Poverty is at the heart of Africa’s problems. The economic problems that Africa’s face, are both due to external and internal factors. This is an overview of some of the economic challenges facing the continent due to the internal factors.Misuse of their natural resources. Most of the African countries do not know how to utilize their environment that is usually based on intellectual and technological advancement in combination with the degree to which the labor is organized effectively. Natural resources are important aspects of a nation’s power. Africa has a whole vast of resources and if well utilized can be a major force in world affairs. For example, Malawi has limestone, arable land, hydro power, unexploited deposits of uranium, coal and bauxite but still is one of the least developed country in Africa. If these resources were utilized properly then the story would have been different. As of 2008 South Africa is one of the countries that has coal and is successful in generating electricity. The coal in Malawi is of high quality but because it is not properly used most of the coal mines are in ruins forcing the market to close.
The external debts that are taken by African countries also contributes to the economic problems in Africa. Africa’s external debt burden has contributed to the Deeping crisis characterized by a decline in industrial output, poor export performance and deteriorating social indicators, institutions and environment. One of the main problem with the external debt is how it directly damages capital inflow. For example, during the period 2006- 2012, forty-two cents of every dollar loaned by foreign creditors left Nigeria through capital flight that is the amount of an investment that will return to the investing country. What highlight the crisis is the fact that over the entire 15-year period in African countries, export receipts have continued to be less than the level of imports. It is quite clear therefore that the resultant shortfalls in exports receipts to finance import have resulted in the massive borrowing hence, the huge external debt contracted by African countries.
Borrowing money from the world bank and the international monetary fund (IMF) as stated before is not a bad idea if the money is properly used for the intended purposes. It helps boost the economic standard for countries. Borrowing money becomes when the problems when the money is used for social development that are not self-financing and the management of external debt itself is not properly done that problems arise. For example, in the Joyce Banda era, the party distributed cows and bags of maize to people. That was a mismanagement of the money that was used for social purposes rather than projects that would boost the economy of the country.
Furthermore, policy dependency is one of the drawbacks in economy in Africa. Due structural adjustment programs (SAPs), developing countries tend to lose their sovereignty in the hands of the north. The African countries due to the lack of resources they adopt the policy dependency syndrome that allow the creditors to develop their counties for them. The consequence for letting the creditor to develop the countries is that they develop the projects that they feel like developing than the areas that need to be developed. This means that the socioeconomic development in Africa is dictated by policies of lenders that has resulted in the underdevelopment of agriculture in some countries because of lack of food aid. For example, one of the policy of the SAPs is to privatize government owned estates. This has caused inflation to increase in Tanzania year by year . Through the privatization of public entities, the government has little control of the market as the price of goods are in the hand of demand and supply. The government has little control of monopolies and other market failures making the government to fail to control the increase in inflation.
Corruption and political stability is one of the self-made economic problems in Africa. The selfish nature and the corrupt practices of African leaders who only think of enriching themselves to the detriment of the population, the African continent remains to be underdeveloped. A very good example is the cash gate scandal that happened in Malawi during the Joyce Banda era between 2012 and 2014. It is believed that between the months of April and September 2012, 6.1 billion kwacha’s was paid out of 16 companies from services that had not been supplied and payments with no further documents accounted for 4 billion kwacha’s. In total the state was defrauded of 32 billion dollars in six months, almost one percent of Malawi’s annual GDP. Due to the corruption of the government, the donors withdrew aid that mostly led to major problems in Malawi. The leaders lack of patriotism and commitment for the development strive of Africa due to the mismanagement of funds from IMF and the world bank Africa still remains backward and underdeveloped. Another example is Equatorial Guinea that is one of the richest countries in Africa but ranks in the bottom in the richest countries in the world due to the corruption of leaders there.
The other self-made economic problem in Africa is lack of negotiation skills. This is a major contributor to the external debt crisis. In the past Africa nations went to European countries in order to be educated in appropriate skills. Africa need special expertise in the economic sector to understand some of the economic deals presented to them not to admit to anything that is offered to them. For instance, some of the policies that are in the structural adjustment program are unreasonable and can cause problems to most African countries.
The last self-made economic problem Africa is facing is because of lack of technical advances. Obsolete equipment makes the debtor nations’ exports uncompetitive on the world’s market because of high costs. Competitiveness can only be achieved with mass production, which can only come about in our economies if the latest and most efficient equipment is obtained and the provision of raw materials localized. The use of outdated becomes a problem when the country decides to export the machines of production from abroad. This is a problem because the machines that the country buys from abroad need spare parts that have to be imported to maintain its equipment. Dependence on foreign technology involves a foreign exchange cost that result in the external debts to raise. For example, most schools in Africa, Malawi to be specific do not have access to computers in most schools especially primary and secondary levels. Most students have access to computers at a later age in colleges and universities. Due to this, most students do not have fully knowledge on how the computer works and finds it so hard to develop the country through the use of computers in industries. Most developed countries, children have access to computers at an early age that they end up coming up with projects hence developing their countries.