Factors contributing to slow growth in Africa
African continent for decades has experienced slow growth not only economically but also among other elements of life. Therefore, this presentation aims to highlight some of the factors leading to the situation, looking at the various contributing factors ranging from structural elements of the governments, the biasness, poor policymaking, inadequate political bodies and border openness, and exportation practices among other features that hinder growth.
The political instability in Africa is not a new item in our ears. Now and then, we witness changes in power whereby the transition was neither democratic nor done in goodwill. The ever power struggle for power within the continent has been a common practice among various states. Whereby different sides challenge for political power through ill motive avenues, such methods have been witnessed, for instance, in Nigeria, a country rich in oil, creating instability in its extraction, refining, and distribution. Such issues hinder the commodity’s potential to impact the economy and the country’s growth.
Additionally, the presence of religious differences and terror-related activities in the continent have also fueled the situation to the worst. Some of the most common in our daily headlines, for instance, are Libya once reach and the stable country now on its knees, ever engaging in fights. Somalia is another one, facing political differences and terror activities. Political instability factors in the continent can be closely associated with a lack of social capital and weak political institutions (Ahmed & Suardi, 2007). Hence, creating an unstable environment for growth and development within the countries and the continent as a whole.
Exportation is another consideration as a contributing element for a lack of growth in Africa. Many scholars in the field of economics have hinted on the importance of the free market through openness. According to Azam, Fosu and Ndung’u in their paper, explaining the slow growth in Africa pointed out that for the African countries to develop, they needed them to open up (Azam, Fosu & Ndung’u, 2002, p.178). Open economies facilitate faster growth compared to closed economies; furthermore, for nations to enjoy optimum trade and engage effectively in trading activities, they need to open up their economies. It is with no doubt that the developing countries that have ventured into active trading opportunities have enjoyed better success, sustainable and higher growth rate.
Another factor contributing to slow growth in this continent is the policies that are in place. Take, for instance, the fiscal, monetary policies across most, if not all, African countries aimed at curbing inflation. However, in turn, contributes to a higher cost of borrowing ((Azam, Fosu & Ndung’u, 2002, p.177). As a result, the banking corporations bars many businesses, additionally, banks rarely give loans to companies that lack collateral that is not readily convertible to cash. The continent also has got higher risks concerning inflation, exchange rates, and terms of trading, which are very volatile and vital economic elements. Other factors that bring about slow growth across the continent is the human capital (Wood, & Frynas, 2006, p.244). Who lacks technological knowhow to apply the relevant technology over various industries to help foster production and trade to improve the continent, as well as weak educational institutions.
References
Azam, J. P., Fosu, A., & Ndung’u, N. S. (2002). Explaining slow growth in Africa. African Development Review, 14(2), 177-220. doi.org/10.1111/1467-8268.00051
Ahmed, A. D., & Suardi, S. (2007). SOURCES OF ECONOMIC GROWTH AND TECHNOLOGY TRANSFER IN SUB‐SAHARAN AFRICA 1. South African journal of economics, 75(2), 159-178. 07 doi.org/10.1111/j.1813-6982.2007.00116.x
Wood, G., & Frynas, J. G. (2006). The institutional basis of economic failure: Anatomy of the segmented business system. Socio-Economic Review, 4(2), 239-277. , doi.org/10.1093/SER/mwj034