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The impact of globalization on African countries economic development
Article in AFRICAN JOURNAL OF BUSINESS MANAGEMENT · November 2012

DOI: 10.5897/AJBM12.828
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African Journal of Business Management Vol.6 (44), pp. 11057-11076, 7 November 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM12.828
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
The impact of globalization on African countries

economic development
Kossi Ayenagbo¹*, Wang Rongcheng¹, Wang Wengjing1, Stephanie Nguhi2, Josphert N.
Kimatu3, Judith Makse Patrick4,
1
College of Urban and Environmental Sciences, Northeast Normal University, No.5268 Renmin Street, Changchun, Jilin
Province, Post Code 130024.P.R. China.
2
Kenyatta University, Department of History, Archaeology and Political Science, P. o Box 43844-00100, Nairobi, Kenya.
3
Department of Biological Sciences, South Eastern University College, (A Constituent College of the University of
Nairobi). P.O.Box 170-90200- Kitui, Kenya.
4
School of Foreign Languages, Northeast Normal University, No.5268 Renmin Street, Changchun, Jilin Province, Post
Code 130024.P.R. China.
Accepted 3 October, 2012
The term globalization captures the attention of everyone and especially economic development
researchers. However, despite the prior prosperity promises of globalization and the benefits of an
information accessing society, the afterwards benefits have not been universal and global inequality
has increased instead. Some studies show that globalization has widened the gap between rich and
poor countries in its relentless progression while others are unclear about its effect. Although the idea
of globalization had gradually been developed since the Second World War, its impact gained
momentum in the early 1990s; Africa has not been spared from the implications of this phenomenon.
We used the KOF Globalization Index with a special bias on African countries. The purpose of this
article is to examine the progressive position of Africa in the global economy and highlight key
sustainable approaches which African countries can adopt as economic development priorities as it fits
into a globalized economy. However, the losses could be higher for African countries or less depending
on its approach. African governments’ policies should be designed systematically so as to balance
between its current low economic status, its political teething problems and the pressures to catch up
and fit into the inevitable globalization trends. This would minimize the economic marginalization of
Africa and increase it utilization of its raw materials and human resources.
Key words: African countries, globalization, economic development, information technology.
INTRODUCTION
The term globalization is certainly not new and has Globalization of the economy includes the growing of
received major attention especially in the last few internationalization of trade, capital investment, finance,
decades. It is on record that globalization is taking place business and the technology of production (Wade, 1996).
at a faster pace (Dreher et al., 2008). The benefits of The dynamics of globalization occur not only in the
African countries of this phenomenon are not enormous economic sphere but are also tangible and perceptible in
because of their specific problems in all of the area of the areas of communications and transportation. Indeed it
development. Globalization refers to the growing inte- is as easy to observe and quantify the vast flow of capital,
gration of economies and societies around the world. goods and services around the world as in observing the
distribution of images and ideas across national borders
through antenna dishes and television set. How turmoil in
the Tokyo stock market, for example, affects those of
*Corresponding author. E-mail: [email protected]. Tel: New York and London illustrates how it has become
008613943185493. usual to attend the functioning of the global economy
11058 Afr. J. Bus. Manage.
Figure 1. An illustration of the drives which characterize globalization

showing how they are influenced my intensification of relations across
country bounders (B), liberalizations of economies (C) and the crucial role of
information technology (A) in facilitating direct foreign investments, financial
flows and trade amongst economic blocks.
(James, 1993). However, increased trade has not always the development gap between rich and poor as in this
been held in perfect harmony in all of the continents case those of Africa which continue to grow; although
especially in Africa. some studies are uncertain about the globalization effect
on the gap between the poor and the rich (Sapkota,
2009).
Relationship between evolution of societies and
crisis
African countries influence on international
The economic history of the world teaches us that the institutions
evolution of societies, particularly for economic reasons,
always induced crises, whose resolution has often found Globalization is multidimensional (JRC/OECD, 2008) and
an end only through the appointment of conflicts of all affects all spheres of economic, cultural, environmental
kinds, and by the use of coercion or submission. The and social-up to relations between states and nations
relations of domination have been established in a from the five continents. It includes an intensification of
systematic manner, like what the great economic powers cross-national cultural, economic, political, social and
are now trying to impose on through a more peaceful technological interactions. This links eventually may
way, but whose effects can lead to implications where establish transnational structures and a global integration
violence can be a constant feature. Nowadays, new ways of various cultural, economic, environmental, political and
of domination are instrumented, whose innovation social processes on scales which are at the level of
consists in the economic strangulation of the least global, supranational, national, regional and local
developed, particularly of the African countries. The same (Rennen and Martens, 2003). It is mainly characterized
causes produce the same effects regardless of the by the intensification of relations across borders, facili-
evolution of people. It is possible and even "inescapable" tated by liberalization and rapid progress of information
to obtain solutions with respect to reducing inequality technology in the areas of trade, financial flows and
about economic development between countries. The Foreign Direct Investment (Figure 1). All these have
consciousness of the masses continues to progress. It is contributed to make the further development and
not certain that those, who are still denied of a fair share preservation of internal stability and external tasks difficult
in the distribution of the fruits of global growth, are much as well as delicate (Islam, 1999; Aninat, 2002). African
longer willing to passively suffer immoderate increases in countries, like other developing countries, have to
Ayenagbo et al. 11059
participate in international exchanges. But this integration through diversification of exports, debt reduction and
requires active participation of policy makers and expanded development cooperation with other countries
considerate negotiations in international institutions. is still possible. African countries also need to be
Unfortunately most, African countries play a too weak strengthened as a bulwark against the dictates of foreign
role within international institutions, even when critical capitals. All this accomplished, Africa could join the
aspects of their own development are at stake. This self League of Nations enjoying the benefits of globalization.
marginalization of African countries in these institutions The world is fast becoming a global village, a metaphor
reflects the weakness of their weight internationally. that is often invoked to depict global interdependence
Indeed, despite the many efforts of some African leaders and the increasing interaction among and the integration
after independence and prerogatives afforded by of economic activities of human societies around the
globalization, Africa has been unable to extricate itself world (Ajayi, 2001). In concrete terms, globalization is the
through. Africa seems to be the least developed continent intensification of cross-border trade and increased
in the world, as evidenced by the low per capita income financial and Foreign Direct Investment flows among
of many countries that compose it. The lack of nations, promoted by rapid advances in and liberalization
infrastructure, particularly in the telecommunications of communication and information technology (Islam,
sector, makes it difficult to establish links with the outside 1999; Aninat, 2002).
world and within Africa itself; Africa‟s technology sector is According to Omar Kabbaj President African
not innovative and spends little on research and develop- Development Bank, with respect to Africa‟s economic
ment (RD) and has investment in extractive industries performance in 2004, the report notes that it improved
than in the service sector. markedly. The region‟s GDP growth rate reached an
This present article analyzes the position of Africa in average of 5.1 from 4.4% in 2003, resulting in a per
the global economy after identifying the essential charac- capita GDP growth of 2.8%. This is the highest GDP
teristics of this mechanism; the effect of Structural growth rate recorded for the continent since 1996, and
Adjustment Programs (SAPs) which are designed to considerably above the average of 3.7% for the previous
promote the opening of Africa to global markets and five years. It is also noteworthy that this is the first time in
liberalization; the marginalization of Africa (in terms of over two decades that the Africa continent has recorded
trade, investment including Foreign Direct Investment, growth rates exceeding 4% per annum for two
information technology); factors that influence integration consecutive years. As was the case in the past, growth in
of Africa in international markets and particularly the 2004 exhibited a considerable variation across individual
effect of globalization on poverty and employment in countries, although the trend, overall, was quite positive.
Africa. Secondly this article leads to suggest corrective Some 20 countries achieved GDP growth rates
actions appropriate for the African reality, animated by the exceeding 5% and 14 others recorded growth rates of
wish to significantly improve the lives of African people between 3 and 5%. Only three countries witnessed
which are driven and burdened largely by population negative growth rates, compared with six in the preceding
growth. year. Several factors, both external and internal,
contributed to this strong overall economic performance.
Externally, Africa‟s terms of trade improved considerably
THE INTEGRATIVE DEFINITION OF GLOBALIZATION by 6.7%: largely due the rise in oil prices and the further
strengthening of the prices of major non-fuel
The world has witnessed increased interdependence in commodities, particularly metals. For comprehensive
the last two decades, thanks to globalization. The main analysis, one can refer to (Figure 2) shows some results
driving forces of this process are technology in the from calculations of the Economic Globalization Index
service sector, economic policies and trade competitions. (EGI) for countries in Africa (Lockwood and Redoano,
It has subordinated domestic economies to global market 2005). Examples are given for the countries which
conditions and practices. However, it seems that the sufficient data were available to compute the index
developed nations are the beneficiaries of the strategies between 1983 and 2004. Some countries entered the
globalization to a certain degrees as their share of world series during this period and others due to adequate
trade and finance have been expanded at the expense of data. There were also significant country omissions, such
developing countries in general and in particularly of as Ghana, Tanzania, Uganda, Madagascar, Burundi and
African countries. Thus, the process exacerbates ine- Ethiopia, some of whose figures could prominently have
quality between the world‟s regions and poverty in the influenced the empirical and analytical work on
developing world. There are several reasons which globalization and poverty in African countries. Viewing
explain why Africa has not benefited from these oppor- and comparing the outcomes for 2004, the results show
tunities. The main factors may be due to monocultural that Swaziland is the most globalized African country,
export, inability to attract increased foreign investments closely followed by Angola, and that Comoros is the least
and huge indebtedness. But, the potential for globali- globalized. According to Lockwood and Redoano‟s
zation can be domesticated in the African countries calculations, almost half of the 25 countries for which
Globalization index
Years
Figure 2. A comparative trend of globalization index of the best (Swaziland) and the worst (Comoro)
economies in Africa against the economic giant of East Africa (Kenya) and Malawi which has become recently
food sufficient. Source: Lockwood and Redoano (2005).
estimates exist were less globalized in 2004 than they conduct and governance of African debt. In most
were in 2000. Some countries appear to show signs of indebted African countries, governments are developing
steady globalization (South Africa, Cameroon), some under the supervision and control of institutions of
show a downward trend (Liberia), some show U-shaped Washington, a “political framework document which such
tendencies (Côte d‟Ivoire) and others are inverse U- institutions directly countersign to mark its binding.
shaped (Zimbabwe, Nigeria). A structural adjustment is often divided into two distinct
phases: the first is the short term macroeconomic
stabilization, including devaluation, price liberalization
Structural adjustment and liberalization in Africa and fiscal austerity and the second being that the imple-
mentation of a number of more fundamental structural
Structural adjustments are a response to the financial reforms as indicated by Chossoudovsky (Ki-Khuabi,
crisis of debts notably known by African countries. They 2006). Almost all African countries have implemented
consist of “conditional ties under which loans are first economic reforms in the form of the SAPs. These
intended to complete the public finances”, and result in “a economic reforms are clearly related to the phenomena
series of reforms aimed at finding the major macro- of globalization. The example of the liberalization of trade
economic and financial equilibriums, and place the may be a structural reform which, in many cases, open
economy on a sustainable path of growth” (Hugon and new trade markets while intensifying competition. But
Pagès, 1998). As a result of continuing difficulties, most globalization can exacerbate this competition. It is difficult
African countries were forced to seek support from the to distinguish between impacts that are attributable of
Bretton Woods institutions, which have concocted the SAPs from those that come from globalization. We shall
term “Structural Adjustment Programs” (SAPs). These focus on the prominent facts of SAPs and globalization to
programs involve removing all the “distortions” opposing highlight some of the most important relationships.
the market and thus leave the field open to the forces of African states have imposed SAPs to end the economic
supply and demand (Lawrence Egulu). However, a prior, crisis caused by various exogenous and endogenous
adjustment is not a new phenomenon. Indeed, it is only a factors. Some of the external factors are: increases in oil
return to aid the balances of payments which were prices, the deteriorating terms of trade, droughts, wars
performed in the 1960s. The only difference is that this and political upheavals. Internal factors include inade-
aid is now conditioned by a set of structural adjustments quate policies such as the overvaluation of the currency,
which must be met by economies of the South” (William, which has hurt exports, import subsidies and distortions
1994). The description of the mechanisms of realization in the structure of factor prices, which are slowing global
of these programs reveals the deep level of involvement growth. The omnipresence of the public sector is as a
of the World Bank and International Monetary Fund in the result of cumbersome and inefficient civil service and of
government intervention in the direct production of goods dyeing. If trade liberalization has fostered trade, it has
and services through a myriad of public companies in discouraged investment in productive activities in the long
deficit. This has led to large budget deficits and has term. Thus, import liberalization has improved the supply
caused high inflation. and helped small businesses and informal sector
The closed policy of import substitution, supported by enterprises to have access to raw materials, tools and
the widespread use of tariff barriers and quotas to protect spare parts: particularly in the case of small retailers,
uncompetitive manufacturing, has stifled any kind of tailors and food companies and woodworking. The ability
innovative response to global competition. Excessive of African governments to manage their economy has
regulation of prices was imposed to better cope with deteriorated since the implementation of economic
market forces and a corrupt bureaucracy has favored the reforms in many countries; past policies have undermined
issuance of permits rather than relying on market forces the ability of the private sector to offset the reduced role
to allocate resources efficiently. These policies have of government in the economy. Where the private sector
fueled the race for rents and discouraged agricultural is strong, it is dominated by ethnic minorities, Asians in
production. Governments improperly running inefficient East Africa and whites in South Africa or by subsidiaries
tax systems have disproportionately used credit (issuing of transnational corporations. It is not clear whether the
treasury bonds), and have fixed interest rates and credit international links created by the private non-indigenous
control. The liberalization of financial services has not will foster the national economy. The indigenous private
helped the fragile financial institutions gain expertise. sector in African countries can improve its performance
Foreign banks have doubts about their investment in given that the governments want to play an active role in
those countries which are now available to them. The developing national capacities, streamline the public
insolvency of banks and virtually non-existent infras- sector and promote cooperation between public and
tructures has delayed the establishment of an efficient private sectors.
financial system. The SAPs have resulted in developing Factors such as the country's situation before the
countries, especially in Africa having an increase in implementation of reforms, intensity and sustainability of
inequality and poverty. The imposition by the World Bank those reforms, the pace, resources and capital inputs in
and International Monetary Fund of market mechanisms addition to national resources are important preliminary
has particularly resulted in a reduction of state analysis factors indicating the reaction of African
intervention both internally and externally in Africa. Thus, countries to SAPs. The SAPs are for many the case
in the health sector for example, curative and preventive problems in African countries. These phenomena have
cares are crumbling, infrastructure, working conditions led to outflow phenomena to numerous constraints of the
and salaries are degrading. A similar approach prevails in tax, the extension of the informal sector, lower yields of
the field of education where schools are closing, teachers customs revenue due to the proliferation of fraud. The
are laid off, and education is virtually being privatized. In beneficiary states have become dependent, which led to
short, the World Bank requires African states to their political responsibility. In addition, key sectors of the
compensate for the lack of grant funds through partial, or economic have been neglected in favor of the restoration
even full, privatization of essential social services, thus of public finances. Hence the many problems faced by
implying the de facto exclusion of large sectors of the industrial and agricultural sectors.
population unable to pay the various fees related to
health services and education (Ki-Khuabi, 2006). The
negative policies adopted in economic reform programs Marginalization of Africa
are the bases of the poor performance of the
manufacturing sector. Thus, the devaluation of currency Globalization has facilitated the opening up of un-
has pushed up import costs and, by extension, costs of expected possibilities for individuals, groups and coun-
production. tries. Literacy, school attendance, infant mortality and life
Trade liberalization has exacerbated problems of expectancy are examples of human indicators that have
domestic industries. Inexpensive commodities imported been much improved in recent decades. In countries with
from technically advanced developing countries, parti- low income and middle-income, life expectancy has
cularly South-Eastern Asia, quickly invaded the African increased from 46 in 1960 to 63 in 1990 although recently
markets (Bagachwa et al., 1995; UNIDO, 1996). The this has been influenced by HIV/AIDS; the infant mortality
trade associations of Ghana, Nigeria and Zambia rate, meanwhile, fell during the same period, from 149 to
reported dumping and unfair competition. In some cases, 71 per 1,000 live births: the literacy rate for adults rose
reforms abroad have forced small and large companies to from 46 to 65% and finally, the real GDP per capita rose
engage in excessive competition, thus reducing their from $ 950 to $ 2,170 (UNDP, 1993). Globalization has
profit margins and sales volume. In others, these reforms proved particularly beneficial to Asia but not Africa for the
have led to the closure of factories, especially in small- global production for profit and for owners of capital and
scale, less competitive, producing industries such as highly advanced skills.
soap, footwear, textiles and Sablon pieces of cloth- Furthermore, as indicated earlier globalization has
been more beneficial to industrialized countries and some pronouncedly, from 0.6% to 0.2% (UNIDO, 1993).
developing countries than poor countries. In April 2000, According to the World Bank (1993c, 1995c, 1996e),
at the South Summit, the Cuban President Fidel Castro between 1980 and 1994, the contribution of exports to
used a metaphor to describe the current reality of GDP has slightly increased in many countries of Africa,
globalization for the immense majority of people. but decreased in others, notably in Algeria, Congo,
According to him, globalization is an objective reality Nigeria, Togo, Uganda and Zambia. Similarly, exports
underlining the fact that we are all aboard the same ship, have recorded negative growth in Côte d'Ivoire, Nigeria,
signifying the planet we live on. However, he said, Tanzania and Zambia during the 80s, as well as Algeria,
“passengers travel in ways that greatly vary”. According Cameroon, Côte d'Ivoire, Mauritius and Togo in the 90s.
to him, a small minority of people travel in luxurious Mauritius was the only African country to record export
cabins, all equipped with Internet, cell phones and access growth exceeding 10% in the 1980s. The market share of
to global networks of communication equipment. They manufactured exports of African countries is thin, with the
have an alimentary plan which is nutritious, abundant and exception of Kenya, Mauritius, Senegal, Tunisia and
balanced, with a provision of portable water. They have Zimbabwe. The market share of Zimbabwe's exports has
access to modern medical care and culture. Instead, says remained constant between 1980 and 1993. Finally,
he, the vast sad majority of passengers are traveling in exports of machinery have been very low in many
conditions resembling that of the terrible slave trade countries of Africa except in Cameroon, Kenya and
conditions from Africa to the Americas during our colonial Tunisia .This very small market share suggests that Africa
past. He continued by stating that 85% of passengers on is lagging behind and cannot compete with the rest of the
the ship are piled helplessly in its repulsive and dirty world like United States, Asia, and Europe. The rate of
holds, where what they know most is hunger and productivity growth and innovation and technological
disease. Obviously that kind of ship carries on too much progress has been much lower in Africa than elsewhere.
injustice not to sink and it follows a route so irrational and The changes recorded in the sub-regions are not good
meaningless that it cannot call at any port. In conclusion indicators of the overall situation. In general, export
he send a warning tone, thusly that this vessel seems be growth was faster in Southern Africa in the 90s and the
destined to hit an iceberg. Then he soberly stated that, contribution of manufacturing to GDP tends to be higher
“should this occur, we will all sink with it”. Nevertheless, than in other parts of Africa. Since independence the
economic restructuring, liberalization, technological structure of commodities remained substantially the
change and fierce competition that have accompanied same, as shown by indices of concentration and
globalization as those in employment have contributed to diversification for the years 1970 and 1990 UNCTD
impoverishment, inequality, work insecurity, weakened (1984/1991). The dependence on primary commodities
institutions and systems of social support and the erosion remains.
of identity and established values. Globalization has been However, the change in the nature of exports, such as
unfavorable to most of Africa and countless regions of the increased exports of manufactured goods can promote
planet in terms of employment, as well as countries that technological progress, dynamic comparative advantage
have no assets or whose skill base is not stable and and increase productivity. Prices for commodities soared
adaptable. and, according to forecasts, some upward pressure will
Declining share of Africa in world trade, investment and be felt in coming years. Because of supply problems,
technology of information constitute the major signs of some African countries would benefit from rising prices of
weakness in its integration. According to the study of the commodities and will therefore make every effort to
(World Bank, 1996b) on global economic prospects of increase their export volume and thus their income.
developing countries, integration of these countries into However, African countries must use these additional
the global economy in recent years has been done very revenues to increase their production capacity and
unevenly. Integration has been much slower especially in international competitiveness. Africa should also diversify
the Middle East and especially in Africa. The African its economy, particularly exports, because the high price
continent is most marked by marginalization. However of commodities will perhaps not always be maintained.
the SAPs have not effectively helped Africa to integrate With the liberalization of international trade and increased
the global economy. interdependence of national economies, African countries
The African continent's share in international trade is can expect that the competition is fierce in the field of
small and continues to decline, its market is facing the exports of manufactured goods and primary products. If
export of primary products and import of non-primary. they do not react, their global market shares will continue
Thus, the part that the continent held between 1960 and to erode the benefit of other countries, even in traditional
1965 ranging between 4.1 and 4.9% and fluctuated to export sectors such as cocoa, oil palm and coffee.
around 4.4% during the 70s had dropped to reach 2 or Diversification of production and exports being a business
3% in the 90s. Its share of world exports rose from 4.7% on a medium and long term, African countries should also
in 1975 to 2% in 1990, while the market share held by the be more competitive in the traditional export sectors.
least developed countries declined even more They will have to adopt macroeconomic and sector
policies, including the establishment of competitive trends in Africa relative to other global regions, in Table 1
exchange rates and measures to reduce domestic we show some summary data on performance in Sub-
production costs, improve their competitiveness in the Saharan Africa (SSA) in respect of trade openness,
non-price factors such as marketing, particularly assisted alongside evidence on economic growth, over the period
by the highway information, which is discussed below. 1980 to 2004. Estimates are shown for 5-year periods for
The marginalization of African countries is reflected by each of regions (low and middle-income countries) where
their low share of commerce (2% only) (Mohamed, 2001). comparable data are available. Clearly, such selectivity
Preferential trade agreements concluded with the over periods of time can be problematic because we may
European Union or under the General Agreement on miss events and macro features of individual years.
Tariffs and Trade (GATT) through the Lomé Convention However, this span covers the period when many African
are being questioned. It is likely that the implementation countries embarked on economic reform programmes,
of the agreements of the Uruguay Round will gradually and it includes the decade or so of their aftermath.
eliminate these preferential agreements. Although an Turning first to the evidence on trade openness, following
estimated $213 billion was gained as a result of trade Sachs and Warner (1995) we use a measure of trade
negotiations of the Uruguay Round, in Africa, excluding intensity, that is, imports plus exports relative to GDP
Egypt and Libya, could lose $ 2.6 billion per year (Martin (measured in current US$). Three important issues about
and Winters, 1995). measuring trade intensity should be noted. First, ceteris
During the 1960s, the volume of exportations from paribus, one would expect the ratio to decline with
African countries had increased by an average of 6% per income, so if a ratio for a region is based on country
annum. However, since 1973, the volume stationary at ratios weighted by GDP, then this is likely to be lower
the beginning declined significantly in most countries at than an equivalent ratio using (equal) country weights.
an average 0.7% per year according to report WTO Second, if trade and GDP are valued at public-private
(2003). Despite the considerable increase of volume of partnership (PPP) units, then the ratios are also likely to
world exports, the share of Africa has unceasingly been be lower (as GDP in PPP prices for low-income countries
declining. The part that was 3% in 1990 became only are higher than in current dollars, while trade values
1.7% in 2001, in which almost all is relative to commodity would remain the same). Table 1 is therefore based on
and raw materials. This loss of market share is asso- average trade intensity measured in current US dollars.
ciated with the decline in imports of these products in Third, the ratio is likely to be affected by country or
world trade. And this, despite the changes in tariffs which region-specific effects, which has led some researchers
have become more favorable with the application of the to control for these factors before making comparisons
tariff advantages granted by the EU under the Lomé across regions. The first panel of Table 1 shows the
Convention (1976-1981-1988-1990) and the generalized expected general trend towards greater openness over
system of preferences on main markets. The loss of the two decades across all global regions between 1980
market share costs $70 billion per year in Africa since the and 2004, based on GDP weights. The trend is not
late 60s. For the proper functioning of their economies, uniform, either across regions or over time, and this is an
most African countries need to import goods that they important feature. At first sight, openness in Su-Saharan
cannot sufficiently, or not always, produce. African Africa is higher than other regions in almost all years
countries import from the North technology (capital shown, but this is potentially misleading because of
goods, machine tools etc), cereals and some basic foods region-specific factors (IMF, 2005).
(milk, meat, etc). Imports of cereals, which were all at a
low in 1960 (only 1 million tons after year) rose to more
than 10 million tons on a consumption of 60 million tons INVESTMENT IN AFRICA
in 1997. The dependence of Africa on the outside for
most of its food has increased so rapidly and dramati- Foreign investment might serve to close “idea gaps”
cally. Most imports of energy products are extracted from between developing and developed countries (Romer,
Africa, exported and then re-imported after transformation 1993). According to World Bank estimates, least
at a much higher price. However imports from Africa have developed countries require infrastructure investment
collapsed, the relatively large deficits in current account equivalent to about 7% of their GDP annually (Akyüz and
balances not being able to be funded by capital inflows Gore, 1996). The lame performance and the manu-
according to Report WTO (2003). In fact, the global facturing base of small-scale concern the exportations
movements of goods, services, direct investment and which we have previously seen is consistent with the low
financial concern especially in North America, Europe investment rates in sub-Saharan Africa. World investment
and Japan. The group of least developed countries of African countries is about 1% according to Mohamed
accounted for only 0.1% inflow of investment globally and (2001). The private and public investment remained
0.7% inflow of investment in all developing countries. modest, even in African countries where reforms were
Africa has been particularly neglected (OECD, 1992). more successful. Expressed as a percentage of GDP,
In order to examine some features of globalization investment has declined significantly from the 70s into
Table 1. Global comparisons of trade openness and growth.
Trade openness¹: (X+M)/GDP 1980 - 1884 1985 - 1989 1990 - 1994 1995 - 1999 2000 - 2004
Sub-Saharan Africa 55.4 53.0 54.8 60.1 65.3
Latin America and Caribbean 27.3 29.2 32.0 39.3 43.4
South Asia 19.2 17.8 22.4 27.5 32.5
East Asia 29.2 36.6 50.7 59.8 73.9
E Europe and Central Asia na na 59.1 67.3 73.9
Middle East and North Africa 57.6 41.5 59.7 54.0 56.9
World total 37.9 36.6 38.8 43.9 48.5
Sub-Saharan Africa (with country weights)² 69.3 65.3 68.6 70.4 75.7
Growth of GDP per capita (average annual)³

Sub-Saharan Africa -1.2 -0.2 -2 0.8 1.5
Latin America and Caribbean -0.8 0.3 1.7 0.9 0.8
South Asia 3.2 3.6 2.8 4.0 3.7
East Asia 5.7 6.2 7.7 5.4 6.5
E Europe and Central Asia na na -5.4 1.6 5.3
Middle East and North Africa 0.7 -1.2 1.8 1.7 2.5
World total 0.5 2.0 0.8 1.7 1.6
Note: na = not available; Sources: 1). World Bank (2005) (calculated from current US$ estimates); 2). Own calculates based on World Bank
(2005); 3). Average annual % (World Bank, 2005).
the 90s, from about 26% to just over 16% according to disregard the recent surge of FDI in Angola and Nigeria,
IFC (1995). The drying up of funds from abroad in the the region as a whole has suffered setbacks in regard to
early 80s contributed to the decline in investment. The FDI in 1994. In recent years, the International Finance
decrease in gross domestic investment reflect a declining Corporation (IFC) has established several programs,
savings rate: gross public savings has declined by 2% on including the African Project Development Facility and the
average per year. In most cases, public investment in African Enterprise Facility. However, investments of
infrastructure and social sector dropped during imple- International Finance Corporation (IFC) were only about
mentation of economic reforms. The institutions of $600,000 in 1994, compared to an average of 12.3 million
science and technology, telecommunications, energy elsewhere. In 1994, the share of investment from
production and education have all been faced with International Finance Corporation (IFC) in sub-Saharan
reductions in investment. The credibility of the policies of Africa has been halved compared to the 70 and 80s
African governments and sustainability of economic (Helleiner, 1996). The share of FDI held by Africa as a
reforms are essential to attract investment in sectors proportion of the total amount granted to developing
growth and by extension for medium and long term. countries rose by 11% between 1986 and 1990 to 6%
Development partners and International Financial between 1991 and 1993 and 4% in 1994. The net inflow
Institutions (IFIs) have made credible African states in of resources has declined so much in Africa, from $24.1
implementing economic reforms. Investors seek macro- billion in 1992 to $19 billion in 1993. One can largely
economic stability. The selective investments and debt attribute this decline to the reduction of financial aid
relief would be welcome to the macroeconomic stability in programs bilateral. The reduction of official programs of
the trade policies imposed by International Financial financial assistance to growth and development has not
Institutions. Despite the liberalization of policies gover- been offset by an increased flow of private capital, or by
ning the investment in many countries, African countries higher export revenues. This reduction has caused a
are marginalized in the case of Foreign Direct Investment decline in imports, as the case in 1993 (Bhalla, 1998).
(World Bank, 1996a). The bulk of FDI in Africa is The globalization of financial flows is after summation,
concentrated in a small number of countries with natural like that of trade. Financial flows to low-income countries
resources, especially oil. South Africa could not succeed especially most African countries are virtually non-
in attracting much Foreign Direct Investment (FDI). existent and, even if the flow of private finance to
Essentially, the resources that this region receives from developing countries at average income has increased
the outside are loans made by government, Foreign more, the official development aid is stagnant. Almost all
Direct Investment (FDI) amounting to only 12% of the financial flows for countries of the Organization for
total granted in 1993 (UNCTAD, 1995a, 1995b). If we Economic Cooperation and Development (OECD), and
% World FDI inflows
Years
Figure 3. The comparative low distribution of the World FDI inflows for Africa from 1986 to 2003 (%) Source:
World Investment Report, UNCTAD, 2002 and 2004.
part of the foreign investment are directed towards a be noted that this figure is 24.5% points below the
small group of developing countries, including China and average share for developing countries over the same
countries of Latin America and East Asia. A study by the period (Figure 3). Hence, in a globalized era, developing
World Bank (1996b) on prospects for global economies of countries have to attract foreign investors; however, in
developing countries, integration of these countries into order to attract more foreign direct investment (FDI) and
the global economy in recent years has performed reap the benefits that accrue from FDI, many govern-
unevenly. In general it is Africa which is most impacted by ments in Africa have in recent years have improved their
marginalization. Thus, a recent article on this subject countries‟ attractiveness by expanding trade and
concludes that Africa is currently more marginalized in liberalizing their investment framework. This is expected
the global economy than at any time during the last fifty to gradually increase employment, higher wages, in-
years and its contribution to world trade, investment and creased worker productivity, technology transfer and
production declined to the point of achieving negligible economic growth generally. Some countries have
proportions (Collier, 1995). In fact, the global movements identified particular sectors which shall drive them to
of goods, services and direct financial investment higher development; Kenya has at least thirteen in its
concern especially North America, Europe and Japan. vision 2030. Rwanda also considers former neglected
The group of least developed countries accounted for sectors like tourism as a dynamic economic sector of
only 0.1% of investment revenues globally and 0.7% of achieving the attractiveness and competitiveness
investment revenues in all developing countries. Africa (Nkurayija, 2011).
has been neglected in particular (OECD, 1992). Africa
has never been a major recipient of FDI flows. On an
annual average basis, the region‟s share of global FDI Information technology in Africa
inflows was 1.8% in the period 1986 to 1990 and 0.8% in
the period of 1999 to 2000. A slight improvement was Satellites and the adoption of the Internet have greatly
observed in the 2001 when inflows to the region rose accelerated the speed of cultural, economic and infor-
from US$ 9 billion in 2000 US$ 19 billion in 2001, mational data transmission on the world stage. However,
increasing the region‟s share of global FDI to 2.3%. It as can be seen in trade and investment, large poor areas
should be noted however that this increase was largely of Africa are ignored. The global forces do not affect
due to two unusual cross-border Mergers and those countries that practice subsistence agriculture nor
Acquisitions in South Africa and Morocco. FDI inflows to suffer from the turbulence effects of globalization. In the
the regional fell by 40% in 2002 but grew by 28% in 2003. technology sector in Africa, investment in research
However, on an annual average basis, the share of Africa development, for example, is very low and constantly
in global FDI inflows rose to 2.5 over the period 2002 to decreasing. Only 0.33% of African GDP was invested in
2003. Although this represents an improvement, it should this area in 1970 against 0.29% in 1990 (UNESCO
Countries
Telecommunications infrastructure (%)

Figure 4. The comparison of telecommunications infrastructure between South Africa with others
countries in Africa. (Source: ITU, 1996).
Statistical Yearbook, various years, UNCTAD, 1994). With the acquisition of computer skills. Economically
the exception of South Africa, spending by African disadvantaged groups are less likely to be able to
countries in respect of telecommunications equipment purchase computer equipment. Given that women are
accounted for in 1986 is 0.7% of spending in the world. In underrepresented in the education system, they were
addition, only a few countries have invested in this sector: probably less likely to access this technology. Moreover,
Algeria, Libya, Kenya, Zimbabwe, Nigeria, Morocco, Ivory the use of symbols, images, sounds and language
Coast and Tunisia. The low GDP and growth in most belonging to a given culture may make the information
African countries according to World Bank (1995c, highway eminently “exclusionary” (Marcelle, 1996). In
1996e) explain the age of telecommunications infra- Africa, automation in factories and computerization in the
structure and low levels of teledensity. The African industry are not very common, which prevents companies
telecommunications network grows slowly compared to to compete internationally. Most African countries rely on
international standards. South Africa is the only country imports in the sector of information technology, including
with a good telecommunications system. If we compare computer-controlled machine tools, used primarily in the
the telecommunications infrastructure in South Africa to sector of industry. The local manufacture of hardware is
the rest of Africa, we realized that the most striking almost absent in most of African countries. Government
indicator is the teledensity. For example, in South Africa, policies have also hindered the spread of computers in
it is 9.5 main lines per 100 people, while in the rest of the past. Thus, between 1974 and to 1980, Tanzania
sub-Saharan Africa, it is only 0.5 (Figure 4). About 33% of banned the import of computers on the pretext that they
main lines in Africa have nearly 84% of all cellular were luxuries. Some countries refused to connect to the
subscribers are in South Africa although this is rapidly information highway because of unwanted information
changing. There was a superiority of the infrastructure of that is conveyed.
North Africa compared to that of Sub-Saharan Africa A country can thus voluntarily deprive itself of the
concerning main lines and teledensity. In contrast, North advantages derived from new technologies (Ramani,
Africa has far fewer cellular phone subscribers. Serious 1996). The agreements of the Uruguay Round were
problems also arise with the lack of software available in formalized and universalized the intellectual property
local languages, even in South Africa, a country relatively rights (Correa, 1996). For developing countries, parti-
advanced compared to the rest of Africa. Some countries cularly for African countries these agreements resulted in
have tried to adapt computers to their local language. In more costly access to existing programs because it will
Ethiopia, for example, research to exploit the full potential be difficult to engage in piracy. It is obvious that there is
of computers and extend the use of technology piracy in many African countries, although there are no
information to all sectors of the economic development precise data on this subject. Pirated software (including
has been conducted in the national language. The access disks) is available at lower prices. Moreover, once the
to information technology is related to the purchase of software is patented, it will be difficult to have access to
electricity, among other things, as well as education and ideas, concepts and techniques underlying the design,
which is a major obstacle for the integration of Africa into Internet links and especially the lack of public awareness
the semiconductors industry. regarding the computer which have limited expansion or
growth. Kenya also offers Internet services. According to
the most recent data, companies including Airtel,
Electronic networking in Africa Safaricom, Yu, Orange, and others in Nairobi are offering
services for email and Internet for the country.
Despite these constraints, more than half of African
countries have some email services with access points to
the Internet. However, the infrastructure is outdated and Regional cooperation in Africa
affordable access to electronic communications is limited
largely to the capital. By 1996, only Mauritius, Senegal Optic cables are also being laid to transform the elec-
and South Africa provided these services outside their tronic communication in Africa. Among these are the East
capital (Jensen, 1996). In South Africa, five organizations African Internet Association (EAIA) regional grouping that
operate communications networks and all want to expand anticipates providing services in collaboration with
into the rest of Africa. Telkom SA Limited dominates the members of Kenya, Tanzania, Rwanda, Burudi, South
market with its 3.7 million main lines in use. Eskom, Sudan and Uganda, the Trade Information Network
national electricity company, has its own telecommu- (TINET) that are interested in commercial databases and
nications network and cooperates with several African linkages with local issues as part of the Common Market
countries. Transtel is the telecommunications subsidiary for Eastern and Southern Africa (COMESA), and the
of Transnet, a state corporation of South Africa, which system of automatic data processing customs
works in the field of railways and transport. Transtel (ASYCUDA), which specializes in the treatment of infor-
wants to expand and connect all of its operations in Africa mation customs of member countries. Another example
by satellite. South Africa has two competitors in cellular of regional cooperation in Africa is the provision of digital
phones, MTN and Vodacom. Membership fees to the link in the program-phased development of Botswana.
Internet vary considerably among different sub-regions of This program is a link with the outside world via Namibia,
Africa. For example, in Austral Africa, the cost is $10 to South Africa, Zambia and Zimbabwe. Through regional
$100 per month, representing a sum large enough cooperation it is possible to combine resources and
relative to income per capita in most African countries. perform research and development (R&D). Besides, the
This means that even if computers are available, internet exchange of national experiences allows local solutions
access will likely be limited to very few people (Jensen, to be found for the local problems. We can conclude that
1996). In Zambia, the University of Zambia has a very there are timid initiatives for the implementation of
modern communications named Zamnet. So the electronic networks in Africa.
University with this system provides significant services
to the Zambian community and others. The business and
professional community in Zambia can be accessed from Factors affecting integration of Africa
the University through that system. Some agencies have
begun to benefit from the network. The non-trade According to Mohamed and Kenton, 1999), it is unlikely
organizations such as non-governmental institutions in that globalization enables the development of Africa, and
the sectors of health and education and the UN especially with the following reasons: i) Low income and
Organizations began receiving toll-free email services resources of Africa; ii) World prices and demand for
which such system offers them. The network Zamnet African crops (the main sources of foreign exchange) fell
offers other services such as Web browsing, access to in the 60s. Moreover, competition from capital-intensive
the new network, transfer files, downloading information agriculture in Asia and Latin America has further
from the Zamnet database (the example of a user who aggravated the plight of African farmers; iii) African
wants information concerning tourist services and hotels countries with average incomes firstly derive their wealth
in Zambia, may easily obtain it from the Zamnet from mineral exports, which tend to primarily benefit
database). This system is equally used by banks that use transnational corporations and developed countries that
it for the declaration forms for imports. It is a network of turn these raw materials into consumer goods. Ironically,
rapid communication with the Bank of Zambia and the they sell these products to developing countries by
Ministry of Finance. In addition this network allows rose making lavish profits; iv) A majority of Africans live in rural
flower producers to better follow the evolution of areas where the economic cycle depends on an
European markets. With more than 600 subscribers, unpredictable weather). The population increase, which
Zamnet services are more concentrated in Lusaka and goes hand in hand with very limited job opportunities,
on the copper belt. Also in Zambia, there is Telecom results in a rapid growth of labor without land and which
2000, a potential business source wanting to improve the survives on the fringes of the economy; vi) This trend also
communication equipment in the farming communities feeds migratory flows towards middle-income countries
especially in remote areas, has faced enormous like South Africa; vii) Despite the call for an African
problems such as lack of telephone lines, number of rebirth, the world‟s capitals find only very limited
opportunities to bring new investments to the mainland, from the deregulation and social globalization (Bergh and
which is due to the political instability and the negative Nilsson, 2010). The African colonies were deprived of
image that markets have; viii) In the information age, adequate infrastructure, and populations were living in
Africa is in a very poor position to provide international very miserable conditions. These people had no access
competition because the continent suffers from a lack of to education, portable water, health care, etc. After
new technologies and of appropriate offers for independence, many African leaders have tried to erase
educational matters. Thus, the authors concluded that the the traces of their colonial heritage by adopting
prognosis is that the development of Africa and the isolationist policies in the manufacturing sector. However,
dynamics of global capitalism, or globalization in general, this protectionism was not such a good initiative and did
are not converging and will not be in the foreseeable not really promote the development of national
future. competencies necessary for African countries to manage
Several factors have contributed to the marginalization global competition. Another factor that contributes to the
of Africa in the globalization process. Collier (1995) marginalization of Africa in the global economy is the
identified four factors contributing to the marginalization exodus or brain drain. Between 1960 and 1975, appro-
of Africa: i) The lack of reforms, ii) The scale of production ximately 1,800 highly skilled Africans leave every year.
and markets, iii) Environmental risks, iv) Weak This number increased to 4,000 from 1975 to 1984,
constraints. 12,000 per year in 1990 and currently 23,000. This
Regarding the first factor, he argues that even if the represents, for Africa about one third of human resources
reforms nowadays have substantially narrowed the gap at this level was reported last year by Mr. ROSSI,
between the economic incentives for African countries representing the International Organization for Migration
and elsewhere, they have been totally eliminated. (IOM), indicating that these numbers do not include
Regarding the second factor, he argues that Africa has a students who do not return to their country after their
long tradition of production and small-scale markets and training.
that this continent has limited human resources. In
addition, a major barrier to Africa's integration into world
markets lies in the fact that private agents have the EFFECTS OF GLOBALIZATION ON GROWTH,
impression that it is riskier to invest in Africa than Asia for INCOMES AND EMPLOYMENT IN AFRICA
example. African countries are at the mercy of upheavals
caused by frequent changes in policies. Finally, the The phenomenon of globalization has impact on growth,
mechanisms of coercion are indirectly responsible for this income and employment in most developing countries
insecurity. The weakness of the army means that especially in Africa. It was expected that globalization
government policies may be changed without notice; due would cause a great increase in production and indirectly
to the weakness of the central bank, macroeconomic lead to development. This means that globalization would
policy can be radically changed; deficiencies in audits can lead to an increase in production followed by social
result in sudden tax changes. The weakness of impo- welfare. Instead, it has benefited the rich and further
sition mechanisms also contributes directly to the widened inequalities between industrialized and poor
marginalization of Africa: the poor performances of countries. The problems of unemployment and poverty
accounting services show a rudimentary financial system, have not been eradicated in African countries during the
often offering credit only for trade. The marginalization of era of globalization. In this regard we focused on some
Africa in the investment sector is largely explained by the African countries in the1980s and 1990s and also part of
mediocre quality of infrastructure support and political 2000s in terms of growth and effects of poverty and
instability. It is generally believed that a country can unemployment on globalization. According to the World
succeed in attracting Foreign Direct Investment (FDI) by Bank (1995c, 1996e), Growth rates were higher in the
adopting incentive measures, which specializes a 70s than during subsequent periods in Algeria, Côte
favorable national regulatory framework. The positive d'Ivoire, Kenya, Lesotho, Malawi, Mauritius, Nigeria, Togo
macroeconomic indicators also allow for a better and Tunisia. Moreover, they have progressed over the
assessment of the magnitude of investments. A very 80s and 90s in Benin, Ghana and Mauritania. In the case
important reminding factor is the colonization. The coloni- of Tanzania, the rate of growth remained relatively stable
zation of Africa by Belgium, France, Germany, Portugal during this period. For a long time there was no longer
and the United Kingdom constitutes an obstacle for Africa hope for Africa as regards to economic performance: in
to achieve international competitiveness. African countries both absolute and relative terms, the growth rate of GDP
have established very restricted economic links with their per capita in Africa has remained low compared to other
respective colonist homelands rather than with other developing regions. All sub-regions of Africa after the 60s
countries of the world and Africa. However, recent studies have lost their cruising speed in the year of growth. Since
have established that freedom to trade internationally has the 70s, virtually all sub-regions of Africa have consis-
a robust positive effect on within-country income tently recorded growth rates above the rate of GDP
inequality and that there are significant positive effects growth. The overall growth rate of GDP of African
countries has declined from 3.6% between 1970 and sector and the depression that acted heavily on the rural
1980 to 2.5% between 1980 and 1990 and 1.7% between economy have discouraged migration, which suggests
1990 and 1994 according to African Development Bank that in rural areas rampant unemployment is visibly
(1995). This decline was more pronounced in the raging. The urban informal sector provided opportunities
Maghreb countries and net exporters of oil. The growth in for the unemployed in urban and rural regions, but this
the Maghreb is an example. This growth, which was sector is also being saturated. It generates only
nearly 4% in the 70s, went to 1.4% between 1990 and extremely unproductive jobs and of low pay, that is,
1994. Cornia et al. (1992) argue that the traditional survival jobs.
adjustment policies, applied on a large scale in Africa As regards to real wages, the curve is downward
during the 80s, did not contribute to the achievement of sloping. Wages in the manufacturing area fell in the 80s
long-term development, which the persistent macro- in 12 countries (where data was available) to 15 (ILO,
economic imbalances hampered on and for which there 1995a). For example, the minimum wage has fallen from
was given a too excessive emphasis on demand mana- 72% in Zaire between 1984 and 1988, 30% in Niger
gement rather than supply management. The issue of between 1980 and 1987 to at least 25% in Nigeria
poverty alleviation is not very encouraging either (World between 1986 and 1990 (Jesperson, 1992). The
Bank, 1990). decrease in real wages has not favored the creation of
World Bank (2002) report shows that since 1980s a jobs over the 80s. Instead, the growth rate of formal jobs
number of developing countries, encompassing about 3 grew by 2.8% between 1975 and 1980 to 1% in the 90s
billion people and including China, Hungary, Mexico (the (ILO-JASPA, 1989). The SAPs, which were discussed
new globalizers), shifted their exports from primary earlier, resulted in a decrease in employment in the
commodities to manufactured goods and services. Public Service during the 80s. Employment in the private
However, countries covering about 2 billion people- sector has also decreased due to a downturn in the
particularly in sub-Saharan Africa, the Middle East, and manufacturing sector, affected by the liberalization of
some countries of the former Soviet Union have been imports. Wage employment in the manufacturing sector
unable to integrate into the world economy. According to declined at an estimated rate of 0.5% per year in the 80s
Milanovic (2003), some of these economies have con- (ILO, 1995a).
tracted, leading to a further widening of the income gap During the 2000s, growth accelerated in Africa, but
between globalizers and non-globalizers. problems still remained. In World Development Indicators
Cases of extreme poverty in Africa are more found in (WDI, 2006), the data presented showed a remarkable
rural areas than in urban, even the cost of living is recovery in Sub-Saharan Africa since 2000. Twenty of the
significantly higher in urban than rural. Malnutrition, lack forty-eight countries of the region recorded a growth rate
of education, reduced life expectancy, poor housing and above 5% in 2004. The recent surge in oil exports and
disease are problems that are also felt more in rural than soaring prices for this product have pushed the growth
city. Despite their obvious desires to make a proper rate of oil producing countries like Angola, Nigeria, Sudan
distribution of wealth of the nation, many African govern- and Chad. In addition, fifteen non-oil producers have a
ments were not able to reduce income inequalities. In the mediam growth rate of 5.3% since 1995, which bodies
mid-70s these inequalities, which were very important, well for their potential long-term growth. The WDI confirm
could not be obtained appropriate solutions to be the findings of the Global Monitoring Report 2006 that the
eliminated, but they have changed aspect. Stabilization of reduction of poverty is linked with the pursuit of sound
policies in the 80s, which aimed to reduce the income policies, well-targeted aid, better governance and good
gap between rural and urban, were unsuccessful: the gap investment climate. Despite the recent recovery in sub-
in incomes in both urban and rural areas, have widened Saharan Africa, the poverty rate in the region is likely to
(Cornia et al., 1992). The current trends in income remain, as in 2002, the highest in the world that year,
distribution in Africa are hardly encouraging according to more than 300 million Africans, or 44% of the continent‟s
statistics. With the income of the fifth of the best paid population, had less than one dollar a day to survive,
population and the fifth lowest-paid in some African against 139 million people in 1981. The situation in Africa
countries where data are available. In Kenya, Tunisia and is very different from what can be observed in East Asia
Uganda, for the highest paid segments incomes rose where the number of extremely poor fell from 580 million
between 70s and 80s, while the situation remained stable to no more than 12% of the population (World Bank,
or the situation improved slightly for the portion of the 2006). According to current projections, the rate of
population less well remunerated (World Bank, 1996d). In poverty in Africa will always be above 38% in 2015-a
the 1980s, many African countries experienced a decline level much higher than the 22.3% target under the
or stabilization in the rate of employment growth (ILO- Millennium Development Goals. African countries which
JASPA, 1995). Amongst the causes of the problem of have been plagued by conflict and political instability,
shortage of jobs in African countries, one major key is the such as Côte d'Ivoire and Eritrea, or those who have not
existence of an abundance of labor, but unemployed, benefited from the boom in commodities, such as Niger
except for the modern sector. The loss of jobs in this and Central African Republic, have registered growth
rates below 2%. Under the combined effect of slow foreign investors, and to position favorably most African
growth, particularly in those countries, and rates of countries in globalization. Similarly, despite some pro-
regional population growth of 2.5%, the average increase gress, the integration process and regional convergence
in income per capita does not exceed 1.6% since 2000 remains insufficient.
(World Bank, 2006). That, after a period of 20 years The World Bank has done a number of studies on the
during which the situation has deteriorated, is never- relationship between globalization and poverty, income
theless a positive result. The income per capita in Africa disparities and income growth. Its report Globalization,
has increased at the same pace, even faster than in high Growth and Poverty: Building an Inclusive World
income economies during the last four years and faster Economy shows that 24 developing countries (three
than in Latin America for six of the last ten years. billion people) over the past two decades achieved higher
The disparities starting to emerge between the growth in incomes, longer life expectancy and better
economic performances of various African countries are schooling. They enjoyed 5% growth in per capita income,
striking. As in other regions, some countries perform well, compared to 2% in less open developed countries, and a
while others lag behind as pointed out by John Page, decline in poverty. Most showed significant increases in
Chief Economist of the World Bank Sub-Saharan Africa their trade to GDP ratio. Other countries, mainly in sub-
Region. We therefore hope that the Millennium Develop- Saharan Africa, the Middle East and former Soviet Union
ment Goals can be achieved by more than a dozen (2 billion persons), have neither increased their
African countries for many other countries, it remains integration with the world economy nor increased their
highly unlikely. Economic growth does not create trade to GDP ratio. Poverty reduction was uneven; the
necessary employment. The biennial study showed that poverty rate was halved in East Asia and a modest 4%
for every percentage point of additional GDP growth, reduction was achieved in South Asia, but rates were
overall employment grew by only 0.30% between 1999 essentially flat in Latin America, sub-Saharan and North
and 2003, a decrease of 0.38% compared to the period Africa, and the Middle East.
1995 to 1999. While more jobs are actually created in In summary, globalization is good for growth. On
economies dominated by agriculture, as in sub-Saharan average, countries that globalized more experienced
Africa, many jobs are in the informal economy with low higher growth rates. This is especially true for actual
productivity rates and not providing enough revenues for economic integration and African countries, the absence
workers to pull themselves, from their families, from of restrictions on trade and capital. There is although
poverty. For example the number of workers living on less evidence that cross border information flows promotes
than a dollar a day increased to 28 million in sub-Saharan growth. The accusation that poverty prevails because of
Africa between 1994 and 2004 (ILO/05/48). Wage globalization is therefore not valid. To the contrary, those
inequalities increased. The 4th edition of Key Indicators countries with the lowest growth rates are those who did
of Labor Market (KILM) shows that between 1990 and not globalize. Countries like Rwanda or Zimbabwe, for
2000, wages have generally risen faster in highly skilled example, insulated themselves from the world economy.
occupations than those in unskilled positions. In 2009, the They have poor institutions which repress growth and
recession in the global economy cuts one by one the promote poverty. Globalization has been associated with
engines of growth in Africa. Sub-Saharan Africa still rising world income. Many countries and people have
escapes recession (Stéphane Alby, Jean-Loïc Guièze). benefited from this, but some countries and people have
Unlike other developing regions, including Eastern been left out. Amongst the latter are many least
Europe and Latin America, Saharan Africa as a whole developed countries, especially African countries and a
continued to post strong economic performance in 2008 relatively large share of the population of the least
and would escape the recession in 2009. However after developed countries. Many African countries have been
eight years of sustained economic growth (6.5% per year marginalized in the world economy although they have
on average between 2002 and 2007, the highest rate for undertaken far-reaching economic reforms. Poverty
over thirty years, and 5.5% in 2009, leading to a decline reduction may be achieved through either the creation of
in income per capita the first time in ten years. Since productive employment opportunities for the poor or
2001, the average growth rate of region remained above through different types of transfer payments in cash (for
5%. This is an apparent improvement that masks the example, payment of welfare) or in kind (for example,
problems of economic diversification. Note that structural provision of complimentary social services) to the poor.
reforms (privatization, transparency of public funds, While these two approaches to poverty reduction might
consolidation of the banking system, sustainable mana- be considered contradictory, they are in fact
gement of natural resources, etc) during the 2000s are an complementary.
instrument available to authorities to strengthen the
growth potential of national economies. Despite progress
in some sectors and some countries of Africa, these GLOBAL VISION AND RECOMMENDATIONS
reforms have generally leveled off in 2006. And this
happened despite the general consensus on the need to We have some reservations about the incentive systems,
improve the business climate to encourage local and including zones, since drawing a conclusion of their
limited contribution to development. Their production producers to regional markets. They must neither be
being mainly for export, investments are made according limited to protest nor set oneself up as protectionist
to external demands and not from needs or objectives of fortresses against globalization, but to develop programs
local economic development, which we cannot, in a and strategies to further strengthen regional cohesion.
sustainable manner, hope to build ephemeral consump- Using the example of (Gordon, 1995) demon-strates how
tion needs. We must also admit that these tools, except regions can increase their skills margin and their potential
for the creation of jobs, have contributed nothing to the for creation of regional wealth through the linkages
development of local economies. Often however social between local networks of innovation and the increasing
systems are completely absent, even while the egali- research global alliances with characteristic development
tarian or humanitarian concerns are not obstacles to of multinational corporations.
boosting the economic sector. But above all, these tools
do not generate surplus value for directly benefiting the
states to develop needed structures and facilities, thus Financial institutions in Africa
allowing them to economically advance. This highlights
how much the perverse effect of these systems is Nowadays the cost of capital is high and access to credit
disadvantageous. Through this some recommendations is often problematic. The areas of micro credit and micro
can be formulated to African Governments. finance are often completely neglected by the traditional
banking sector in Africa. Those means are to be provided
to influence International Financial Institutions, forcing
Implementation of real institutional and political them to engage their thinking on the subject, and to take
reforms concrete decisions which will promote real development
in this sector which will improve access to credit.
Often the untimely interventions of International Financial Generally Africa has a network of interactive banking, but
Institutions have led these states in directions of more focused on the role of managing deposits than on
economic policy over which they have no control, while encouraging private initiative and thus investment.
globalization also alters the social and political structures Therefore the sector that mainly suffers from this trend is
of societies. Reforming these systems is hence pressing. that of small and medium enterprises. We must improve
To reorient their activities based on the transformation of in this area, so that the benefit from these positive
raw materials or local production, would be a first lever to experiences lead Africa to micro-finance development to
begin to reverse the trend. This will facilitate integration of build a system of savings for investment by encouraging
the local economy and enable them to globally intervene private initiatives to create profit- generating activities.
more effectively in the setting of prices. The troubles also However, studies have shown that a lot of the present
take from a difficult environment: political stability, often day foreign capital inflow to a country is short term and
precarious and corollary from the slow progress of speculative and not long term. Recent studies and
democracy; deficiencies in governance particularly in the analysis have shown that that Africa‟s financial instability
legal, tax and state law fields; very low level of was particularly severe as from the nineties. However, the
infrastructure; weak consideration in the forecasting field instability was more pronounced in the case of portfolio
and few specialized business institutions. The imple- investments than in foreign direct investments because of
mentation of real institutional and political reforms, and the longer-term relationship established by the latter
especially of true legal means to guarantee their (Mougani, 2012). Hence, such speculative “hot money”
application, is essential to build competitive productive may be harmful to a country since it flows in and out
capacities, only capable of giving Africa its deserving rapidly and has the potential of destabilizing the
place within the global economy. Africa holds huge economy. For example, Malaysia attracted a great deal of
reserves of raw materials: it is potentially rich and yet it is foreign investment and, like Chile, had regulations, which
anomalous that this continent is the least developed. The curbed rapid withdrawal, but this is not an easy process
absence or weak of infrastructure in all areas including (Mapuva, 2010). This will doubly be hard for developing
the area of communication makes it difficult to establish countries in Africa to regulate.
links with the outside world. Proficiency in information
technology and communications is now a key factor in
promoting development. African countries must make Partners in development
some efforts in that way. Small and medium businesses
need information because they do not know the global Helping Africa today is to put it in front of its
markets. It is necessary to create or increase the required responsibilities, allowing it to go beyond the ethnic frame
level of real structures of information for innovation, which so that each country‟s population becomes inclusive to
would promote greater entrepreneurship. that of the nation. This may seem a priori trivial, but it is
The regional organizations should be treated as tools precisely because the developed countries have long
for facilitating the integration of African countries into the been established into genuine nations, later evolving into
global economy by improving the access of African nation-states, allowing for the creation and consolidation
of structure, from which they could create a dynamic much less against their goodwill. The NOGs must from
development momentum around large designs or great now have the courage to engage alongside Africa on the
goals. The implications are major to determine the difficult path of making its people more aware, and
priorities and raise the general enthusiasm for the therefore ensure their training. Otherwise Africa runs the
implementation of projects. Helping Africa today is to risk of suffering future serious disappointments. African
enable Africa to imagine and build its development, people should know and must firstly have the idea that
based on the regional and sub-regional facts beyond African development will come by them through courage,
even the completely obsolete borders that are the legacy determination and abnegation to work hard. They have to
of decolonization. It would therefore create conditions to build Africa by themselves.
enable each of its residents to support his or her own
development, sharing a very pertinent point that “one
does not develop by others but one has to develop Conclusions
himself” as pointed out by Professor Joseph Ki- Zerbo.
Helping Africa is being able to create conditions for the Has globalization been uneven process? The answer is
youth to obtain prospects ensuring his development on not. This is because not all places enjoy equally the
the very land he was born, and not only through the benefits that come along with globalization. Some of the
mirage of emigration which is more often than not only a burdens that have recently been are increased cross-
decoy. This contributes to further weakening of its border crime, terrorist threat, environmental degradation,
potential since very often the candidates are most climatic change, spread of diseases and erosion of
enterprising and dynamic young people but who cannot cultural identity. These burdens are related with globali-
find on their motherland the way forward because of zation process. Africa is beautiful but deserves better
barriers and obstacles that have been mentioned before. than only the beauty of its nature. It is yet a land of
paradox: in all likelihood it is the cradle of humanity but
halted on the road to its evolution. If the people of Africa
NGOS AND AFRICAN PEOPLE feel, rightly, that rich countries have a duty towards them,
they have to share the obligation to raise the quality of
Let us look at the important role and position that their services for the implementation of its development.
nongovernmental organizations (NGOs) play with their In this case, we have also tried to identify the effects of
people with many talents and good will. We have globalization on the marginalization of Africa. It was
explained the massive failure of states, including their shown that Africa is not so integrated into the global
primary missions. There is no single unaffected area of economy with the latter not following its conditions, and
operation of structures, particularly in education and how this vast African continent may, one way or another,
health. In drawing this conclusion, we believe that the be able to participate in this globalization process. The
developments of Africa will undergo their first phase from marginalization of Africa in global economy manifests
their massive intervention so long the sites are when one considers the steady decline in its global
numerous. States cannot do everything. This perspective market share, in investment and information technology.
offers another advantage that is probably the best asset This can be explained by historical factors, as well as the
in development that of conscious participation of policies adopted and the quality of socioeconomic
stakeholders in the evaluation of their situations and to infrastructure. In many African countries, economic
develop solutions to reduce the harm gnawing of Africa reforms adopted in the 80s and 90s show some variation
(poverty, source of all evils). In so doing, the resources in the relationships and interactions in the globalization
allocated are likely to be well spent, because among the process. The Structural Adjustment Programs have not
immense needs, choices must be prioritized, and their all produced the same results and their overall effects are
spending streamlined. We meet today the term “sustain- not known. African countries should adopt the SAPs in
able development” in any speech or any publication accordance with the economic climate, social, cultural
dealing with the situation of poor countries. But in and political for their economic development without
contrast, virtually none of the action that is taken worries constraints. Indicators show that these reforms can
of the duration or creation of the conditions such that promote the integration of Africa into the global economy.
once the project ends, the people can themselves Africa has many advantages such as human factors:
continue them. In summary they are now able to take materials not to be argued to within the margins of
charge. NGOs must heavily contribute to the personal globalization. Policies and strategies related to macro-
development of African citizens, making men and women economic stability, investment and trade regimes as well
become aware that their development is in their hands as transport infrastructure and communications can
alone. Nobody can do that for them. This is the only way especially be of African help for countries to integrate into
to success and It is in such a way that Africa has the the global economy. All the SAPs adopted by African
opportunity to ensure itself of its development. We cannot countries do not have the same results and one does not
build the happiness of mankind against their freewill, know yet their overall effects. However indicators showed
that reforms can facilitate the integration of Africa in as other international organizations which have adopted
global economy. African governments should also the States, must direct its efforts to engage the thinking of
formulate national policies in the field of Information African economies in the process of globalization.
Technology and Communication (ITCs) that will enable Investments are rare in Africa, but those who are brave
their countries to enjoy economic and social benefits of enough to come are not disappointed. Under the risk of
information technology. Africa is unlikely to improve its continuing to see delays in its development, Africa must
competitiveness on the global scale without the wide- reverse this trend. One way to achieve this is to en-
spread use of economic and social advantages of courage exports and local investment, increase revenues
information technology. We must encourage the private and strengthen national capacities. But the current
sector to use information technology in production incentive schemes such as export processing zones have
systems. In this sense, import duties on computers are also shown their limits. The system of incentives for
systematically eliminated or reduced with the aim of Foreign Direct Investment should be reconsidered. The
making them more accessible or affordable. Computers concessions granted to companies on general taxation
are still quite expensive in almost all African countries (customs duties and taxation of benefits) are not the only
because of import duties and costs related to value worthy arguments to make. It should, for instance, allow
added and especially to the sales tax. Further research the use of Foreign Direct Investment for enhancing
should seek the position which Africa must take into the productivity and improving competitiveness. To validly
global economy from its development objectives in the benefit of globalization, countries of Africa must also seek
medium and long term. We will try to create opportunities to strengthen competitiveness and export capacity of their
and occasions for African countries to facilitate the enterprises. The economic fabrics of different countries
efficient use of information technology and thus generate are mainly formed by a network of small and medium
greater interdependence and greater integration into the enterprises. This sector must be strengthened mainly to
global economy. As written by Gore (1992) thanks to provide economies of production capacity worthy of the
modern technology, history as known now is in an name, and make changes that will enable African
accelerated mode. For his part Dore (1996) considers countries to integrate into globalization. Often the invest-
that technological changes have contributed more for ments are made on unproductive sectors, and despite the
globalization to promote competition and transform the implementation of liberal policies, states must take their
character of our societies. responsibilities in defining priorities either from functional
Certainly Africa has as any region of the whole world needs, or in regards to opportunities offered. This can
potentials, despite lagging in development which - a priori lead in some cases to specialization. The bedrock of
- tends to provide proof to the contrary. Firstly we will globalization is the integration and their interaction of
place the human factor without which nothing is possible. national economies. African countries must seize the
Africa is a reservoir in approximation of 900 million chance given to developing countries, many relocations
individuals in which youth is the majority, and already is carried on by the North. African countries must strive to
benefiting from its population. The wealth of any nation is take market shares that they can hold. Because later on,
first and foremost its human potential. In this sense Africa even China, which is currently enjoying an economic
is well endowed, but it remains to use a great deal of boom unprecedented in the history of modern Indus-
efforts to bring the youth of these countries to the trialization, will be forced in its turn to make relocations
required level by the economic stakes of the new era. after reaching a certain level of development. Africa today
This human potential should be well educated, well offers this possibility, especially in the hinterland adjacent
trained, and should know more about the new to major ports of the continent that often attract the more
technologies and above all be well equipped for the qualified workforce and have the infrastructure to the
economic integration of Africa into the global economy. As industrial plants. African countries should invest in niche
at now, only a few elites enjoy a high level of training products that meet their needs or those of their region.
often acquired in other countries than on the mainland, Offering services in the field communication is still far
but it is insufficient in light of the immense needs of from being commensurate with the needs, notably with
Africa. Along with its human wealth, Africa is also rich in a regards to the performance in networking equipment.
large quantity of raw commodities (gold, diamonds, Being informed and to communicate is the capacity to be
phosphate, limestone, clinker etc). Africa must strive, in open to the world, sharing with others. We stressed that
this area, local processing of products to cease exports of the African population were overwhelmingly rural. And yet
raw materials. This has the double benefit of improving with a minimal investment, it is possible to quickly
the employment and growth situation, and can weigh develop a large area of agricultural production and food
more on the earnings of those commodities. It is a industry, on one hand with food-producing crops which
challenge faced by African economies which have alone can generate the requisite amount African people
enormous natural resources at their disposal. In this need, but also with other export products that can
particular domain, the New Partnership for Africa's generate profitable surplus production. Therefore Africa
Development (NEPAD), to establish its credibility, as well can offer its own contribution to the global economy.
Globalization is a phenomenon of integration, always and tolerance, accommodation and social justice become
inevitably time will come when a major readjustment will values that shape and guide relationships in society.
be made in the distribution of the fruits of global growth African countries must all join hands and mobilize the
from a global perspective, even if we do not know when. necessary good-will and resources to humanize globali-
It is in this movement that we must now register the zation, give it a human face, and let it reflect and respect
actions of African peoples to assert a fair allocation of our cultures and values. African Leaders must continue,
their share. Africa should benefit from globalization. As in their personal and official capacities, to work with all
everyone knows, we are entering WTO; our goal is to use organizations to promote and interdependent and
globalization for us to enlarge ourselves (Zeng, 2007). peaceful world. African countries must live in and interde-
pendent world. A world that ought to be characterized by
shared values, mutual respect, concern for the weak and
Recommendations less endowed, peace, harmony, love and collective
pursuit of the common good. In reality, these values
The emergence of Africa economic development forums ought not to be affected negatively by race, gender,
in the year 2009 marks an historic opportunity for African ethnicity, religion, location, even politics. Today‟s world
leaders both in the public and private sectors to join hand has been badly polluted by interests and values that seek
in the process of shaping the African agenda to meet the to undermine the essence of our place and roles on
challenges of this period of globalization and the earth. Hence all the suspicions, poverty, wars, disputes,
emerging information economy. and divisions.
To be integrated in this phenomenon of globalization, It is not too late for African leaders to reorder their
African countries can try to move at the same time. priorities, rediscover their values, refocus their priorities,
However the problem really is this, even with the African and reorganize their communities in this era of globali-
Union we know that trying to move 54 countries forward zation. It is not too late for African leaders to work
at the same time will not be easy. African countries have together to transcend the limitations of class, gender,
to be compacted enough in order to talk about infras- race, ethnicity or other primordial sentiments. Even in
tructural development, a gas pipeline connection, road Africa and all over the world several organizations and
network, linking energy through a great system, building communities exist that shows the possibility of trans-
block will be the regional economic communities, thinking cending such limitations, real, or invented.
about of a common currency. In other words African African leaders still face a lot of challenges like
countries have to put their efforts together in order to desertification, fragile governments, conflicts, economic
benefit from this globalization. They have to deal with the dislocations, institutional fragility, severe environmental
issue of movement of goods and people, talking of stress, access to basic human needs, HIV/AIDS, gender
common passport, talking of community citizenship. inequality, building and nurturing new leaderships, re-
African countries can talk about Central Bank and evaluating their educational systems for relevance in a
Investment Bank. But these are easy and once we have changing global division of labour and power, and
these at regional community levels, five of them (the case responding effectively to globalization. African leaders
of ECOWAS), it will be easier to bring five into one, rather have to put in their utmost best through internal reform
than bringing 54 into one at one go. In Africa more than programs, war on corruption, regional economic commu-
ever before regionalism has found new relevance and nities, a reformed, refocused and repositioned African
has become the core of our recommitment to growth, Union, and the New Partnerships for Africa‟s Develop-
partnership and development. The goal of African ment (NEPAD). At this point it must be the African
Leaders, must to reflect, discuss and strategize on how, leaders hope that their development partners will
in an interdependent world, to improve on a set of issues continue to work with them to engage these challenges.
(poverty, religion and reconciliation, combating climate All over Africa, national governments must continue to
change and strengthening governance institutions) in reorganize the local government as a fundamental level
order not to be marginalized in term of global economy. of government at which the momentum to sustain
Good governance remains, in some respect, the most national development and growth can be created. In
critical ingredient for eliminating poverty, instability, essence, local governments in Africa must be expected
violence, and development. With governance you can be to serve as the mechanism for harnessing local re-
assured of accountability, respect for the rule of law and sources, develop local initiatives in order to meet
human rights, transparency, sensitivity to the flight of the essential local demands and needs, and provide the
disadvantaged, and the deepening and consolidation of playground through which the teeming populace could
democracy; political and social reconciliation within and participate in the affairs of the country or the continent.
between the communities, constituencies and nations As governments seek to deepen democracy, increase
become possible. New voices get onto the political their capacity to deliver services and care for citizens,
landscape even as new leaders, ideas, and contestations effective and efficient local governance structures must to
emerge to strengthen democratic conduct. Inclusion be established as meaningful participatory mechanisms
and accountability instruments at the level closest to the Dev. 39(1):4-7.

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Marginalization of Africa: in Globalization, Growth and Marginalization
Edited by Bhalla, 1998, p.188
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The impact of globalization on African countries economic development

Article in AFRICAN JOURNAL OF BUSINESS MANAGEMENT · November 2012

Josphert Ngui Kimatu

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Full Length Research Paper

The impact of globalization on African countries

Key words: African countries, globalization, economic development, information technology.

Figure 1. An illustration of the drives which characterize globalization

Table 1. Global comparisons of trade openness and growth.

Growth of GDP per capita (average annual)³

% World FDI inflows

Telecommunications infrastructure (%)

and accountability instruments at the level closest to the Dev. 39(1):4-7.

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