Summary
Highlights
In the early 1990s, the developing world, including Africa, faced economic stagnation. However, a significant shift occurred in the late 1990s with explosive global trade growth, leading to a dramatic reduction in poverty. The share of people living on less than $1.90 a day fell from 36% in 1990 to under 10% in 2022. While the proportion of Africans in extreme poverty decreased from 53% to 35%, rapid population growth meant the absolute number of poor Africans increased. Despite this, Africa has been among the fastest-growing regions globally, with increasing economic and social changes positioning it for a more significant global role.
To understand Africa's economic performance, countries are categorized into two groups: strong growth (5% or higher) and weak growth (less than 5%). These are further divided by economic type: non-resource-intensive, oil exporters, and other resource-intensive countries. Between 2013 and 2023, 18 out of 41 African countries achieved 5% growth or more, with non-resource-intensive countries making up the majority of these successful economies. This diverse performance prompts an investigation into why some African countries thrive while others falter.
The contrast between Rwanda and Burundi illustrates the importance of a functional state. Both small, landlocked, and densely populated countries experienced similar incomes in the early 1990s and shared a history of ethnic conflict. However, Rwanda's income has more than tripled since then, while Burundi's has fallen, making it the world's poorest country. Rwanda, despite not being democratic, boasts a functional government and low corruption, ranking 12th in the Ibrahim Index of African Governance, compared to Burundi's 43rd due to political strife and coup attempts.
Economic policies are crucial for development, as seen in the contrasting paths of Kenya and Tanzania. Both started with similar agricultural economies and authoritarian one-party states post-independence. Kenya's embrace of free markets and investment-friendly reforms led its citizens to become 80% wealthier than Tanzanians, who pursued 'African socialism' with nationalization and collective farms. Similarly, Botswana's market-oriented, anti-corruption policies under Seretse Khama led to wealth nine times greater than Zimbabwe, whose economy was devastated by Robert Mugabe's policies.
Mauritius stands out as Africa's most successful economy, defying pessimistic predictions made by Nobel Laureate James Meade. Despite historical reliance on a mono-crop economy and vulnerability to shocks, Mauritius achieved sustained 5% annual growth between 1980 and 2000, known as the 'Mauritian economic miracle.' This success is attributed to robust institutions, including peaceful elections, rule of law, integrity within courts, low corruption, and sound economic policies that attracted foreign direct investment. In stark contrast, its neighbor Madagascar pursued socialism in the 1970s, leading to economic collapse and increased poverty.
Corruption and mismanagement, often exacerbated by resource-rich economies, pose significant challenges. Nigeria, Africa's largest economy and an oil exporter, faces a 'resource curse' where easy access to oil revenues fuels corruption. Ranking 150th out of 180 countries in the Transparency International Corruption Perception Index, Nigeria's economy could be 37% larger if corruption levels matched Malaysia's. Its major challenge is economic diversification beyond oil and subsistence agriculture, hindered by an unstable power distribution and inefficient public institutions. In contrast, South Africa, while not immune to corruption, has successfully diversified its economy, fostered a growing middle class, and utilized effective institutions and cooperation to expand public services and reduce poverty.
Africa's growth is increasingly driven by internal consumption and investment, reinforced by expanding regional trade, especially in manufactured goods. Countries like Nigeria are reducing oil reliance, Rwanda is becoming a conference and business hub, and Lesotho and Ethiopia are building manufacturing centers. While some economists question the replicability of Asia's manufacturing-led growth, Africa's path is diverse, with opportunities in commercial agriculture and tourism. Despite challenges like rapid population growth, malnutrition, and a deficit in skilled labor, long-term trends such as urbanization, migration, remittances, and rising school enrollment offer reasons for optimism. Nations with capable bureaucracies, open democratic systems, and investments in education are reinforcing a virtuous cycle, demonstrating that while not all countries are on this path, the disparities for those that are remain significant.