Free «Why is Africa so Poor» Essay Sample

Africa is one of the world’s wealthiest continents. It has vast quantities of oil, timber, and precious metals. Countries such as the Democratic Republic of Congo, Sudan, and Nigeria have so many resources that it is logical for them to have powerful, vibrant economies. However, this is not the case. All three of these countries are plagued by corruption. And their situation is not unique: many African countries rate very high on Transparency International’s list of the world’s most corrupt countries. Many experts agree that corruption is holding Africa back.

Throughout the continent of Africa corruption is rampant. In order to receive even the most basic services Africans must pay bribes. In order for companies such as Shell to do business in Nigeria (ranked 121 in the world by Transparency International) a huge amount of money must be paid out to local officials to “grease the wheels.” In hospitals, patients may have to put money in doctors’ consulting books in order to be treated. In schools, students may have to pay their teachers for passing grades. All of these situations are commonplace. Studies have shown that Africa loses $150 billion a year due to corruption and that products cost as much as 20 per cent more. It is impossible to measure how much more developed Africa would be at this moment had not a culture of corruption existed there for so long.

Part of the reason for this situation is that many African countries are not democratic. As John Mukum Mbaku of the Cato Institute argues:

In countries with poorly constructed, inefficient, and non self-enforcing constitutional rules, opportunistic behavior (including rent seeking) are usually quite pervasive. In such countries, the rules that regulate socio-political interaction, have failed to adequately constrain the government. As a result, state intervention in private exchange is equally pervasive. Excessive regulation of economic activities creates many opportunities for rent seeking, including bureaucratic corruption.

Many public servants in Africa may have power to allocate resources, but they make small salaries. It is very easy for them to make a lot of money on the side by taking payments from special interests. Plus, public servants may have poor relatives who they are also supporting. They may not simply take bribes out of selfishness, but possibly to help feed their extended families. Nevertheless, it is clear that more rules and guidelines are required for public servants in their dealings with the private sector. Enforcement of such rules is desperately required.

John Githongo argues that corruption usually begins at the top of a country’s leadership, and that in many African countries keeping together a disparate political coalition of ethnic groups and tribes requires lots of patronage. In order to stay in power the leader must provide something for everyone. This is especially true when a leader is not chosen by the people. Instead of being accountable to voters, the dictator or illegitimate leader must be accountable to the people who keep him power: among them, perhaps, the army, the businessmen, corrupt local leaders. Instead of providing proper services to African citizens, revenue is instead doled out to whomever the leader relies on. Also, because so many institutions are weak—especially the judiciary—there is no way to challenge the authority of the leader. Tackling corruption at the high level, Githongo says, is one of the key first steps to solving Africa’s corruption problem.

With a lack of democratic accountability comes a sclerotic and onerous official economy. Because starting a business in many African countries takes a very long time and requires innumerable bribes to many bureaucrats, many African businesspeople are reduced to operating in the black market. This has many bad consequences: for starters, it means the government has less tax revenue to provide services. It also means that it is hard to enforce contracts and attract any sort of foreign investments. These consequences lead to a vicious cycle.

What is the solution? One thing that appears to be quite clear is that aid to Africa has not been very good value for money. Billions of dollars have been sent to the continent, but much of it has been stolen by corrupt officials. In a way, Western taxpayers subsidized the summer homes on the French Riviera that the Congolese President, Mobutu Sese Seko, once owned. This is not acceptable. Indeed, Adam Lerrick argues that

As the world contemplates an unprecedented transfer of taxpayer funds to faraway places, good governance on the receiving end must be convincingly demonstrated over time. In the interim, rich nations must underwrite more aid but in a meaningful manner: Grants that address the most basic needs of the poor, paid out only for performance; endowments that do not lend or spend but protect resources and draw upon income to leverage funds in the capital markets. It is naïve to send aid to Africa without strict supervisory strings attached.

This may well be the most important thing to keep in mind when considering the Africa corruption question. We must be very sure where money goes.

With the economic troubles of recent years will Africa get even worse? A global recession took place in the late 2000s, resulting in a big drop in international trade, rising unemployment and falling commodity prices. Many economists believe the crisis began because of a big asset boom in the United States. Banks and other lenders gave away many loans at very low interest rates to people who simply who could not afford to pay back the money. In the beginning this led to a huge boom in housing prices because there were so many buyers in the housing market and there was a high demand and a somewhat low supply. However, eventually what happened was that people began to default on their mortgage payments. During the boom years many complicated financial products involving mortgages were bought and sold by banks and it was difficult to know how many of these "toxic mortgages" were actually on a bank's balance sheet. As the number of defaults and foreclosures increased people began to become very nervous as they had trouble determining the value of banks' stocks and how many bad mortgages they held. When Bear Stearns, an investment bank that had borrowed heavily and then had the rug pulled out from beneath it big losses in the mortgage sector failed in 2008, people got very worried (Cohan, 2009). The American government bailed it out and there was a period of some relief. In October of 2008 another bank, Lehman Bros. failed but the government this time did not step in. After the failure of Lehman Bros. the stock market began to collapse and many huge banks and insurance companies began to fail. The American government had to step into bail them out. By the turn of the new year, there was a new American government, led by Barack Obama, the first African-American president of the United States, and a basic sense of stability had been restored. Talk turned to how the system could be rebuilt and restructured most successful. Africa’s economies are not very developed and don’t rely on banking sectors or financial services very much. In that respect, they have not been hit too hard. But they do rely on commodity prices which at the beginning of the crisis went down. Now these prices are going up again. It appears that the recession did not have a huge impact on African economies because they are so disconnected from the world economy.

Whatever approach global leaders choose to take in helping Africa with this problem, it is very likely to take a long time to affect any sort of change. Corruption in many African countries is so entrenched that it will take years to make incremental improvements. It will take a long time to defeat and a long time to build mature economies.This is a terrible shame because so much of Africa has huge amounts of natural resources and talented and energetic populations. With corrupt leaders they will continue to suffer.


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