Sub-Saharan African countries have not fulfilledtheir potential since independence. While otherdeveloping countries and regions have grown over

the past 50 years, much of Africa has stagnated. Africanleaders have become adept at externalizing blame, holdingothers responsible for Africa’s failings. Yet African lead-ers—not a lack of capital, access to world markets, or tech-nical expertise—are to blame for the continent’s underde-velopment.

As Asian countries have shown, African countries mustliberalize their economies to grow. Africa must embrace

globalization and trade with the rest of the world. Africancountries must also make their business environmentmuch friendlier to domestic and foreign investors. Thepolitical elite, which benefits from the status quo, is themain obstacle to reform. The spread of democracy on thecontinent—haphazard though it is—will make African gov-ernments more responsive to the needs of the populace, butWestern governments must also help—by ending or reduc-ing foreign aid to African regimes. That move could helpestablish a better link between governments and citizensand reduce disincentives to necessary reforms.

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d e c e m b e r 6 , 2 0 1 0 ● n o . 6

Why Is Africa Poor?

by Greg Mills

Greg Mills is the director of the Brenthurst Foundation, which is based in Johannesburg, South Africa. He is the author of Why Africa Is Poor—and WhatAfricans Can Do About It (Johannesburg: Penguin, 2010).

Executive Summary

Insufficient Reasons forAfrican Poverty

With a per capita income 50 percent lessthan that of the next poorest region (SouthAsia), sub-Saharan Africa’s growth has laggedsince independence some 50 years ago. Manyreasons have been put forward for theregion’s slow development—a lack of humanand government capacity, poor infrastruc-ture and trade access, the effects of too little(or too much) foreign aid, the legacy of arbi-trary colonial boundaries, low productivity,the Cold War, climate, and geography. ManyAfrican leaders blame the rest of the worldfor African poverty, implying that solutionsto underdevelopment are out of their hands.

But the world has not denied Africa themarkets and financial means to compete. Farfrom it. The contemporary era of globaliza-tion has afforded unprecedented opportuni-ties to billions of people in emerging markets.Globalization may have suffered a setbackrecently, but the current recession does notalter the fact that global wealth has tripledsince 1990.1 It is the varying abilities of gov-ernments to translate such opportunities intodevelopment and prosperity that has account-ed, in large measure, for the widening inequal-ities within and between countries.

Africa is poor not because of aid per se,although large inflows of foreign aid havealmost certainly been a disincentive to reformfor many African governments. Nor is Africanpoverty solely a consequence of poor Africaninfrastructure or trade access. Africa hasenjoyed preferential access to internationalmarkets, yet the continent has slipped behindother, less favored, competitors. True, much ofAfrica’s infrastructure has deteriorated andfallen behind that found elsewhere in theworld. But there have often been vested inter-ests—like local monopolies—that had no inter-est in making infrastructure more efficient.Similarly, many African countries have avoid-ed putting in place policies and proceduresthat would facilitate more exports. Those poli-cies and procedures could have been put in

place quickly and for far less money thanimprovements to infrastructure.

Africa’s poverty has not been caused by thelack of necessary technical and developmentexpertise. Those can be bought on the interna-tional market—as many Asian countries havechosen to do. Such expertise could even havebeen accessed for free via donors. Africa has,however, been highly possessive about thedirection and control of its development. Thatis partly due to an innately skeptical view ofoutsiders, but also because Africa has been ableto get away with pursuing bad economic poli-cies through subsidies from rich countries.

Africa is not poor because its people donot work hard but because their productivityis too low. For example, subsistence agricul-ture, from which many Africans derive theirlivelihoods, creates very little value added.Unfortunately, without institutional andpolicy changes, there can be only a limitedexpansion of large-scale farming and of theindustrial and service sectors of the economy.

Nor is Africa poor because it lacks naturalresources. Compared with Asia, it is a treasure-trove of natural resources from agriculturalland and precious metals to wildlife andhydropower. Yet, with few exceptions (Bot-swana is one), those resources have been usedonly to enrich elites, spread corrupt practices,and divert development energy and focus. AndAfrica’s people are poverty stricken not becausethe private sector does not exist or has beenunable to cope with difficult conditions. Theproblem is that the private sector is often not“private” at all. Rather, it is an elite-linked sys-tem of rent-seeking. Even where there is adegree of private-sector independence, govern-ment attitudes toward truly private businessesrange from suspicion to outright hostility—notleast since politicians in some African coun-tries fear that economic autonomy will be fol-lowed by political autonomy.

African Rulers DeserveMost of the Blame

The main reason for African poverty is the

2

African leaders have

become adept at externalizing

blame, holding othersresponsible for

Africa’s failings.

bad choices made by African rulers. Therecord shows that countries can grow theireconomies and develop faster if leaders takesound decisions in the national interest. Thatis as true of the Vietnamese leaders beforeand after the failure and reform of Vietnam’scommand economy as it is of African reform-ers from Ghana to Botswana.

Africa’s positive economic growth recordin the 2000s illustrates that better choicescan be made. True, African growth has tradi-tionally mirrored the ups and downs of nat-ural resource prices, but Africa’s growth inthe 2000s has also reflected better gover-nance and more widespread democracy onthe continent.2

The economic success of countries in otherregions offers many good examples thatAfricans can learn from. In assigning blamefor not seizing the opportunities of globaliza-tion to African leaders, it is important to rec-ognize that those leaders have often takendecisions under difficult circumstances. Noone disputes that African politicians face bigchallenges. Yet in other parts of the world,those challenges are usually regarded as obsta-cles to be overcome, not as permanent excusesfor failure.

For in a half century of independence,Africa has not realized its potential. Instead,its greatest natural assets have undermined itsprosperity. Africa’s youth, for example, is notbeing regarded as a huge source of talent andenergy to be harnessed. Rather, this group isregarded as a destabilizing force because it islargely unemployed and uneducated. This isnot only a threat to Africa’s security. By 2025,one in four young people worldwide will befrom sub-Saharan Africa.3 Most of thoseyoung people will be living in Africa’s citieswhere, by then, the majority of the continent’scitizens will be located. And if they do notfind employment on the continent, they willseek it elsewhere.

Far from being the font for development,Africa’s oil wealth has served instead to enrichelites. For example, Nigeria has received anestimated $400 billion in oil revenues over thelast 40 years. Oil revenues per capita rose from

$33 to $325 between 1965 and 2000. Yet thenumber of Nigerians living on less than onedollar per day rose from 19 million in 1970 (ofa population of 70 million) to 90 million (of apopulation of some 120 million).4 Instead offueling development, oil has tainted gover-nance and accountability across Africa.

Africa’s agriculture potential has similarlybeen squandered. Many African states possessagricultural land in abundance. Yet, 35 out of48 sub-Saharan African economies were netfood importers at the end of the 2000s.5

Africa’s share of world agricultural exportshalved since 1970, to under 4 percent.6 Thoughagriculture was responsible for only one-fifthof the continent’s economic output in the late2000s, two-thirds of Africans (the majority ofthem women) lived in rural areas and weredependent on farming for their survival.7 Itdoesn’t take much to work out why productiv-ity in that sector is so low. The agricultural sec-tor was ruined through taxation that wasmeant to fuel Africa’s centrally planned indus-trialization drive. Today, Africa is neitherindustrialized nor self-sufficient in food pro-duction. Instead, the continent relies mainlyon export of natural products.

Enabling Bad Leadership

If Africa’s dismal economic performancecan be put down to bad choices by Africanleaders, then we have to ask: Why have thoseleaders made those choices? The key reason isthat Africans and the international commu-nity have enabled them to do so. The formerhave typically believed that they lacked themeans to change the status quo, whereas thelatter have been too ready to “help” Africa forreasons ranging from self-interest to altru-ism and pity.

African leaders have successfully man-aged, with the help of donors, to externalizetheir problems, making them the responsi-bility and fault of others.

Donors have typically lacked the tools orpolitical will to manage their relationship withAfrican leaders and the flow of money to

3

Africa is not poorbecause its peopledo not work hardbut because theirproductivity istoo low.

Africa according to the democratic, economic-reform, and public-goods-delivery record ofthe recipients. Nowhere has this been morethe case than with the many so-called “fragile”or “failed” states. Governments in those coun-tries have frequently abrogated the responsi-bility, but not the authority, for rebuildingtheir countries to others. Too often, donorshave taken up the challenge of rebuilding fail-ing states, thus weakening the already tenuouslink of accountability between the govern-ment and its people.

The fact that African leaders were permit-ted to get away with ruinous, self-interesteddecisions must be attributed, in large part, to arelative lack of democracy (or to single-partydominance) in Africa. There has been littlebottom-up pressure on leadership to makebetter choices, although there has beenencouraging growth of civil society in parts ofthe continent over the last decade. This appar-ent passivity of the populace in the face of badleadership must, at least in part, be attributedto a neo-patrimonial culture. In that culture,the “big man” rules and dispenses favors. Heuses all manner of tools to bolster his rule—from traditional governance structures andkinship ties to witchcraft and the church.

The system that many African leaders havepreferred thrives on corruption and nepotism.Corruption is not particular to Africa, ofcourse. But leaders from other societies wherecorruption is also a problem—Asia in particu-lar—have displayed a commitment to popularwelfare that is lacking in African leadership.

African societies, in contrast, have over-whelmingly been run along the lines of the“politics of the belly”—a primordial lust forwealth and power along crude racial, tribal,party, and familial lines. In this system, gov-ernment officials and politically connectedbusiness elite use their positions and influenceto enrich themselves and their families or kins-men. Personal wealth, Jean-François Bayart ofthe Centre for International Studies and Re-search in Paris writes, “is one of the chief polit-ical virtues rather than being an object of dis-approval.”8 Similarly, Patrick Chabal of King’sCollege London and Jean-Pascal Daloz of the

University of Oslo argue that “in most Africancountries, the state is no more than a decor, apseudo-Western facade masking the realitiesof deeply personalised political relations[where] legitimacy is firmly embedded in thepatrimonial practices of patrons and their net-works.”9

Africa’s traditional land holding structureshave also been an impediment to entrepre-neurship. Communal land holding has im-peded the collateralization of land valuethrough individual ownership and mortgageschemes. There has been little interest amongthe leadership of many African countries toreform the system. At the same time, a disas-trous “reform” took place in Zimbabwe, whereland was seized and redistributed on the basisof political allegiances.

The top-down imposition of states and bor-ders on Africa’s rich ethnic and sectarian tapes-try by colonial powers has institutionalizedweak governance structures. African stateswere both formed and maintained not by rais-ing taxes and ensuring public goods, as was thecase in Europe, but by colonial fiat. Over thepast 50 years, however, the Organization ofAfrican Unity and the African Union have beenadamantly opposed to changing Africa’s colo-nial boundaries.

Finally, and perhaps most importantly,bad choices have been made because betterchoices in the broad public interest were invery many cases not in the leaders’ personaland often financial self-interest.10

The Sad Case of Zambia

Zambia is an example of a country that hassuffered from this sort of policy malaise. Thereis probably no country as studied by develop-ment consultants as Zambia. A darling ofdonors since independence in 1964, countlessWorld Bank and other reports have been writ-ten on every conceivable topic—from trans-port and tourism, to regulatory reform andmining.

Thus, it’s not as if Zambians shouldn’tknow what to do when thinking about how to

4

The main reason for

African poverty isthe bad choices

made by Africanrulers.

deal with economic and other developmentproblems. For nearly half a century they havedebated how to diversify their economy awayfrom mining into agriculture, tourism, andmanufacturing—so far with marginal effect. Infact, most of the reports have been languish-ing on dusty shelves in government offices —their often replicate proposals seldom readand virtually never acted on.

In some ways, Zambia’s economy has donewell during the 2000s. Privatization of itsprincipal export asset, the copper mines, hasresulted in more than $4 billion in inwardinvestment.11 Annual national copper pro-duction has climbed threefold in 15 years. It isnow nearly back to its peak of 720,000 tons inthe mid-1970s.12 The economy has grown atan average rate of more than 5 percent peryear during the 2000s.13 Lusaka’s traffic is oneillustration of the rise in living standards andthe emergence of a middle class in Zambia.

But Zambia needs to do even better. Highunemployment, especially among young peo-ple, is no recipe for long-term stability. “Theirarmy of numbers will, one day, make Zambiaunviable,” Hakainde Hichilema, a leadingopposition figure, told me.14 Zambian infra-structure is rickety and costly to business. Ittakes a week to get exports out via road toSouth Africa and at least four times longer byrail. A power shortage looms even though thecountry has abundant hydroelectric potential.Despite the quality and quantity of its naturalendowments, the mining sector is undevel-oped compared with other copper producers,such as Chile. Tourism facilities remain clus-tered around Victoria Falls, in spite of extraor-dinary offerings elsewhere from the LowerZambezi to Lake Tanganyika.

Overall, the country has not performed toits considerable potential. There is little ur-gency in government to execute sound plans.And, at times, the government has made thismore difficult for itself through ill-consid-ered actions, such as the hurried adoption offarmland rent and windfall taxes on miningcompanies. Those measures threatened tobankrupt producers in both agriculture andmining before they were repealed.

The government says that it is constrainedby politics and needs to move slowly onreforms out of a risk of appearing too “reac-tionary.” Government officials claim thatdemocracy has made economic choices polit-ically risky. Others point to the deleteriouseffect of aid, which comprises one-third ofgovernment expenditures. Aid blunts therisks associated with policy inertia. Zambianpoliticians know that the donors will bearound to pick up the pieces. Aid also pro-vides a source of rent-seeking income andremoves the incentive to expand the domesticproductive sector and tax base.

But some observers highlight deeper under-lying causes, though similarly political and cul-tural. Hichilema says that lack of reformshould be attributed to the country’s havingbeen ruled for 27 years between 1964 and 1991by a socialist-inclined leader, Kenneth Kaunda.During that time, the state became the largestemployer, the regulator of first and last resort,and, as a result, it became corrupt.

Kaunda’s socialism has created a civil ser-vice geared to protectionism and regulation atall costs, and a private sector attuned to work-ing within a system that rewards insiders anddiscourages independent entrepreneurship.(We should not underestimate the fact thatthis system, a feature of most African coun-tries, works just fine for the elite).

Africans Must Liberalize

Yet this is a very good moment for Africanleadership to push ahead with reforms.Commodity prices are high, allowing a freshrange of policy choices. Investors have anappetite for high-growth emerging markets.And many tough macroeconomic reformshave been carried out across the continent.

But to take matters to the next level, Africawill have to carry out sweeping regulatoryreforms. For example, Zambian tourism in-vestors should not require 33 different licens-es to operate.15 Such reforms will have to bematched by attractive tax regimes across thecontinent. To achieve those goals, the elites

5

As Asian countries haveshown, Africancountries mustliberalize theireconomies togrow.

must be willing to prioritize economic growthover political power. They have to stop seeingforeign investors as predators snatching awaytheir birthright. To do better, Africa has to sig-nal that “business as usual,” in which politicspresides over economics, is truly over.

I spent much of 2008 in Rwanda as Presi-dent Paul Kagame’s strategy adviser. Frank,our driver there, had a great idea for a taxibusiness, but he was not able to get financingfor it. He lacked not only a financial systemthat could cater to his needs, but also demandfor his business. Rwanda’s tourism industryhas been stunted by the cost and difficulty inaccessing that beautiful country, and also bythe lack of tourist attractions—apart fromRwanda’s world-famous gorillas. While thegovernment has rhetorically been open toincreasing the number of visitors, it has beenless open to investors, including those in thetourism business. There is a clear tensionbetween African governments’ desire to con-trol their societies and the understanding thatstability and growth ultimately depend on lib-eralization.

Tourism is one of the underutilized advan-tages that Africa possesses. Global tourism is abusiness that caters to nearly one billion peo-ple. Yet Africa has just a 4 percent share of thatmarket. To increase its share of the tourismbusiness, Africa will have to liberalize air flightand visa regimes. In the formerly communistcountry of Georgia, for example, it is not nec-essary to acquire a visa for visitors who comefrom countries with a GDP per capita of$10,000 or more. Compare the Georgian sys-tem to the difficulty of entering many Africancountries or, for that matter, the difficulty ofleaving African countries like the DemocraticRepublic of Congo, where one has to run agauntlet of security and other checks—infor-mal and formal.

I wonder how many visitors from rich coun-tries to Africa have been put off by the chal-lenge of just getting to the continent or gettinga visa. Yet I suspect that few, if any, overstaytheir welcome. The number of tourists toGeorgia has nearly quintupled from 2003 to2009—a war with Russia notwithstanding.16

(I should add that Georgia had also adopted apolicy that did away with work permits for for-eigners.)

Getting to Africa is difficult. Movingaround in Africa is similarly onerous. My teamand I have conducted a number of route diag-nostics—essentially sitting on a truck anddoing time and motion studies. We spent onethird of the duration of our journeys at bor-ders and police checkpoints. The other twothirds we spent traveling, resting, and eating.Africans often bemoan the state of the infra-structure on the continent. Yet it would takeno donor money to keep borders open aroundthe clock, thus making the best use of existingresources—if the idea is to improve opennessand trade, of course.

Or, take another example. It takes an aver-age of eight minutes to clear each of the 30million containers that move through the city-state of Singapore annually. The minimumaverage time in Mombasa is 72 hours per con-tainer. Yet, this main East African port handlesonly 600,000 containers annually.17

The answer to the question of Africanpoverty lies in the difference between successand failure in worldwide trade. This differ-ence can be found in policy choices—the dis-tinction, to take another example, betweenVietnam before and after its own reforms.And the explanation behind the choices thatAfrican governments make lies in politics.Indeed, the principal challenge to Africaneconomies is political. To succeed, Africangovernments must, like the governments ofSoutheast Asia, put people and ideas ratherthan narrow-minded political interests at theheart of development.

Notes1. Fareed Zakaria, The Post-American World (NewYork: W.W. Norton, 2008).

2. For an assessment of the spread of democracyin Africa, see Tony Leon, “The State of LiberalDemocracy in Africa: Resurgence or Retreat?”Cato Institute Development Policy Analysis no.12, April 26, 2010, http://www.cato.org/pubs/dpa/dpa12.pdf.

6

It would take nodonor money to

keep bordersopen around

the clock, thusmaking the best

use of existingresources.

3. Based on analysis conducted by Genesis Analyt-ics on behalf of the Brenthurst Foundation, 2008.

4. Nicholas Shaxson, Poisoned Wells: The DirtyPolitics of African Oil (London: Palgrave, 2008), p. 4.

5. “Africa: The Commodity Warrant,” Credit SuisseNew Perspectives Series, April 14, 2008.

6. Ibid.

7. Brenthurst Foundation.

8. Jean-François Bayart, The State in Africa: ThePolitics of the Belly (London: Longman, 1993), p.238.

9. Patrick Chabal and Jean-Pascal Daloz, AfricaWorks: Disorder as a Political Instrument (London:James Currey, 1999), p. 16.

10. For a discussion of how predatory politicalelites keep Africans poor, see Moeletsi Mbeki,“Underdevelopment in Sub-Saharan Africa: TheRole of the Private Sector and Political Elites,”Cato Institute Foreign Policy Briefing Paper no.85, April 15, 2005.

11. Interview with First Quantum Minerals offi-

cials, conducted in Ndola, Zambia, in December2009.

12. Ibid.

13. World Bank, “Data: GDP Growth,” October26, 2010, http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries/ZM?display=graph.

14. Interview with the Zambian opposition leaderHakainde Hichilema, Lusaka, Zambia, March 2010.

15. Ibid.

16. Department of Tourism and Resorts, Repub-lic of Georgia, “Arrivals of Non-resident Visitorsat National Borders of Georgia by Country ofResidence,” November 18, 2010, http://www.dotr.gov.ge/files/files/Statistics/2000_2009vizitorebiing.pdf.

17. Kenya Ports Authority, “Port Performance forYear 2008,” October 26, 2010, http://www.kpa.co.ke/InfoCenter/Performance/Pages/default.aspx; and Maritime News, “Shanghai Can Be SeenFalling 14%, in TEUs, January 2, 2010,” http://bestshippingnews.com/transport-news/shanghai-can-be-seen-falling-14-in-teus/.

7

ANNE APPLEBAUMWASHINGTON POST

GURCHARAN DASFORMER CEO, PROCTER

& GAMBLE, INDIA

ARNOLD HARBERGERUNIVERSITY OF CALIFORNIA

AT LOS ANGELES

FRED HUGOLDMAN SACHS, ASIA

PEDRO-PABLO KUCZYNSKIFORMER PRIME MINISTER OF PERU

DEEPAK LALUNIVERSITY OF CALIFORNIA

AT LOS ANGELES

JOSÉ PIÑERAFORMER MINISTER OF LABOR AND

SOCIAL SECURITY, CHILE

T he Center for Global Liberty and Prosperity was established to promotea better understanding around the world of the benefits of market-lib-eral solutions to some of the most pressing problems faced by develop-

ing nations. In particular, the center seeks to advance policies that protect humanrights, extend the range of personal choice, and support the central role of eco-nomic freedom in ending poverty. Scholars in the center address a range of economic development issues, including economic growth, international finan-cial crises, the informal economy, policy reform, the effectiveness of official aid agencies, public pension privatization, the transition from socialism to the mar-ket, and globalization.

For more information on the Center for Global Liberty and Prosperity, visit www.cato.org/economicliberty/.

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OTHER STUDIES ON DEVELOPMENT FROM THE CATO INSTITUTE

BOARD OF ADVISERS

“Freedom and Exchange in Communist Cuba” by Yoani Sánchez, Development Briefing Paperno. 5 (June 16, 2010)

“The State of Liberal Democracy in Africa: Resurgence or Retreat?” by Tony Leon, DevelopmentPolicy Analysis no. 12 (April 26, 2010)

“Reflections on Communism: Twenty Years after the Fall of the Berlin Wall” by Paul Hollander,Development Policy Analysis no. 11 (November 2, 2009)

“Socialism Kills: The Human Cost of Delayed Economic Reform in India” by Swaminathan S.Anklesaria Aiyar, Development Briefing Paper no. 4 (October 21, 2009)

“An International Monetary Fund Currency to Rival the Dollar? Why Special Drawing RightsCan’t Play That Role” by Swaminathan S. Anklesaria Aiyar, Development Policy Analysis no. 10(July 7, 2009)

“The False Promise of Gleneagles: Misguided Priorities at the Heart of the New Push for AfricanDevelopment” by Marian L. Tupy, Development Policy Analysis no. 9 (April 24, 2009)

“El Salvador: A Central American Tiger?” by Juan Carlos Hidalgo, Development Policy Analysis no. 8 (March 9, 2009)

“The Benefits of Port Liberalization: A Case Study from India” by Swaminathan S. AnklesariaAiyar, Development Policy Analysis no. 7 (December 3, 2008)