Why is Africa Poor?

75% of the world’s poorest countries are in Africa. One-third of the people living in sub-Saharan Africa are poor. More grim facts about Africa can be found here.

Africa (sub-Saharan Africa to be precise) is poor but why is this so? Several reasons have been suggested. But I came across a 2004 Brookings Institution paper by Jeffrey Sachs and others on the subject which I found fascinating.

The paper suggests that Africa is in a poverty trap. High poverty leads to low savings which is not offset by inflow of private capital because of the poor infrastructure and underdeveloped human capital and therefore there’s low growth. The paper suggested that what was needed was high investment coming from official development assistance (ODA).

Of course since this paper was written Africa has witnessed a commodity boom which allowed some countries to borrow from international markets and drove up growth rates. And we’ve also seen how this high growth rates and easy access to credit has ended due to the commodity slump and the end of the Great Recession in the USA.

But the poverty trap is not the main part of the paper that interests me. I was more interested in what the researchers thought started the poverty itself. Let me share that here.

High transport costs and small market size

The Sahara makes high-volume trade between Europe and SSA overland almost impossible. Most Africans don’t live by the coast due to centuries of escaping slave raiders, more rainfall and less malaria in the interior regions. This has led to an underdeveloped trading system oversea. Asia in comparison has much less transportation costs and larger internal markets.

Low-Productivity Agriculture

The paper states “Indeed, of all major regions, Africa loses the largest share of its precipitation to evapotranspiration.” This means that water leaves the soil and plants in Africa much faster than in other regions. There are also too few rivers for irrigation, erratic rainfall and the high transport costs significantly increases the cost of fertilizer. To make matters worse, Africans are farming on soils increasingly losing their nutrients.

Very High Disease Burden

Let me quote:

Unlike in other parts of the world, Africa’s malaria mosquitoes
are almost exclusively human-biters, and this fact enhances the chain of
human-to-human transmission. Africa is also the only major world region
where the most malignant human malaria species, Plasmodium falciparum,
predominates. The combination of high year-round temperatures,
adequate precipitation for mosquito breeding, and human-biting
anopheles mosquitoes has made Africa the global epicenter of malaria
from time immemorial.

Of course managing malaria involves huge funds which Africa does not have. And malaria is a huge drag on productivity and a contributor to a high infant mortality rate.

Adverse Geopolitics

This needs another quote:

Africa suffered brutally at the hands of European powers for almost five centuries, and the record with Arab powers was little better. A massive slave trade helped undermine the formation of nation-states and may have depopulated Africa’s coastal regions. In the nineteenth century the slave trade was replaced by direct colonial rule and a century of exploitation by European imperial powers. At the end of the colonial period, most of Africa was left with tragically little infrastructure and education, far less than in postcolonial Asia. In contrast to much of Asia, Africa’s borders were drawn up without regard to ethnic and political units, with little infrastructure connecting them. In addition, differences in colonial languages and customs further fragmented many parts of Africa, particularly in West Africa.

Then they go on to talk about the intervention by foreign powers during the Cold War and the continuous exploitation of natural resources with the aid of brutal puppets.

After the Cold War, Sub-Saharan Africa was not a strategic focus of either USA or Western Europe for trade. Rather, Latin America, East Asia and the Middle-East benefited from the US largesse while Eastern Europe benefited from Western Europe’s help.

Slow Diffusion of Technology from Abroad

The Green Revolution in Agriculture in the 1970s due to the development of high-yielding varieties (HYVs) and the use of irrigation and fertilizer did not happen as much in Africa as it did in Asia and Latin America because the HYVs were made for their conditions, not Africa’s.

I know many people will have more causes to add for Africa’s poverty. For example, about $1.26 trillion dollars a year leaves developing countries to tax havens, mostly from corporations evading tax. In return a pitiful $135 billion is given out in aid to developing countries.

However, I found the causes listed in this paper compelling because Africa’s poverty is usually spoken of in terms of a continent with all the advantages doing nothing. In this case, serious structural problems that I hadn’t thought of were mentioned. Apart from that, there was a solution – these structural problems could be largely improved with massive investments.

Do give the full paper a look.

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Jerome Kuseh

Financial Analyst | Accountant | Private Investor
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