Economic Development in Africa: An Analysis of Both Sides of the Coin

Economic development in any country or region is not an isolated process.  Globalization has resulted in a high level of interdependency (Stonehouse, Campbell, Hamill & Purdie, 2004).  The development of the European Union (EU) after hundreds of years of conflict has opened the door to increased political and economic stabilization and growth (McGiffen, 2005).   When China opened its doors to foreign investment and increased its involvement in the global marketplace, it altered the trajectory of its economy (Solso & Chinyanta, 2010).  For Africa, involvement in globalization has historically been one sided.  The wealth and resources of Africa have often been exploited in one way relationships based on dependence and not interdependence (Rodney, 1973).  However, more recently, African countries are beginning to step out of the shadows of dependency and are attracting a new wave of investment from inside and outside of the continent (Nibbe & Sita, 2013).  The literature, though, is largely one sided in its analysis.  Either articles or books are written from the perspective of the foreign investor or, they are written from the perspective of Africans.  The reality is that successful economic development in Africa will be a result of the development of mutually beneficial interdependent relationships.  Any analysis of the status of African economic development must include both perspectives.  Any meaningful plan for African development must result from a synergy of efforts and ideas coming from all perspectives.

This paper represents an attempt to exemplify a synergistic analysis regarding the economic and political development of Africa.  The objective is to glean from a sample of the available literature, ideas from the perspective of Africans and of persons elsewhere.  To do this, two very different, but highly regarded African countries (when it comes to investment attractiveness) will be analyzed.  Rwanda, after the devastating genocidal rampage that occurred in 1994, has experienced nearly two decades of economic growth and development (Hernandez, 2013).  Nigeria, one of the oil giants of Sub-Saharan Africa, is the most populated country on the continent and is also growing economically while showings signs of increasing political stability (Nibbe & Sita, 2013).  

The Historical Context

In the thousands of years prior to consistent European contact with Africa many great kingdoms rose and fell (Rodney, 1973).  However, much of Africa’s political and economic structures were based on highly localized village kingdoms that related to each other both economically and socially.  Most parts of Sub-Saharan Africa continue such structures up to the present day.  In modern society, village rulers exist side by side within the structure of democratically elected representatives. Such ancient structures continue to be highly respected and relied upon for leadership at the village level.

At the same time that European contact with Africa was increasing, respected European scholars such as George Cuvier of France had already developed a science of the superiority of the white race.  He wrote: “The Negro race ... is marked by black complexion, crisped or woolly hair, compressed cranium and a flat nose. The projection of the lower parts of the face, and the thick lips, evidently approximate it to the monkey tribe: the hordes of which it consists have always remained in the most complete state of barbarism” (Cuvier, 1835, p. 50).   Many scholars supported what were considered scientific conclusions that Northern Europeans were the genetically superior race among humans.  Africans were often categorized as barely above apes.  Thus, the entry of Africa into the modern global economy (that was largely controlled by Europe) was characterized by attitudes and beliefs that did not view Africans as deserving of being equal partners.  In the earliest days of trade involving Europe and Africa, human beings, bought and sold as slaves, were the most valuable commodity.

As the slave trade was slowly coming to an end, the major European powers carved up Africa into colonies under the jurisdiction of each respective government.  The dissection of Africa, in 1844 by European powers meeting in Berlin, was done without regard to how the various ethnic groups were organized geographically.  The only interests that were considered were those of the European nations involved (Rodney, 1973).   In the 19^th and first half of the 20^th century the role of Africans in the global economy was reduced primarily to that of laborers working for companies that were now getting rich from products and natural resources extracted from Africa. 

By the early 1960’s nearly all African countries had achieved “independence.”  However, as the British, French, Belgian, Portuguese and Dutch turned over political control, they did not turn over economic control.  The major extraction industries that had been established in Africa remained in the control of the colonial companies.  Thus the practices of exploitation and unfair partnerships with indigenous peoples continued. 

Kwame Nkruma became the first elected President of Ghana after its independence in 1957.  At the time, the British were cooperating with Nkruma to build a major dam on the Volta River.  Nkruma believed that the dam would generate enough electrical power to support significant industrial and infrastructure development in Ghana.  Unfortunately, the British withdrew from the project long before its completion.  Undaunted, Nkruma sought other sources of financing and was able to get the support of the World Bank and other foreign investors after a deal was negotiated with Kaiser Aluminum.  The dam was finally completed in 1967, but Kaiser (the biggest consumer of electricity from the dam) demanded ultra-low rates that resulted in residential consumers increasingly subsidizing the operating expenses of the aluminum company.  Fifty years after Ghana’s independence, the country’s aluminum sector has helped US-based companies Kaiser and Alcoa profit while showing little benefit to the country’s economic or industrial development (The Drop Squad, 2013).  Such unbalanced contracts were typical in post-colonial Africa and have had a lasting negative impact on economic development and political stability. 

The view of Africans as less than human gradually abated but did not evolve into a view of Africans as equals or deserving of the same treatment given broken economies and political systems in Europe and Asia after World War II.  Instead there was seemingly an intentional strategy to keep Africa poor (Iheriohanma, 2010).  Intense poverty became the way of life for the majority of Sub-Saharan Africans after independence and soon the societal destructiveness of that poverty began to boil over as leaders made promises that they couldn’t or were not allowed to keep.  A pattern of military coups and civil war became the norm for nearly three decades throughout Africa.  Yet, many leaders of the struggling African countries did not allow their hopes for a better Africa to be dashed.  They pushed on. 

Today, Africa is still recovering from over a century of abuse and neglect from outside of Africa and many self-inflicted wounds.  In spite of all the damage and underdevelopment, many African leaders of today are implementing strategies to more effectively engage the global market while lifting its citizens out of poverty.  Leaders like Paul Kagame, the President of Rwanda, and Ngozi Okonjo-Iweala, Finance Minister of Nigeria, have demonstrated a clear understanding of the need to reduce their country’s foreign debt and dependency on aid (Building Rwanda, 2012; Keating, 2013).

 

The African Worldview

Ntibagirirwa (2009), in his discussion of the need to incorporate African cultural values into any meaningful plan for economic development, argues that neoliberal views of economic development have been generally assumed to be universal.  He points out that the cornerstone ideas of great European thinkers like Descartes, Rousseau, Locke, Hume, Adam Smith and others have formed the foundation of theories of economic development that are thought to be applicable to all human societies.  An initial flaw in this line of thinking is that these great thinkers did not view Africans as equal to Europeans or capable of development in any way similar to Europeans.  It has not been until relatively recently that European scholars began to widely accept that Africans are human beings on the same footing.  Even now there are a few remaining detractors.  Nevertheless, Africans are in fact human beings on the same footing with all other humans.  Our differences lie in our cultural beliefs, values, and worldviews.

Ntibagirirwa (2009) goes on to identify the basic components of the cultural value system common throughout Sub-Saharan Africa.  In short, he describes what has become to be known as “Ubuntu.”   Ubuntu can be described by the saying, “I am human because we are human” or simply “I am because we are.”  This idea of self/group-awareness is in contrast the Descartes statement of, “I think, therefore, I am.”  With Ubuntu, the individual and the group are interdependent.  Traditional European philosophy and cultural values are more individualistic.  The community is made up of a group of independent individuals. 

Another aspect common to the African worldview relates to the relationship between the material and spiritual realms.  The idea of interdependency is carried onto the relationship between material and spiritual.  Material and spiritual are interdependent and inseparable.  Everything that is material has a spiritual component and everything that is spiritual has a material component (Jackson & Sears, 1992).  The entire universe is seen as dynamic web of interdependent energy patterns.  Thus, the individual is seen as an inclusive part of a single spiritual/material universe.  Everything and everybody is connected and interdependent.  Ntibagirirwa (2009) suggests that a meaningful and effective plan for economic development in Sub-Saharan Africa must be based in the cultural values and worldviews of Africans. 

In the struggle for independence, and shortly after, it appears what was known at the time as “African Socialism” may have been an early attempt to incorporate African cultural values and worldview into the developing economic and political systems of several African countries.  Unfortunately, this attempt occurred in the middle of the Cold War.  In the US and in Western Europe, ideas resembling communism or socialism were largely demonized.  Thus, African leaders that espoused such ideas were viewed as being on the wrong side of the Cold War and perceived as possible threats. 

An interesting side note is the term “Third World” developed out of the Cold War rivalries.  The “First World” was the US, Western Europe and its committed allies.  The “Second World” was the Soviet Union and its allies.  The “Third World” was the designation for non-aligned countries which included most of the countries of Africa.  However, before the end of the Cold War, “Third World” became synonymous with poverty and underdevelopment.

In an increasingly interdependent world, the question remains regarding what exactly would an economic and political system consist of that is firmly based in African cultural values and an African worldview?  The need for African leaders and for governments of African countries would be for them to have the ability to be both African and “global” at the same time.  African government and business leaders must be able to communicate and effectively connect to both the citizens in their countries and their global partners.  However, such relationships depend not just on the skills of the African leaders but also on the openness and receptiveness of other world political and business leaders.

Perception versus Reality

Africa has been known as the “Dark Continent” not because of the dark complexion of its people but because so much about Africa is unfamiliar or unknown to the rest of the world.  Even at the present time much of the perception of Africa, its countries and its people is clouded by unflattering bias and racism.  However, there appears to be hope.  With increased exposure, old biased perceptions are giving way to a more realistic view (Nibbe & Sita, 2013).   Even when taken as whole, perceptions of Africa as a place for future investment have been steadily improving.  What is most striking is that when the perception of companies currently doing business in Africa is compared with companies not currently in Africa, the differences in perception is very clear.  Those established in Africa tend to evaluate the attractiveness of Africa for business nearly twice as high as those not established in Africa (Nibbe & Sita, 2013).   The conclusion is that those established in Africa are basing their perceptions on actual experience while those not established in Africa may be basing their perceptions on old biases and stereotypes.

On the other side of the coin is the perception of Africans about Africa.  In discussing the result of a Gallup Poll on the perceptions of Africans regarding governance and institutions, Rheault & Tortora (2011) reported that people generally had more confidence in religious institutions and the military than in the government and judicial systems.  Many governments in Africa experience a credibility gap with its citizens.  Perhaps part of the problem relates to what was discussed in the previous section. African leaders must be skilled at communicating with Africans from the perspective of African cultural values while also being able to communicate effectively with global partners. 

Finally, related to issues of perception, it is also important to understand that in spite of the many biases and misperceptions that may be present regarding Africans, the individual African tends to view him or herself as a human being who is a part of this world just like everyone else.  It makes no sense to an African that there should be a bias against them simply because of where they come from or how they look. 

Rwanda and Nigeria

To explore the topic of African economic development further it would be helpful to evaluate the examples of Rwanda and Nigeria.  The two countries are very different in many respects.  While Nigeria is the most populated country in Africa with over 170 million people, Rwanda has only 12 million people.  Nigeria is rich in natural resources especially oil and is a member of OPEC.  Rwanda has little in the way of natural resources.  Nigeria’s GDP (PPP) is $485.194 billion with a per capita rate $2,866.  Rwanda, with its much smaller population has a GDP (PPP) of $16.937 billion and a per capita rate of $1,592.  These numbers represent vast improvements for both countries over the past 20 years and are the result of very active economic development plans by their governments.  Nigeria has had successive democratically elected governments since 1999 and Rwanda has had democratic elections since 1994. 

Both Nigeria and Rwanda rank near the middle of the pact when it comes to ease of doing business there (Nibbe & Sita, 2013).   Nigeria ranks second to South Africa regarding the amount of capital invested for infrastructure improvements.  Both Nigeria and Rwanda have dramatically reduced the size of external debt in relation to gross national income.  Rwanda went for a high of 63.1% in the 1990’s to a 14.2% in 2010.  Nigeria went from 118% down to 4.5% during the same period (Nibbe & Sita, 2013).     

It is probably no coincidence that such improvements in the economies in of Rwanda and Nigeria have all came after the end of the Cold War.  Attempts to manipulate internal politics and foreign policy are no longer as urgent for either of the former Cold War foes.  It appears that it has resulted in giving Africa some breathing room to develop on its own and garner greater interest in global investment that actually leads to growth and not dependency. 

While economic conditions are improving for both countries they are still very far from being comparable to any country in Europe or North America.  Yet, with so much room for additional growth it appears investors are beginning to recognize many golden opportunities and the governments are better prepared to manage the growth (Solso & Chinyanta, 2010). 

Since 1994, Rwanda has experienced relative political calm.  There have been no military coups and the current President, Paul Kagame was re-elected with overwhelming support.  That is not to say that Kagame’s government is not without its critics.  Desrosiers & Thomson (2011) attempt to make the case that Kagame is actually no different than his dictatorial predecessor.  They claim that Kagame has established a system of fear and repression.  He is controlling his own people and fooling the international community.  However, the World Bank and many other international observers do not agree with their assessment (Hernandez, 2013).  On the contrary, the World Bank views Rwanda under Kagame’s leadership as having established a sustainable path for economic development and moving its citizens out of poverty.

Nigeria too, is heavily criticized for corruption and “sectarian” violence.  Royal Dutch Shell is constantly victimized by extremely organized and capable thieves that still thousands of barrels of oil per day from pipelines (Shell Global, 2013).  It is often speculated that Nigerian government officials are paid off as a part of keeping the scheme going.  In the North, Nigeria is attempting to deal with the Boko Haram, an Islamic extremist group that has been responsible for the deaths of about 10,000 Nigerians (mostly Muslim) during the past 12 years.  Violence in the North may cause investors to pause, but companies familiar with Nigeria continue to recognize the potential there and know how to steer clear of hot spots.   

Rwanda and Nigeria are more of the norm in today’s Africa rather than the exception.  They represent the enthusiasm and optimism of many African countries in spite of more than century of tragedy, internal conflict, foreign abuse, financial manipulation, unfair trading practices, exploitation and more.  While there are many challenges still to meet, there is cause for optimism and foreign investors are beginning to agree (Solso & Chinyanta, 2010). 

A Comment about Corruption

Whenever there is a discussion about economic development in Africa the mention of corruption is not far behind.  However, very often the term is used without adequate quantification.  A policemen taking a bribe at a check point that may amount to a couple of dollars is put into the same category as the high government official that embezzles millions.  In a review of the book Corruption in Africa: Causes, consequences and cleanups, Abdul-Korah (2010) indicates the book even identifies school children as culprits in the problem of corruption.

When discussing corruption it must be quantified in terms of the amounts of money involved and the potential damage to economic development.  The most damaging types of corruption are those that result in the extraction of billions of dollars out of the home country.  A distinction should also be made between corruption and confidence schemes.  In much of the literature all of these distinctly different activities are grouped together as corruption (Ebegbulem, 2012).   Additionally, when large amounts of money are being embezzled and being taken out of the country, it most often requires the cooperation of foreign banks.  Should these banks be identified as being involved in the corruption or theft from the home countries?  Or should they be allowed to take advantage of the large deposits and be held harmless? 

Most recently many of the biggest acts of corruption in history have been committed by some of the world’s largest and richest banks.  Earlier this year HSBC agreed to pay $1.9 billion to resolve charges it enabled Latin American drug cartels to launder billions of dollars.  HSBC was accused of failing to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. currency from HSBC Mexico, allowing for money laundering (Smythe, 2013).   If such numbers were associated with an African leader it would mean utter disgrace and severe damage to the economy of his country.  HSBC paid the fine and continued with business as usual.  No criminal charges were filed for any HSBC executive involved. 
Also, notable is JP Morgan's involvement in making illegal representations about mortgage securities to investors.  Their deception, involving 100 of billions of dollars, contributed to the financial collapse that reverberated around the globe in 2008 and 2009.  Economies in the US and Europe were all damaged severely.  Consequences have been limited to fines totaling into the billions of dollars, with no criminal charges having been filed to date.  The fact that, after doing so much damage on an international scale, companies like HSBC and JP Morgan are allowed to continue to exist suggests that much of our global economic system continues to be vulnerable to a level of corruption that dwarfs anything that has ever occurred in Africa.

In Africa, there is a direct link between corruption and poverty. The desire for money when it is limited creates temptation in some people and they succumb.  Others have bad intentions from the beginning.  However, there is evidence that high level governmental corruption in Africa is on the decline (Abdul-Korah, 2010).   As economies improve and more people are able to make a decent wage, the motivation for small time corruption will decrease as well.

Conclusions and Recommendations

When a long look is taken of the Africa’s history and underdevelopment it is amazing that the current possibilities that are surfacing are coming to fruition.  Economically and politically Africa is finally facing what she has been dreaming of for decades.  In modern times, Africa, especially Sub-Saharan Africa, more than any other region of the world has faced attack and atrocities that have cut to the core of her being.  Yet, she has survived.  Like an adult with a history of trauma and abuse, she has been scarred and sometimes the distortion of those wounds has resulted in further self-inflicted damage.  At present in some parts of Africa those suicidal tendencies continue, but in other parts the healing has taken root.  World economic events of the past four or five years have created the opportunity for Africa to be highlighted as a good place for future investment.  While most of the world was falling into recession, Most African nations were exhibiting healthy growth.  As a result, the world is now taking a new look at Africa and the possibilities for economic development.  A growing Africa could mean huge profits for many global companies as well as many Africans coming out of poverty. 

When evaluating where to go from here, a couple of new realities must be recognized.  First, nearly all Sub-Saharan African countries have substantially decrease its proportion of debt compared to Gross National Income.  That means that Africa is finding its way out of dependency and rapidly moving toward true financial independence.  Second, the investment in to Africa will also be from within.  Countries like South Africa and Nigeria, while focused on their own development, are also looking for good investments in their own neighborhood.  The size of the middle class in many African countries is increasing, that means an expanded consumer base for many consumer products. 

As the world increases the attention it is paying towards Africa in a very favorable way, so too must Africans look at themselves with more favor and confidence.  Over a century of foreign domination, decades of poor governance, economic exploitation, war and instability have traumatized many Africans to the point of perpetual pessimism.  A new reality is dawning that will require the citizens of the countries of Africa to respond with hope and optimism.  One of Africa’s strengths as it goes through this economic transformation is that it has a very young population.  Half of the population of Sub-Saharan Africa is under the age of 18.  That means the potential for an energetic, enthusiastic, and optimistic workforce that spans all professions is a reality.  However, the challenges of all this potential must be met by current political and business leaders in Africa.  Ideally, they will have the honest and sincere support of governments and business leaders from around the world that recognize the current potentials and seek to nurture their development and not simply exploit for their own gain.  The cooperation among European nations and the expansion of the EU has benefited the populations of many countries.  If that same atmosphere of cooperation is established in Africa it too will thrive.

Finally, the leaders of Africa must become skilled at speaking the language of the global marketplace, while also connecting to their people from the perspective of an African worldview; sharing and living traditional cultural values that support coming together to make all of Africa and the world a more livable place for everyone.

 

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