Africa: Development Issues and Policy Options

Publication Date: July 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Economics

Type:

Abstract:

Sub-Saharan Africa has been a focus for U.S. development assistance for decades. Many believe that U.S. interests in the region are increasing, partly because of its oil resources and the international terrorist threat. However, at the beginning of the twenty-first century, Africa faces grave challenges that potentially threaten long-term stability, including the world's most serious HIV/AIDS pandemic, widespread rural poverty, and high levels of urban unemployment. In constant dollar terms, incomes in Africa are only about $100 higher than in 1960. Recently, gross domestic product (GDP) has been growing, but at rates well below the 7% or better needed to make significant headway against poverty.

The reasons for slow growth and poverty in Africa are the source of much analysis and debate. Some emphasize factors largely beyond Africa's control, such as a difficult geographical endowment that has limited growth in manufacturing, agriculture, and trade. Dependence on primary product exports has made the region vulnerable to cyclical price trends and global economic downturns. Meanwhile, the HIV/AIDS pandemic and the "brain drain" to developed countries have taken away large numbers of adults in their most productive years. The colonial powers made minimal investments in African infrastructure, and left the region divided into some 48 separate countries -- several of them landlocked -- complicating prospects for economic integration and growth. Trade barriers imposed by developed countries to Africa's exports of cotton and other primary products have also come in for criticism.

Many analysts blame Africa's economic problems primarily on the limited capabilities of African governments, inappropriate economic policies pursued into the 1990s, and corruption. They maintain that further free market reforms are essential if the continent is to grow more rapidly. Some stress Africa's heavy burden of foreign debt, which required the payment of $12 billion in debt service in 2002. Africa's difficulties have limited foreign investment in the region, hampering the development of an export manufacturing sector that could provide jobs and growth.

Development experts and advocates are recommending a number of measures to accelerate growth in Africa, including increased foreign assistance; debt forgiveness; the easing of trade barriers; expanded HIV/AIDS programs; and support for capacity building, both in terms of human capital and infrastructure. Investment promotion programs and expanded applications of research and technology also have support. Each of these approaches has its critics and some could face political problems in the donor countries. In both Europe and the United States, for example, there is strong opposition to any proposal perceived as having the potential to export jobs, as some fear would happen if trade barriers were eased. Moreover, some experts doubt that existing assistance agencies in the developed countries have the knowledge and capacity needed to help Africa grow. Thus, Africa's ability to escape its current economic dilemmas remains very much in question. For background on the U.S. foreign aid program in Africa and information on current legislation, see CRS Issue Brief IB95052, Africa: U.S. Foreign Assistance Issues. This report will be updated as events warrant.