African Economic Disparities Remain as Stark as Ever

By Green, Paula L. | Global Finance, January 2005 | Go to article overview

African Economic Disparities Remain as Stark as Ever


Green, Paula L., Global Finance


With a population of nearly 680 million people and some of the poorest people on the planet, the African continent is still struggling to initiate the macro-economic reforms needed to attract long-term foreign investment across its borders. South Africa remains the African nation most thoroughly integrated into the global economy, as many other countries of sub-Saharan Africa remain on the sidelines-uncompetitive and largely dependent on agriculture and commodity exports.

Analysts agree that one of the keys to luring critical foreign dollars onto the continent is strengthened corporate governance regulation that can cut down on corruption and provide transparency. "The corporate investor wants to know, 'What specific steps can I follow when I invest?' and 'Are there laws that protect my property and enforce my contracts?' and 'Are these laws enforced?'" says Richard Mshomba, a professor of economics at La Salle University in Philadelphia. "Foreign direct investment is critical for most of Africa because there is little capital generated from within, and if the countries can get savings, it's in the local currency, which can't be used to import needed machinery," he continues. "Foreign direct investment also brings in the technology, which can provide growth."

Maxwell Oteng, an associate professor of economics at Maryville College in Maryville, Tennessee, says that along with moving toward greater economic and political stability, African governments need to develop their infrastructure, including transportation and telecommunications links. "They also have to develop more favorable exchange rate systems so they can establish capital markets," says Oteng. "Except for South Africa, they don't have a capital market, and that's an impediment to foreign investment."

An even more challenging task is the development of human resources in a continent whose labor force is being ravaged by HIV/AIDS. …

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