Africa

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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.

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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.

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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.

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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.

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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.

The Economy section of this article was contributed by Assefa Mehretu.