AFRICAN ECONOMY

ECONOMY

Since prehistoric times, the majority of Africans have been farmers and herders who raised crops and livestock for subsistence. In precolonial times, a few African states developed long-distance trade networks based on the exchange of raw materials and some specialized local goods. Starting in the 15th century, European colonization of Africa brought overseas demand for certain agricultural and mineral products. The colonizers built new transportation networks and introduced technological innovations and new crops. At the same time, they exported millions of able-bodied Africans as slaves, exploited African labor within the continent, and undermined local industries, crafts, trade networks, and governments. By the mid-20th century, European colonies in Africa had established one-way trade systems in which Africa’s wealth of raw materials were exported to enrich foreign coffers, with little regard for development within Africa.

As decolonization began in the late 1950s, the African economy was divided into two distinct sectors. Most of the population took part in the traditional rural sector, which featured subsistence production of food and simple manufactured products. The remainder was involved in a relatively modern sector, based in cities and mining and plantation centers. There, Africans worked for wages, producing mineral or agricultural raw materials for export to industrialized countries. Although people in most rural communities earned some money from seasonal work in the cities and modern industrial centers, the two sectors were largely separate.

In subsequent decades, African governments pursued various economic development initiatives in an attempt to improve the living standards of their people. In many countries, these efforts led to the growth of manufacturing of consumer goods and other products. Services—in education, health care, civil services, and other areas—also grew in economic importance.

Development efforts led to a greater degree of interaction and movement of people and money between the modern and subsistence sectors of the African economy. Yet, by the early 21st century, the sectors were still far from integrated. Most of the population still pursued traditional subsistence activities, which continued to provide sustenance for the majority of Africans. At the same time, despite increasing levels of industrialization in many countries, Africa’s raw materials continued to be produced primarily for export.

Traditional Subsistence Sector

Despite economic development efforts, the traditional subsistence sector is a constant in the African economy. In general, the majority of African people farm, herd livestock, fish, make handcrafted products, and trade their goods much as they have for hundreds of years.

Farming is by far the most important subsistence activity, and it dominates rural production in the tropical forest and tropical savanna zones of West, Central, and southern Africa. Traditional agriculture is basic and at best yields enough food and income for the household to survive. The average rural household has no access to scientifically improved seeds, farm machinery, or sophisticated methods of farm management. On most African farms, the soil must be worked with hand tools or small, animal-drawn plows. Use of artificial fertilizers is almost nonexistent. Insects and vermin are constant threats, sometimes eating away more than half of the crops. Farmers raise crops primarily to supply food for the family. However, there may be small surpluses, and these are sold to purchase other foods and essential goods.

Cottage industry employs close to one-third of the rural labor force, not counting the many farmers who also engage in this activity on the side. It is largely responsible for the local supply of clothing, footwear, farm implements, and construction materials, as well as for processed foods. This sector also produces crafts, cloth, jewelry, and decorative artifacts to sell to tourists in urban areas and at tourist attractions.

Small-scale commerce, taking place in small, often periodic, markets, is vital to people's sustenance in Africa's rural areas. At these markets, rural Africans sell crop surpluses and cottage industry products to traders who, in return, sell them goods such as spices, condiments, kerosene (for domestic lighting), soap, matches, batteries, clothing, and spare parts for bicycles and carts. The small-scale traders then sell the crops and manufactured products to larger-scale traders. These small-scale traders have played a crucial role in bringing the subsistence sector into the larger economy by buying farm products and making consumer goods available to the rural producer.

Migratory herding, based on extensive and frequent movement of livestock, declined in importance over most of Africa in the second half of the 20th century. The area required for migratory herding has been greatly reduced as pasturelands have been taken over for agriculture—particularly modern plantations—and wildlife reserves. Fishing is a minor subsistence activity in most of Africa because of a general scarcity of good fishing grounds and because most of the continent’s rural population lives in the interior.

Development of the Modern Sector

The modern sector of the African economy was developed largely by Europeans during the colonial period and geared toward the export of raw materials. Industrialization was minimal. After independence, many African governments pursued industrialization programs with varying success. Today, African nations face the challenge of expanding their economies to fulfill the needs of their people while maintaining their profitable export-oriented activities.

Colonial Economy

The colonial economy was centered around isolated agricultural and mining centers in which foreign-financed and foreign-managed firms employed local labor to produce raw materials for export to Europe, North America, and Japan. Colonial administrations started most of the important large-scale farming and mining activities: for example, cotton growing in the irrigated Al Jazīrah (Gezira) region of Sudan, rubber growing on plantations in Liberia, coffee growing in Côte d’Ivoire, Ethiopia, and Kenya, and copper mining in Zambia.

For a variety of reasons, colonial economies did not focus on developing industry to produce finished goods for local consumption. First, markets for finished goods in Africa were small. Second, mineral and agricultural raw materials, for the most part, were not processed in Africa, or were only minimally processed to ease shipment to ports. Third, since African industrialization was largely initiated by European firms, it was not in the firms’ interest to create competition for their own products in Europe. Fourth, in the case of some countries, both the colonial and later African governments kept the exchange rates of their currencies too high, making imported consumer goods more affordable.

South Africa and Zimbabwe were two distinct exceptions to this general lack of industrialization. South Africa had been administered by settlers of European descent since the early 20th century. The size and technical skill level of the settler population—combined with relative autonomy from colonial powers—supported greater economic development, making it possible for industrialization to succeed. In the case of the colony of Rhodesia (what is now Zimbabwe), the white minority regime faced world sanctions for its illegal takeover of the government in 1965, and was forced to embark on homegrown industrial development to meet its own domestic needs. At independence in 1980, Zimbabwe had one of the most developed economies on the continent, second only to South Africa.

Colonial export-oriented industries did make some positive marks on the African economic landscape. They introduced important innovations in transportation, banking, marketing, trade, and many commercial services. They also led to improvements in government administration, agricultural practices, health care, and education. However, these innovations were not intended to modernize Africa as a whole. Instead, they were primarily concentrated in and around a small number of principal ports and trade centers, which usually also served as colonial capitals. This unbalanced system gave rise to tremendous disparities between developed urban centers and the rural sector.

Postcolonial Development

From 1960 to 1980 most newly independent African countries launched ambitious development plans to lift the standard of living of their peoples, who had suffered years of colonial misrule and exploitation. Development projects were launched to spur economic development by promoting manufacturing and other industries. One major goal of industrialization was for a nation to spend less on imports by producing the consumer goods that formerly had to be imported (such as textiles, tires, chemicals, fertilizers, paper, glass, ceramics, and electrical equipment). This strategy, known as import substitution, faltered in the 1960s because of the inability of new African manufacturers to produce consumer goods efficiently. New factories required imported machinery and other costly goods to sustain production. The high costs made local manufacturers inefficient and incapable of competing with foreign manufactured products. The efforts were also hampered by the relatively low demand for consumer goods by Africa’s small markets.

The other major goal of industrialization was to increase earnings by promoting exports. Toward this end, foreign development agencies encouraged the colonial practice of developing export-oriented centers of raw material production. African governments therefore not only continued to protect the isolated mining and agricultural developments from the colonial era, but also helped create new ones. The guiding theory, borrowed from basic Western economic ideas, was that the high incomes generated in the developed areas would spill over into the local economy in the form of higher demand for locally produced goods and services. In response, the local people would not only spend more themselves, but would also invest both in new industrial developments and in building the roads, schools, health facilities, and so forth needed to support the expanding economic activity. All of this, in theory, would lead to still further increases in income. Meanwhile, national export earnings would be used to fund further development projects in agriculture and industry. Thus, the developed area would initiate a cycle of rising incomes, consumption, and investment, culminating in a takeoff in industrialization and modernization.

The reality was quite different. First, the export-promotion strategy was crippled by declining world prices for African raw materials. Second, what wealth was generated in the developed areas was often expatriated to foreign investors, siphoned off by national governments, or spent on ostentatious public works and imported consumer goods for urban residents. The promised economic spillover effects were minimal, except in oil-producing countries such as Libya, Gabon, and Nigeria, and in a few other countries such as South Africa, Zimbabwe, and Kenya, which received significant amounts of foreign investment in industry.

Furthermore, the geographic distribution of development remained as limited as in the years when Africa was under colonial rule. Export production and other manufacturing activities were concentrated in isolated rural areas and in a few port cities or other transportation hubs. Colonial-era transportation networks and marketing systems remained in place, and continued to favor these locations. The result was a widening economic disparity between centers of development and outlying areas. Innovations in modern technology and know-how developed in cities like Dakar, Senegal; Abidjan, Côte d’Ivoire; Lagos, Nigeria; Addis Ababa, Ethiopia; Nairobi, Kenya; Lusaka, Zambia; and Harare, Zimbabwe, and city dwellers saw their living standards improve. At the same time, outlying areas increasingly faced poverty.

African governments sought to improve traditional subsistence agriculture either by promoting the use of modern farming equipment, fertilizers, and pesticides; or by forming collective farms for subsistence farmers to share. These measures were somewhat successful in improving the quality of life of some rural populations, but failed to transform Africa’s traditional subsistence mode of production.

Despite these challenges, African industry has made important strides since the 1970s. In this period, many African governments developed more effective import substitution strategies by more closely analyzing their internal and external markets and producing goods that were easiest to produce, given their countries’ resources. There was measurable success in many sectors, especially in consumer products, though not all import substitution schemes worked out.

Labor

Only 52 percent of the African population is between the ages of 15 and 64, the age range that is conventionally considered to be working age. About 45 percent are children under 15 years of age, while 3 percent are 65 years or older. Africa has the highest dependency ratio—the proportion of the total population that needs to be supported by the working-age group—of any continent. This does not mean that children under 15 years of age do not work. In rural areas, children, especially girls, start work at 5 or 6 years of age. The child labor pool is shrinking, however, as opportunities for universal elementary education expand.

Only a small portion of Africa's labor force—mainly males—has formal wage-paying jobs in the cities or in the mining and plantation sectors. Most of the labor force is employed in subsistence production in rural areas or in the informal sector of the urban economy. The latter often involves women and children, and includes petty trade and other urban services such as cleaning, repairs, manual labor, and handicrafts.

The lowest earnings come from the rural subsistence occupations, which generally require basic traditional skills. Rural cottage industry is usually more profitable, but these occupations require higher skill levels and typically necessitate long apprenticeships. During the colonial period, the creation of a small number of more lucrative jobs in mining or plantation agriculture caused subsistence occupations to lose their respectability as routes to well-being. Eventually they were stigmatized as 'primitive' by a growing number of young men, who went off to big cities in search of better-paying jobs.

Africa’s major cities remain magnets for the rural labor force, which perceives these areas as centers of opportunity. The rise in the number of rural-urban migrants has contributed to wild growth, high unemployment, and overextended social services in African cities. In most countries in Africa, the major cities drain most of the national resources for modernization, leaving little to be shared with the rural population. At the same time, the unrestrained rural-urban migration has grave consequences for the food-producing areas that are losing significant numbers of able-bodied workers to the cities.

D

Economic Activities

Despite the expansion of industry and services and the growing economic importance of these activities, in almost all African countries agriculture continues to be the most important economic activity. Agriculture makes up about one-sixth of Africa’s total gross domestic product (GDP), while industry makes up about one-third, and services about half.

Agriculture

Despite being the most agriculture-based continent in the world, Africa does not produce enough food to feed its people. There are a variety of reasons for this problem, notably Africa’s high rate of population growth, the loss of farm labor due to widespread movement of workers from rural areas to urban areas, the economic priority given to the production of export crops, and a general lack of adequate investment in modern agricultural technology. Many African countries must import food staples and require food aid.

Africa’s most important export crops are coffee, cotton, cacao beans (cocoa beans), peanuts, oil palms, tobacco, cloves, and sisal. Major food subsistence crops include maize, rice, millet, and cassava. Cattle, sheep, and goats are also important sources of protein.

The continent’s different climatic zones have their own opportunities and limitations for agricultural development (see the Climatic Zones section of this article). The lack of modern agricultural technology among African farmers renders them powerless to overcome the climatic limitations of their regions.

Tropical Wet Zone

In the tropical wet zone, occurring close to the equator in West and Central Africa and eastern Madagascar, dense natural vegetation requires periodic clearing and burning to obtain plots for cultivation. Both small-scale and plantation agriculture are practiced in the zone, but small-scale production predominates for almost all export crops as well as food crops. Major export crops include coffee, oil palms, and cacao, and important subsistence food crops include cassava, yams, okra, plantains, bananas, and legumes. In most areas, farmers grow both export crops and subsistence food crops. Most of Africa's exports of coffee, cacao, and oil palm products come from small-scale producers in this region. In some areas of Liberia, Côte d’Ivoire, Ghana, and Nigeria, plantations using modern mechanical equipment and artificial fertilizers have been established. The most notable example is the extensive Firestone rubber plantation of Liberia, which produces most of the country’s rubber crop. Other major successful commercial undertakings include coffee growing in Côte d’Ivoire and cacao production in Ghana.

Tropical Summer Rainfall and Highland Zones

The tropical summer rainfall and highland zones are less agriculturally viable than the tropical wet zone. In these regions—covering a huge area that includes much of the tropical savanna land of West and southern Africa, as well as the East African highlands and most of Madagascar—rainfall is lower and less reliable, and the soil is often difficult to work by hand. This forces subsistence producers to limit cultivation to isolated areas of relatively high fertility, such as river valleys with rich, easily worked sedimentary deposits. Legumes and grains such as millet, sorghum, maize, and wheat dominate subsistence agriculture. Large-scale plantations are uncommon, except in wetter plateaus of Zimbabwe, South Africa, Kenya, Ethiopia, and Tanzania, which support plantations of tea, coffee, tobacco, pyrethrum, and fruit.

Both crop cultivation and livestock herding are limited by the prevalence of the tsetse fly, which spreads sleeping sickness. The tsetse continues to prevent settlement and farming in potentially valuable areas, especially wetter and riverside savanna areas. The tsetse is less common in the open and drier savanna, and these areas are used for the raising of cattle, sheep, and goats. Ethiopia, Zimbabwe, and Botswana export substantial quantities of livestock products, including live animals.

Semiarid and Arid Zones

In West and north central Africa, the semiarid zone known as the Sahel extends from northern Senegal in the west to eastern Sudan in the east. Other semiarid areas are found in east central and southern Africa. Rainfall is sparse and unreliable and falls at best only in a short rainy season in the summer. Population settlement is very sparse and migratory herding is still important as a source of food and of exportable hides and skins. Subsistence farming in the semiarid zone is carried out on small plots. The zone’s short growing season limits farmers to low-yield crops like millet and cowpeas. More productive farming of crops such as cotton, rice, and peanuts occurs in the valleys of the Nile, Niger, and Sénégal rivers.

The fertility of some areas of the Sahel has declined due to erosion, population growth, and centuries of farming. Disastrous droughts caused famines in the region in the 1970s and 1980s. To cope with these challenges, the countries of the Sahel region have required considerable international assistance in the form of food aid and rural development ventures.

The arid Sahara occupies all of North Africa except for the coastal fringes of Morocco, Algeria, and Tunisia. In southern Africa, the arid zone is limited to the Namib Desert. Very little farming takes place in these deserts. Until the discovery of oil in the 20th century, the Saharan economy depended on migratory herding, sedentary settlements raising date palms and some millet around a few oases, and long-distance commerce by camel caravans. Lacking the extensive petroleum deposits of other North African countries, Egypt built the Aswān High Dam on the Nile from 1960 to 1971 in order to expand irrigation for agriculture. Cotton is the chief export crop along the Nile, and lentils and many cereal crops such as rice, maize, wheat, and millet are also raised.

Mediterranean Zone

The Mediterranean zone—found only at the northern and southern extremities of the continent, on the coasts of Morocco, Algeria, Tunisia, and South Africa—has soils and topography suitable for the cultivation of vineyards and orchards of citrus and olive trees. The farms in this zone are among the most prosperous and modern in Africa, and agriculture here is often combined with food-processing activities such as wine making and fruit preserving. Cereals such as wheat are important, and livestock, particularly sheep, are also raised. Exports of farm products are very profitable in the Mediterranean zone, especially for Morocco, Tunisia, and South Africa.

Land Use and Ownership

Before Africa was colonized, Africans farmed or herded with little or no regard for land ownership. Land was shared by clans, communities, or ethnic groups, and was often shared between groups as well. One group may have farmed a piece of land for part of the year, while another group grazed livestock on the land while it lay fallow (unfarmed) the rest of the year.

The concept of exclusive land ownership was introduced by colonists, who, in many areas, seized the best farmland in order to grow export crops. Less fertile areas were left for indigenous Africans, who farmed them in small, fragmented plots. This process was fostered by many independent African governments, which seized further communal farmland for private, corporate, or governmental use. Eventually, smallholders’ plots became increasingly subdivided into smaller fragments in order to provide at least some land to each of the growing generation of village families. Fallow periods, essential to maintaining the fertility of the soil, have been steadily reduced because all available land has been brought into cultivation. In addition, many smallholder farmers, unsure about the future of their farms in light of land seizures, began to favor short-term crops. In doing so, they abandoned traditional practices of crop rotation and intercropping—planting soil-depleting cereal crops and soil-restoring legume crops on the same land, either one after another or at the same time. Many farms became infertile, further reducing the amount of land available to smallholders. Coupled with recurrent drought, these conditions have brought serious food shortages to much of sub-Saharan Africa.

Many African governments have consequently faced the need for land reform. In some countries, land reform measures and rural development schemes initiated soon after independence gave smallholder farmers ownership of or leasehold rights to the small parcels of land they were already working as tenant farmers. Many African governments have resorted to nationalization of land assets with the presumed claim of better land distribution among the landless. In some countries, such as Ethiopia, land reform has been manipulated for political purposes, and mismanagement and corruption has harmed agricultural production. In other countries, such as Zimbabwe, the best lands remained in the hands of European settlers and were not redistributed after independence.

Agricultural Output

There were encouraging trends for African agriculture in the early 21st century. With the exception of countries that faced political turmoil in the 1990s, much of Africa—including countries with large populations, such as Nigeria, Ghana, Tanzania, and Zimbabwe—showed impressive growth in agricultural production. Profits from agriculture rose significantly in the 1990s and outperformed the previous decade. African policymakers remain concerned about population growth outpacing the growth of food production, but current trends point toward a more optimistic scenario for Africa’s food supply.

Forestry

Although about one-fifth of the continent is covered by forest, there is relatively little forest industry in Africa. Most felled trees are cut down to clear land for farms or, to a lesser extent, to supply fuelwood. The most desirable timber trees are mahogany, obeche, iroko, and other tropical hardwoods. Tropical forests rarely offer dense stands of a single species, however, inhibiting massive logging operations. Selective cutting is very expensive, especially in the interior where transport costs become prohibitive.

In 2006 African countries exported $4 billion of forest products. The largest exporters were South Africa, Cameroon, Gabon, Côte d’Ivoire, and Ghana. Countries with greater levels of industrialization were more likely to process timber into sawnwood for export, which is typically more profitable than exporting uncut timber. For example, South Africa, Côte d’Ivoire, and Ghana cut or otherwise processed almost all of their exported forest products, while Gabon, Equatorial Guinea, and Liberia exported almost all of their forest products unprocessed.

Fishing

Fish is not a major staple food in the savanna and highland zones of Africa, where there is a relative abundance of livestock as a source of protein. However, in the tropical forest margins of the West African coast, fish is a crucial source of protein and, in dried form, a common condiment. Principal grounds for marine fish such as tuna, sardines, and hake are found off the West African coast from Morocco to Senegal, and from Angola and Namibia. The Nile, Niger, Congo, and Sénégal rivers and Lakes Victoria, Tanganyika, Malawi, and Chad are major sources of freshwater fish. The most common freshwater catch is the Nile perch.

In 1999 African fishers caught a total of 6.3 million metric tons of fish, of which 3.8 million metric tons were marine fish. Morocco, Egypt, South Africa, Ghana, and Nigeria were the top African countries in total fish catch; and Morocco, Namibia, South Africa, Senegal, and Libya exported the most fish. Morocco is also the leader in fish-processing industries, producing more canned fish, fish oil, and fish meal than any other African country.

Mining

Africa plays a very important role in the global mineral economy, producing about three-quarters of the world’s cobalt; half of the global supply of platinum, chromium, and diamonds; approximately one-third of all gold, manganese, and uranium; one-fifth of all bauxite; and one-tenth of the world’s petroleum. Minerals account for at least half of export earnings in 12 African countries, and 90 percent or more of exports in Angola, Nigeria, Algeria, Libya, and Zambia. The countries of the Sahel and East Africa, where mineral production is unimportant, are notable exceptions.

North Africa is one of the world’s major centers of oil production, and Libya, Algeria, and Egypt are among Africa’s top producers of crude petroleum. Algeria has vast reserves of natural gas as well. North Africa is also rich in phosphate deposits and production, Morocco being a leader in world output. Of lesser significance in the region are coal, iron ore, uranium, platinum, lead, zinc, and cobalt.

West and Central Africa also contain significant oil reserves. Nigeria is Africa’s top petroleum producer, and Angola, Gabon, and the Republic of the Congo are other important oil-producing countries. West and Central Africa also possess some of the world’s most significant sources of cobalt, manganese, potash, bauxite, and copper. Guinea has about one-third of the world’s reserves of bauxite, the commercial source of aluminum. Other minerals of economic significance are iron ore, gold, diamonds, tin, uranium, phosphate, columbite, and titanium.

Southern Africa is one of the world's richest sources of gold, diamonds, and several rare metals. South Africa has the largest and most diverse mineral economy, and is a leading producer of gold and of uncut diamonds. Zimbabwe is also an important producer of gold, and Botswana and Namibia are important producers of diamonds. Other important minerals produced in southern Africa include chromium, cobalt, antimony, uranium, lithium, nickel, manganese, asbestos, platinum, titanium, and vanadium.

The economies of African countries that are heavily dependent on one principal mineral export are seriously affected by price declines in the world market. Recent decades have seen destabilizing shifts in the price of Zambia’s copper, Guinea’s bauxite, and Togo’s phosphate.

Manufacturing

In general, manufacturing is an underdeveloped activity in Africa. Countries with more developed manufacturing sectors include South Africa, Zimbabwe, Egypt, Algeria, Burkina Faso, and Côte d’Ivoire.

Much of Africa’s modern industrial activity involves the processing of raw materials. Processed foods are largely consumed by Africa’s expanding urban populations, while raw materials such as minerals, petroleum, and timber are processed almost entirely for export.

The bulk of the rest of Africa's manufacturing output consists of consumer goods such as textiles, footwear, beverages, and soap. The technology used in manufacturing ranges from rudimentary tools used in small-scale cottage industries to large-scale factories. Although its impact on the national economy is frequently underestimated, the cottage industry sector of the economy produces significant amounts of goods both for local consumption and for the tourist trade. Textile and footwear plants, on the other hand, can be sizable, often requiring modern machinery. Heavy industry—such as the production of metal, cars, motorcycles, bicycles, and household appliances—is limited to a few countries, notably South Africa, Egypt, Algeria, Zimbabwe, Nigeria, and Côte d’Ivoire. Almost all consumer goods produced in Africa are sold and used within Africa rather than being exported.

African manufacturing grew in the 1960s and 1970s, but declined in some countries—including Nigeria, Ethiopia, Ghana, Tanzania, Zambia, and Zimbabwe—in the 1980s and 1990s for several reasons. First, many oil-rich countries like Nigeria relied too heavily on extracting and exporting petroleum and neglected their manufacturing sector. Second, war and political unrest disrupted development efforts and caused the role of manufacturing to decline in formerly robust economies like those of Nigeria, Sudan, Ethiopia, and Zimbabwe. The development of African manufacturing has also been hindered by a general lack of investment capital, as well as by misguided economic strategies and corruption. In addition, multinational corporations have tended to discourage African manufacturing, seeking instead to trade their manufactured goods for African raw materials. Africa also has an inherently small market for consumer goods due to its mostly rural, subsistence-oriented population.

Services

In African countries, on average, the service sector makes up about one-half of the GDP, but employs only about one-third of the labor force. Social services such as education and health services make up the bulk of the African service sector. Formal schooling and modern public health care expanded across much of Africa in the second half of the 20th century. African governments have built countless schools, clinics, and other basic service facilities needed to improve their people’s living standards.

Commercial services are less developed in much of Africa. The principal types of commercial services include transport, communication, tourism, banking, insurance, and import-export agencies. Countries with mineral wealth, such as South Africa and Botswana, or developed tourist industries, such as Kenya, have a much higher level of these commercial services than more agricultural countries like Ethiopia and Ghana. Most commercial service institutions and infrastructures remain concentrated in areas of modern development and major urban centers.

The African service sector has several general features, characteristic of less developed areas, that combine to limit its impact on national economies. First, the government is often the most important investor and employer, especially in the social services sector (which includes government, civil services, and defense). Second, the most lucrative aspects of the commercial service sector—banking, insurance, tourism, import-export, communication, and transport—are usually owned, controlled, or operated by foreign companies. Third, many of the commercial services required by African smallholder farmers and cottage industry operators—such as transportation and credit services—are provided in the informal market, and are therefore undocumented. As more service institutions become locally and privately owned, and as they extend their reach to small-scale producers, they will benefit African countries’ economies to a greater degree.

Energy

Wood from trees and shrubs is still the most important source of domestic fuel in Africa. Use of coal and petroleum is limited to urban centers, modern factories, and power plants. In 2003, 79 percent of the electricity generated in Africa was produced by burning coal and other fossil fuels.

The most promising source of energy in Africa is hydroelectric power generation. The continent’s many large rivers give it a vast hydropower potential that has barely been tapped. Several major installations have been constructed since 1960, including the Aswān High Dam on the Nile River, the Akosombo Dam on the Volta River, and the Kariba Dam and Cabora Bassa Dam on the Zambezi River. In 2003 African hydroelectric plants produced 18 percent of the electricity generated in Africa.

Transportation

Transportation in most of Africa is rudimentary. Most people walk to markets, schools, and health facilities, often carrying needed items on their heads or shoulders. However, bicycles and animal-drawn carts are increasingly available in rural communities. The use of motorized vehicles is mostly limited to cities and intercity traffic by buses and trucks. Throughout the continent, smallholder farmers are unlikely to afford motor vehicles. Bus and train travel is within the means of most people and they are used especially for long-distance travel.

The quality and connectivity of African roads and railroads remain poor: Most roads are made of dirt or gravel, and good quality all-weather roads are limited. Colonial rulers laid railroad tracks to connect ports to export-producing areas in the interior, and these networks have been largely unexpanded since independence. Few roads and tracks cross international boundaries in Africa. The poor condition and disjointedness of the road and rail networks have hindered African economic development. South Africa, with higher-quality roads and a greater degree of road and rail connectivity, is a notable exception.

Many African countries operate national airlines. South Africa, Egypt, Ethiopia, Kenya, Nigeria, and Ghana have well-developed airline systems for domestic, international, and intercontinental flights.

World Trade And Debt

As was the case during colonial rule, Africa’s role in the world economy remains to produce raw materials for use in developed nations. Whatever economic development has occurred in African countries since the end of colonial rule has reinforced this pattern. Investment by international corporations and most foreign governments has concentrated on expanding production of exportable mineral and agricultural raw materials. The emphasis on exports has left inadequate resources for developing domestic industry or changing the traditional, underdeveloped system of African smallholder food production. Neglecting their food-producing sectors has led African countries to increase their dependence on raw-material exports and has required many to import food to feed its people.

The continent’s trade position has faced further challenges since the 1960s. The prices of manufactured goods and fuels imported by African countries increased substantially, while the prices of almost all products of African mines and farms declined or fluctuated. This downturn meant that African countries not only had to make do with fewer needed imports, but they also had to go into international debt to meet their financial obligations. Oil-exporting countries were able to avoid this pitfall for a time, but they too were beaten down by the collapse of world oil prices in the 1980s and 1990s. Africa has also been put at a disadvantage by the protectionist trade policies of industrialized countries, which admit unprocessed raw materials tax-free but impose substantial tariffs on imported products made from the raw materials.

As a consequence of their internationally disadvantaged status, nearly all African countries have had to borrow money from foreign lenders to cover the difference between their export earnings and their spending for imports. The amount of accumulated external debt owed by sub-Saharan African countries has risen from less than $6 billion in 1970, to $80 billion in 1985, to $230 billion in 1999. Interest payments to foreign creditors siphon away precious foreign exchange earnings. Such pressures on export earnings have led African governments to make stringent cuts in imports through high tariffs and outright prohibitions.