Why Sub-Saharan Africa Remains Mired in Extreme Poverty

Written by: Gerardus Yosari

According to the World Bank, the region of Sub-Saharan Africa (SSA) in 2017 had a total GDP (US$) per capita of 1,574.77 and a population of 1.061 billion (World Bank, 2019).  For economic development, Sub-Saharan Africa is the most dependent on other continents for their education, healthcare, infrastructure and virtually all the basic improvement of quality of life for its citizens. Sub-Saharan Africa is blessed with an abundance of natural resources but despite this bounty and more than one trillion US dollar in foreign aid over sixty years, SSA is still the poorest continent in the world. In most cases of poverty in any country or region, the main cause of poverty stems from the inability of the incumbent government to use the country’s resources to boost the economy through innovation and a spirit of entrepreneurship. This side of the story posits that that government is mostly at fault for the failing economy befalling the country (Ayeni, 2017). But before we delve deeper on the failure of governance, it is important to explain the different development hypotheses that tries to paint a picture of the poverty in Sub-Saharan Africa. In the area of development studies, there are four distinct hypotheses, varying in their approach to explaining world poverty and inequality (Acemoglu and Robinson, 2012).

Geography Hypothesis

The geography hypothesis is one of the most accepted theories on what causes poverty in the world. This hypothesis chooses to explain poverty through the lenses of the specific geography of different countries. In its basic form, this hypothesis claims that what separates countries’ wealth and their fight with poverty is essentially their location on the world map. Poor countries are located between the tropics of Cancer and Capricorn and the rich countries are located mostly in temperate latitudes. There are a few versions of this hypothesis. The earliest version was written in the late eighteenth century by Montesquieu, a French political philosopher. His version included an argument that people in tropical climates are more likely to be lazy and lack creativeness. Because of this laziness and lack of innovative spirit, they were poor and thus allowed themselves to be ruled by despots (Acemoglu and Robinson, 2012). A more recent version of this hypothesis was written by Jared Diamond, an ecologist and evolutionary biologist. The difference between his version and Montesquieu’s lies in the basis of his argument. He approaches the argument from the purview of ecology, stating that different places have varying endowments of plant and animal species. This differing availability of species created different intensities of farming and led to different paths of technological advancements and prosperity across countries. Each version of the geography hypothesis has its problem. Firstly, there are countries who lie in the tropical climates who are very advanced and prosperous like Singapore for example. Secondly, if plant and animal endowment ruled development, then why are the Mexicans and Peruvians who inhabit the former advanced nations of the Aztecs and Incas experience much poverty? (Acemoglu and Robinson, 2012).

 

 

Culture Hypothesis

The culture hypothesis just like the geography hypothesis has a long history of thought and writing. The earliest contribution of this hypothesis came from Max Weber, one of the greatest German sociologist, who argued that the Protestant Reformation and its subsequent work ethic advanced modern industrial society in Western Europe (Acemoglu and Robinson, 2012). Some experts are still adamant that Sub-Saharan Africans are poor because of poor work ethic or their strange beliefs and superstitions. From past history in Sub-Saharan Africa, countries like the modern Democratic Republic of Congo did not adopt much of the European technologies needed to advance their economy. The reason for this is not cultural but the existence of despotism in the country. The Congolese lacked any incentive to adopt these technologies because any kind of resulting output from these activities would be expropriated or taxed heavily by an all-powerful leader. Also, many of them were slaves, which is an adverse environment to development (Acemoglu and Robinson, 2012).

 

Ignorance Hypothesis

This is another popular hypothesis similar to the geography hypothesis that is held by many economists. The basis of this hypothesis is the First Welfare Theorem which explains the socially desirable way of allocating resources in a market economy. A market economy is only an abstraction whereby sellers and buyers freely exchange goods. When this ‘freedom’ of exchange is absent, a market failure would occur. The more market failures there are in a country, the poorer that country would be. Therefore, to put it simply, the ignorance hypothesis argues that countries are poor because of such market failures and individual country’s policymakers either do not know how to make the country rich or in the past have heeded to advices that made their country poor (Acemoglu and Robinson, 2012). After independence from British rule, Ghana was ruled by Kwame Nkrumah. His focus for Ghana’s economy was the development of state-owned enterprises. However, it was inefficient because the factories were located so far apart. Transportation costs was very high, making the economic activities inefficient. Kwame Nkrumah was not ignorant of his policies, neither was he ill-advised. With him as advisors, he had Nobel laureate Sir Arthur Lewis and British economist Tony Killick. What made him champion the economic policies was to “buy political support and sustain his undemocratic regime” (Acemoglu and Robinson, 2012).

 

Institutions Hypothesis

The last hypothesis focuses on the institutions present in the country. Inclusive economic and political institutions are needed for positive and lasting development. An economic institution that is inclusive will more often than not provide incentive for business activities and innovations. It will nurture the country’s sprit of entrepreneurship and establish business connections with the rest of the world. A renowned Peruvian development economist, Hernando De Soto, puts it succinctly in his book, the Mystery of Capital. For him, the reason why the poor are poor does not stem from just the lack of capital ownership but also the lack of opportunities in using this capital as surplus value. Essentially, the poor are not connected closely with the capitalist system. Why the focus on capital? It is because capital is the “force that raises the productivity of labour and creates the wealth of nations”. Just like blood is for the life of a human body, so is capital to the capitalist system. It is the foundation of economic progress (Soto, 2003). As mentioned previously, Sub-Saharan Africa already possesses an abundance of natural resources, including physical capital. Yet, why is the region still the poorest in the world? De Soto mentions that the resources these people have are in “defective forms”. For example, ownership rights for houses are not adequately recorded and businesses are ill-incorporated and have undefined liability. Because of these reasons, these capitals cannot be used to improve the economy of the country. Another aspect of inclusive institutions is political institutions because politics and economics go hand-in-hand. To simplify this hypothesis, political institutions that are centralized and pluralistic are referred to as inclusive political institutions. The opposite is extractive political institutions that promote economic gain to selected individuals or elites. These negative kinds of political institutions create a negative feedback loop that enable strong political elites to control the economic resources of the country, resulting in a lag in any kind of positive and lasting development (Soto, 2003).

 

Leadership Matters

Angola, a country in Sub-Saharan Africa, according to the World Bank has a GDP per capita of US$4,100.29 in 2017 (World Bank, 2017).  Over the past dozens of years, the country has seen its per capita income tripled. Even with what seems to be a great feat for any country in that region, Angola remains one of the world’s least developed nation and the irony in the country is that it was named by Mercer, a renowned global consulting firm, as the most expensive city for expatriates. For example, a bottle of Coke could sell for ten dollars. The main reason why Angola was able to have its per capita income tripled over a relatively short period of time is because of its lucrative business in oil. However, relying on solely oil production to gain economically is highly risky and economists call it a ‘resource curse’ ( Ayeni, 2017). One of the main trading partners of oil for Angola is the United States but oil experts have predicted that by 2020, the United States might not need any Angolan oil after the shale revolution in Texas and North Dakota (Ayeni, 2017). The very fact that Angola relies heavily in oil production shows the inability of their government to diversify their country’s capabilities and resources. Good leadership is displayed by the ability of the incumbent government to capitalize on every possible resources and skills that the country has and not just on one single resource. One example of corruption in Angola comes from its natural resource industry. It was reported in 2012 by the International Monetary Fund that billions of dollars were disappearing from state-owned energy companies. This shows a lack of transparency on the part of the government in providing data on oil revenue to the public. When US company Cobalt Energy invested in Angola, the company realize the full risk of doing business with certain anonymous companies. Apparently, when the company received oil exploration license, some of these stakes were awarded to anonymous local companies connected to government cronies like Leopoldino Fragoso Nascimento, the president’s security cabinet (GAN Business Anti-Corruption, 2019). What is definitely obvious in Angola is a lack of proper and good governance.

Sub-Saharan Africa and the World

Source: World Bank 2017, Region Data

A simple comparison between Sub Saharan Africa with the four main regions in the world will immediately put SSA at the bottom in terms of GDP per capita. In this regard, SSA is closest to South Asia but is more than 10 times apart with East Asia and the Pacific and more than 20 times apart with Europe and Central Asia. The Middle East and North Africa which is its closest neighbors have slightly more than 7 times in GDP per capita. This comparison clearly shows that something has to be done to improve the economic outlook of SSA. It seems that Europe and East Asia are or have already experienced accelerated economic growth that is not evident in SSA.

Conclusion

Among the four development hypotheses, the institution hypothesis remains to be the most accurate source for explaining poverty in SSA. However, good and robust institutions in a country does not create itself but by a strong government leadership that can propel the country through entrepreneurship and meticulous long-term planning. In the current political climate where a country’s leadership can shift power dynamics, it is important then for governments to be inclusive in not only protecting the rights of their people but also nurturing their talents towards a promising future. Poverty especially in SSA is not an easy problem to solve. It is multifaceted with many driving forces from the advanced countries playing a part. However, creating awareness about it is the first step to a better world for current and generations to come.

 

 

 

References

Acemoglu, D. & Robinson, J. A. (2012). The origins of power, prosperity, and poverty: Why nations fail. New York, NY: Crown Publishers/Random House.

Ayeni. S.A, (2017). Rescue Thyself: Change in Sub-Saharan Africa must come from within. Maryland, U.S. Hamilton Books.

GAN (2019). Business anti-corruption portal on Angola. Retrieved from https://www.business-anti-corruption.com/country-profiles/angola/

Soto, H.D. (2003). The mystery of capital: Why capitalism triumphs in the West and fails everywhere else. NY, U.S. Basic Books.

World Bank (2017). Country data on Angola. Retrieved from https://data.worldbank.org/country/angola

World Bank (2017). Region data on Middle East and North Africa. Retrieved from https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZQ

World Bank (2017). Region data on East Asia, South Asia and Europe. Retrieved from https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=Z4-8S-Z7

World Bank (2017). Region data on Sub-Saharan Africa. Retrieved from https://data.worldbank.org/region/sub-saharan-africa.