almost any other region – and at twice the rate of the 1990s. In the world economic growth league, Africa has moved from the lower echelons to the premier division. This has led to improvements in several areas such as trade, mobilization of government revenue, infrastructure development, and the provision of social services. Indeed, over the last decade, Africa has been among the fastest growing regions in the world economy, and it is interesting to note that this improvement in growth performance has been widespread across countries.

The impressive economic and political performance of Africa since the turn of the century has led to the description of the continent as “the hopeless continent” changed into others such as “Africa rising: the hopeful continent”, “Lions on the move: blazing a pathway to prosperity”, “Africa’s rising middle class”; “dynamic African consumer market”; “Growth opportunities for investors” etc.

The extent of extreme poverty is shrinking, both in absolute numbers and as a proportion of the continent’s population. That fact is why we can realistically envision a continent without extreme poverty in the unknown future.

Precisely because economic development can and does work in so many parts of the African continent, it is all the more important to understand and solve the problems of the places where economic development is not working, where people are still off the ladder of development, or are stuck on its lowest rungs; why some states/countries fails to succeed amidst all these positives.

To understand why some countries in Africa fail to thrive whiles others are succeeding, we first need a conceptual framework that can account for the changes over time in these countries.

This means that we need to analyze comprehensively and bring to light, the very factors or instances that inhibits some countries from succeeding on the African continent. The first two of the factors that I would want to discuss in this piece is the incidence of political instability and the lack of economic growth. This is because continued instability and political volatility in a few regions can compromise economic and social progress across those countries.

Let me start by tackling it from the latter point, which is, lack of economic growth in those countries. What really is the case when we say that some countries are failing because of the absence of economic growth? And does economic growth in itself represent prosperity or there is more to it than just the numbers? What then can bring about economic growth and transformation in some countries but not in others?

Society’s economic system is so complex that a single item could not be singled out as the contributing factor to economic stagnation or decline. However, some obvious ones can be identified and each has its own appropriate course of treatment; therefore, a good diagnosis is very crucial.

Economic growth and prosperity is a relative term. It means that, overall, the economy is doing well and most people have sufficient income for essentials and perhaps a little extra. It means that businesses are hiring and jobs are relatively easy to get. It however does not mean that everyone is well-off. When economic growth and prosperity is experienced in a particular country, households begin to save, trade among and between other countries increases and there is also the incidence of technological advancement and usage. Under these circumstances, let’s consider how the reverse is the case, thus decline or stagnation in economic growth and prosperity using the household as an economic unit.

First, suppose that the household is chronically poor and, therefore, consumes all of its income, leaving nothing to save and no income to be used to invest. In fact, in the subsequent years, households’ purchasing power begins to decline and this is a typical case of capital depreciation or a decline in the capital available for expansion of capacity.

In another instance, let’s assume that households are not able to link their production to the markets, especially from their various rural farms to the regional markets as a result of lack of access to linking roads. In this scenario, households would be restricted to only grow or farm for personal consumption. The accumulation of this over a period of time would then lead to the crippling of the economy as a whole in terms of its capacity to trade with other economies.

Obviously, households need to learn and know new methods of productivity and sustenance through technology. This is to help them lead through increased complexity and volatility. A technological reversal can therefore lead to the decline in the productive capacity of households. Moreover, households face natural resources decline and adverse productivity shocks which can cripple their productive capacity. A natural disaster, perhaps a flood, drought, heat wave, frost, pests, or disease in the household (for example, a bout of malaria), or some combination, wipes out household income for the year.

The obvious conclusion is that, an accumulation of these discussed factors are the very reasons why some countries fail to thrive on the African continent due to lack of economic growth and prosperity. The reverse of the factors would be the case to economic growth and prosperity.

The second of the factors that give reasons why some countries fail to thrive on the African continent is political instability. In governance, as in economics, the story of the past decades has been one of steady progress in Africa. Multiparty elections are now firmly established, there have been moves towards greater transparency and in the most part armies have stayed out of politics.

Likewise, many of the countries have become so chaotic and therefore not conducive for human existence. This means that people are crippled and do not have the capacity to grow the country. In some cases, including Côte d’Ivoire (2000, 2010), DRC (2011), Kenya (2007/08) Zimbabwe (2007), Uganda (2011), March 2012 coup in Mali have rendered these economies very weak. It is of therefore no surprise, that Democratic Republic of Congo (DRC) is the poorest country on the continent with GDP per capita of $348. DRC is now among the failed states on the continent; thus the country is not able to thrive because of political unrest.

Economic development works. It can be successful. It tends to build on itself. But it must get started. There must be a high level of economic and political consciousness in nations failing to thrive on the continent. After that, the tremendous dynamism of self-sustaining economic growth can take hold.


Paul Frimpong CEPA® Chartered Economist who writes on the macro-economy and global affairs. He is also an African Affairs and Emerging Markets Strategist

Tel: +233 -241 229 548

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