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Africa economic potential

Africa has great economic potential brimming with human endeavor, opportunity, abundance and hope. Many write off Africa as the continent of despair, while other entrepreneurs have recognized the huge untapped business venture across the continent. The world is starting to rethink Africa’s role in global markets. In Africa, labor costs are well within Asian ranges and there is a need for job creation. African products have found a niche in the American market. There is an increased interest in traditional areas of opportunity for U. S. investors such as mining, gas, oil and agricultural products.

There are numerous opportunities in the privatization of state-owned enterprises in utilities. Africa Africa is the second largest continent in the world. It has 54 independent countries – 48 mainland and 6 island states. Thirteen percent of the world’s population live in Africa with an annual rate of increase at 2. 8 percent. The region as a whole is among the poorest and least developed of the world. Partly because of long-standing problems that hampered growth and compounded social problems, because some government policies discouraged individual initiative and entrepreneurship. Agriculture

Agriculture accounts for about one-third of the continent’s total economic output, more than half its export earnings and employs 75 percent of the work force. As a whole agricultural production growth dropped to 1. 7 percent in 1997, after bumper crops raised output by 5. 2 percent in 1996. On a per-capita basis, less food is produced in Africa today than in 1970, and food imports continue to rise. Natural Resources Oil, minerals, and natural gases are prevalent all throughout Africa. Despite Africa’s great natural resources and energy potentials, industrialization is just getting started.

Africa contributes only one percent of the worldwide industrial production. Infrastructure An overwhelming part of all development aid goes to infrastructure. Some landlocked countries do have good transportation systems. These are the countries whose mineral or agricultural resources were valuable enough to make a heavy investment in transport facilities. The countries that do not have direct access to the sea require road and rail links to a port if they are to engage in trade. Many of these countries are among the poorest in the world, and their lack of transportation facilities and landlocked positions contribute to their poverty.

The definition of infrastructure is an economic investment, such as communications, telecommunications, airports, harbors, roads, schools, hospitals and administrative buildings. Economy Most African nations gained political independence during the 1960’s, yet their economies are still shaped in part by their past experience as European colonies. Under colonialism, the country which owned the colony exported its raw materials to Europe where the raw materials were made into manufactured goods. Some of the goods were then shipped back to the colonies for sale.

The same pattern occurs in much of Africa today. Africa has faced a variety of obstacles to economic growth, many of which are beyond its control. Nearly three-fourths of all African nations are dependent upon one or two exports for the bulk of all foreign exchange earnings. Drops in world prices for many of these commodities and rising prices for imports, have reduced the money available for development. Many governments borrowed heavily to finance prestigious but often economically unviable large-scale projects; the cost of debt service has nearly bankrupted some countries.

There is a new generation of leaders implementing democratic reforms and expanding economic growth. Though economic growth is healthy, political and economic barriers are hindering Africans from reaching their fullest potential and slowing development. While economic aid and humanitarian assistance remain essential tools in coping with Africa’s inevitable crises, other methods have been chosen to encourage and support economic and political reforms. A bill that completely changed the economic relationship between Africa and the United States was the Africa Growth and Opportunity Act.

This act granted goods manufactured in Africa duty free access to American markets. It also provided incentives and support for American firms doing business on the continent. This bill provides the platform for Africa’s economic transformation into a group of high performance economies. Nearly 60 percent of the African countries registered rates of economic growth in excess of their population’s growth rates, resulting in increased per capita incomes. About half of these countries posted annual economic growth rates of more than 5 per cent.

In 1990, the per capita gross national product (GNP) was estimated at $565 a year. South Africa South Africa has the most sophisticated free-market economy on the African continent. The country represents only 3% of the continent’s surface area, yet it accounts for approximately 40% of all industrial output, 25% of gross domestic product (GDP), over half of generated electricity and 45% of mineral production in Africa. About 75% of South Africa’s economic activity occurs in the four main metropolitan areas, namely the greater metropolitan area.

The Witwatersrand is the financial and industrial hub of the country and accounts for about 40% of the country’s GDP. With only six percent of the total population (Population: 42,327,458 July 1997 est. ) of Africa, its production output is equal to one-quarter of the entire continent. It’s main strength of the economy lies in its rich mineral resources, which provides two-thirds of exports. South Africa possesses and mines a major portion of the world’s 12 main mineral resources.

Most mines continue to face significant productivity problems associated with working conditions, dwindling reserves and slender profit margins. South Africa has built the world’s only oil-from-coal plants. The three plants supply 70 percent of the country’s gasoline needs and the bulk of the petrochemicals used in industry. A major find of natural gas offshore near Mossel Bay has been converted to gasoline production. Agriculture accounts for about five percent of GDP and 30 percent of the labor force. Only 15 percent of the country is farmable.

South Africa’s economic performance in the 1980’s and the early 1990’s was severely hampered by a poor political environment and the deteriorating terms of trade. Terms of trade can be defined as the ratio of export prices to import prices. The success of the April 1994 elections and the subsequent establishment of the government of national unity (GNU) have removed an important obstacle to growth, restoring legitimacy to the governing process and creating a more conducive environment for both domestic as well as foreign investment.

The governments Reconstruction and Development Program (RDP) will provide numerous and important economic opportunities. The primary focus of the program is on meeting basic needs, it also emphasizes the need for maintaining sound economic policies, for becoming accountable and more transparent, as well as for controlling government spending through improved efficiencies. The Reconstruction and Development Program (RDP) is an integrated and coherent socioeconomic policy framework seeking to mobilize all the people of South Africa and its resources to reduce poverty and provide opportunity and growth in a stable society.

The RDP sets out to integrate growth, development, reconstruction, redistribution and reconciliation into a unified program. The country’s economic system, is marked as a sophisticated industrial economy that has been developed alongside an underdeveloped economy. The established infrastructure and economic base has great potential, particularly for the opening up of the modern developed sector to make it accessible to the vast majority of people, and the continued development of the underdeveloped sector through increased employment opportunities.

The South African economy experienced a severe recession between 1990 and 1993. Between 1993 and 1996 there was a marked recovery and improved confidence in the business sector. This recovery was evidenced by a decline in the rate of inflation and by growth in the economy. The average rate of increase of the consumer price index during 1996 was 7. 4% (the lowest rate of inflation in South Africa since 1972). The growth rate in the South African GDP in that year was 3. 1%. Although the average rate of increase of the consumer price index increased to 8. in the period from January 1997 to February 1998, the rate of inflation in South Africa is still substantially lower than the rate in the 1980s. Although the growth rate in South Africa’s GDP during 1997 dropped to 1. 7%, future projections are favorable. In 1995, approximately 29. 3% of the economically active population were unemployed. Nigeria The most populace (Population: 107,129,469 July 1997 est. ) and one of the most politically significant states in Africa, is Nigeria. Nigeria is a resource-rich country that has fallen victim to government mismanagement of its economy.

Although Nigeria is Africa’s leading oil-producing country, it remains poor with a $300 per capita GDP. Nigeria is the world’s largest producer of columbite, a mineral containing iron, magnesium, and niobium. But petroleum has been the mainstay of the economy since the early 1970s. Nigeria is a member of the Organization of Petroleum Exporting Countries (OPEC) and the largest producer of petroleum in Africa. Its total reserves are estimated at 20 billion barrels. The Nigerian government in conjunction controls most petroleum production and exploration with multinational oil companies.

The great surge in world oil prices beginning in 1973 provided a great boost to Nigeria’s economy. The sale of petroleum contributed 65 percent of all government revenues and 95 percent of all export earnings in the early 1990s. The oil boom of the 1970s enabled the Nigerian government to undertake a massive program of construction, industrialization, and extension of social services. One of its projects was construction of the new capital city of Abuja. This program was deeply flawed, however, and by the early 1980s Nigeria had major economic problems and was accumulating a large foreign debt–$31. illion in 1992.

After the fall in oil prices in 1982, Nigeria faced severe austerity measures, including the reduction of its public expenditures. This resulted in unemployment, reduced imports, and political instability. The era of petroleum-based development in Nigeria is now recognized as a period of waste, inefficient use of wealth, and deteriorating standards of living. About 80 percent of Nigeria’s land is suitable for farming and grazing. There are several plywood factories and sawmills. Although it employs less than 45 percent of the workforce, agriculture accounts for only 2 percent of exports.

Exports of traditional crops collapsed as the result of poor government policy and low prices on the world market. The government has attempted to stimulate agriculture through large irrigation schemes, an expansion of credit, the use of high-yielding seeds, and incentives to foreign business. Food production, however, has failed to keep up with population growth, which is increasing at 2. 1 percent each year. African standards Nigeria has an excellent system of communications and a large popular press. The growth in oil revenues facilitated an expansion of the Nigerian road system, which now connects the entire country.

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