★ Must-know
Structural adjustment programs imposed by the IMF and World Bank from the early 1980s promoted privatization and deregulation to expand business freedom and market flexibility.
Sub-Saharan Africa maintained economic growth above 3% from 2003, yet remained increasingly marginalized internationally.
More than 80% of Sub-Saharan Africa's export revenues still came from agricultural and mineral raw materials.
Further detail
Nearly 33 Sub-Saharan African countries are classified as least developed countries.
Sub-Saharan Africa's average annual growth rate was half the rate in Asia, and the region also experienced falling GDP per capita and a very small share of world trade.
Growth above 3% contrasts with marginalization in global trade.
★ Must-know
After independence, African states used public enterprises to replace the former colonial power, provide public services, address the weakness of domestic private business, and support national development. - Hugon, 1999
State intervention included: production through public enterprises, subsidiaries, public procurement and subsidies, planning to coordinate investment and expand collective facilities, regulation of factor incomes and prices
Further detail
In Gabon, the parapublic sector in 1994 had 14,742 employees, turnover of about 498 billion CFA francs, operating subsidies of 4.5 billion CFA francs, and equipment subsidies of 391 billion CFA francs.
Gabonese parapublic-sector personnel costs were 86.931 billion CFA francs, or 52.4% of value added, and the sector recorded a net result before privatization of minus 43.210 billion CFA francs.
The main causes of public-enterprise losses were:
The interruption of external financing and the fall in commodity prices enlarged budget deficits and led to stabilization policies.
Stabilization policies targeted the state's role both as a producer of goods and services through privatization and as a producer of regulations through deregulation.
Higher tax rates can discourage work and push activity underground, reducing tax revenue.
★ Must-know
Reforms sought to restore price signals by: (Hugon):
Price liberalization was intended to precede privatization because investors would be less interested in firms whose margins and operating results remained determined by the state.
Further detail
Trade liberalization reduced or removed customs duties, quotas, and import licenses to increase competition in domestic markets and reduce monopolies.
Restrictive monetary policy limited money supply and credit and used high interest rates to curb inflation, but it also slowed economic activity and did not significantly increase saving.
Structural adjustment programs prioritized agricultural exports to earn foreign currency, often at the expense of food crops.
Investment codes increasingly treated incentives as approved if the administration did not object within a specified period, while effective operation depended on genuine ex-post controls.
★ Must-know
Further detail
Investors consider:
The text cites difficult and costly air travel between African capitals and inadequate infrastructure or expensive access as reasons most African countries remain outside the global tourism market.
Deregulation of telecommunications multiplied operators and exposed the sector to strong competition, making mobile phones commonplace for Africans.
Mobile telephony expanded under competition, while air travel remains difficult.
African agriculture includes food and market-garden crops as well as cash crops, but food self-sufficiency remains elusive despite progress and stronger food production in countries such as Burkina Faso and Cameroon.
Industrial production roles include: assembling products, manufacturing components, acting as an order-giver that creates concepts and brands
The secondary sector includes agro-food processing, beverages and tobacco, sugar, edible oils, cocoa and coffee processing, milling, mining and quarrying, chemicals, hydrocarbons, textiles, wood, paper, and clothing.
★ Must-know
📌 African industry is concentrated in profitable, capital-intensive branches, while the industrial sector is weakly connected: firms often lack complete production chains and depend on distant imports.
Further detail
📌 African economies are described as dualistic: small local firms often operate at the margins of the legal framework, while a few large private firms are foreign or multinational affiliates.
Low income → low saving → low investment → low productivity → low income.
★ Must-know
Industrial progress depends on:
The state can support private-sector growth by: protecting property rights and improving business policies, rationalizing taxation, reforming banking, organizing competition, providing export information, regulating financial institutions and credit risks
Further detail
The text attributes these effects to competitive markets: correction of supply-demand imbalances after shocks, price signals that allocate production factors, lower average production costs over the long term
The text identifies these investment-attracting features:
★ Must-know
The sectors highlighted for development are:
The text argues that African firms need to develop products suited to African markets and acquire new technical knowledge through research and development and technological innovation. - Uzunidis, 2005
The text identifies these investment barriers:
Further detail
According to UNCTAD studies, foreign companies earned an average return of 29% on their African investments during the 1990s, higher than in most other regions. - CNUCED
The text identifies these conditions:
High returns attract investors, but institutional and infrastructure barriers deter them.
| State role | Policy direction | Instrument |
|---|---|---|
| Producer of goods and services | Reduce state production | Privatization |
| Producer of regulations | Reduce regulatory barriers | Deregulation |
| Manager of prices | Restore market price signals | Price liberalization |
| Sector | Main activity | Examples |
|---|---|---|
| Primary | Exploitation of the natural environment | Agriculture, fishing, forestry |
| Secondary | Transformation of products | Industry, construction, public works |
| Tertiary | Provision of services | Banking, transport, education |
Take a 25-question practice quiz on African Economic Reform and Investment, with every answer explained.
1. A government adopts reforms promoted by the IMF and World Bank in the early 1980s to increase business freedom and market flexibility. Which policy combination fits those reforms?
2. From 2003 onward, a region records economic growth above 3% but becomes increasingly marginalized internationally. Which description matches this combination?
Memorize the key concepts of African Economic Reform and Investment with 62 flashcards.
What did IMF and World Bank structural adjustment programs promote from the early 1980s?
Privatization and deregulation to expand business freedom and market flexibility.
What growth threshold did Sub-Saharan Africa exceed from 2003?
3%.
How did Sub-Saharan Africa's international economic position change despite growth above 3%?
It became increasingly marginalized internationally.
Upload your class notes and Revizly writes a study guide, a quiz and flashcards in about a minute.
Study guide maker