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A system of universally acknowledged property rights would benefit Africa by transforming the denizens’ lands and housing into capital. These capital can be used (by mortgaging or other means) to create new capital and promote production. As the Mtandire village example is not a rarity, it is clear how several million of these incidences would wreck havoc upon an economy.
Secondly, the economic policies of many African governments deter economic growth or render it precarious. Oftentimes, the governments' treatment of natural wealth benefits just a select few. The generated wealth from the resources are not allocated to the common citizens and hence do not allow demand propelled economic growth to initiate. Nigeria, for example, sits upon lucrative petroleum. Politicians and elite businessmen have squandered the profits of this resource. Rather than infusing these monies into the hands of the general populace to allow the growth of consumer demand, these bearers of African wealth have wasted these funds on “ludicrous prestige projects benefiting only a handful of entrepreneurs and foreign interests. Billions were directed towards junk factories which have since closed down. There are five lorry and car assembly plants in Nigeria, none of them operating.” (Hadjor, 75)
Some African governments’ policies endanger their economic states. Nigeria, upon receiving wealth from its oil resources, has begun importing food produces. These imported food products are competing with domestic farming industries; this competition has led to lower agriculture prices throughout Nigeria. Domestic farmers cannot compete at the newly created market price level and many have left their farms. The cheap food imports have destroyed Nigeria’s former self-reliance in food.
African economic policies that render a nation’s wellbeing precarious include heavy reliance on a single export commodity. Nigeria’s reliance on oil revenue makes the nation prone to sudden changes in the gasoline market. This country suffers the same problem facing OPEC nations: they lack other industries to absorb oil price shocks. Of course, Nigeria is only one example of a nation relying heavily upon a single commodity. Other African nations have developed other crutches; “Zambia gets 90 per cent of its foreign earnings from copper, Mauritius gets about 90 per cent of its earnings from sugar and Gambia gets about 85 per cent of its earnings from groundnuts and groundnut oil exports”. (Hadjor, 58)
A prime factor in economic growth is investment. Investment creates new capital; more capital generates more output. Foreign investment has played a tremendous role in developing countries’ economies. However, it is hindered in Africa by several factors. Investments occur when projected risk is low and projected returns are high. Foreign investors are reluctant to invest in Africa because of this continent’s volatility and high risk. Many foreign investors avoid Africa because of unpredictable inflation. This instability is often the result of a government burdened with self-interest.
Mobutu Sese Seko, ruler of Zaire (now Congo) from 1965-97, was the archetype. Bluntly declaring that “democracy is not for Africa”, he ruled by decree, jailed his opponents, grabbed foreign businesses and shared them out among the elite. From the fattest minister to the humblest clerk, anyone with power tried to turn it to cash. The regime even forged its own currency; the contractors printing bank notes for the government were caught producing more than one note for each serial number, and pocketing the duplicates. Not surprisingly, inflation hit 9,800% in 1994. (The Economist, January 17 2004)
A further circumstance hindering foreign investment is Africa’s lack of privatization. Foreigners distrust African governments and blame these regimes for the economic despair of this continent. The Economist stipulates that to encourage investment, Africa must privatize faster. However, so far, African governments have only sold low impact assets such as motels. Western countries are requesting the privatization of larger industries such as utilities and telephone. Many privatization requirements are part of IMF and World Bank relief funds.
The emphasis western countries and international economic institutions place upon increasing the level of investment in Africa is hardly met with rapport by the continent’s intelligentsias. Kofi Buenor Hadjor, an Oxford graduate and the author of “Africa in an Era of Crisis”, considers the west’s preoccupation with bringing capitalism and democracy to Africa as an obsession. His chapter, “Bogus Capitalism” examines the negative consequences incurred by Africa because of foreign investment and implementing IMF/World Bank reforms. The total long-term debt of African was 125 billion in 1985. Much of this sum has been deemed unpayable as African countries suffered through a decade of low commodity prices that seriously impaired their ability to return the loans. Hadjor argues that if western countries are truly seeking relief for Africa, these loans should be forgiven. Another consequence of foreign investment delineated by Hadjor considers Africa’s dependence upon western nations. Many Africans see this wave of foreign investment as the re-colonization. However, this re-colonization is headed by corporations and banks rather than by military forces. This concept of re-colonization is the legacy of distrust that has developed as a result of past injustices:
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