Africa Trade and Investment

The value of Africa’s total exports in 1990 was almost 2% of the world’s total exports. Almost all exports consist of unprocessed raw materials (especially crude oil) and food. Although exports are minimal compared to world trade, they nevertheless account for 22% of the continent’s total production (GDP). Therefore, Africa is heavily dependent on world market prices. The relationship between the prices of Africa’s exports and imports, the trade-off, developed negatively from the early 1980s, falling from index 168 in 1981 to index 96 in 1989. This meant that Africa was getting harder and harder to finance its imports..

Foreign trade is concentrated on the EU countries, which in 1990 reduced about half of exports; Here, Nigeria’s oil exports accounted for a significant share. According to CountryAAH, 60% of imports come from the EU. By contrast, trade between African countries is severely limited; in 1990, less than 7% of total African countries exported to other African countries.

Map of Africa 2

The continent’s limited share of total world trade is offset by an even more pronounced lack of foreign private investment. With few exceptions, no African countries have received foreign investment to any significant degree in the 1980s. Nigeria with the large oil sector as well as South Africa are the only significant exceptions to sub-Saharan Africa.

Africa’s marginalization in relation to the world economy is both a consequence and a cause of the continent’s economic situation deteriorating. This will include expressed in a sharp increase in total debt to the outside world. In sub-Saharan countries, debt rose to $ 146 billion. dollars in 1990, a tripling during the 1980s. Paying interest and repayments is a huge burden on the already troubled economies. In some years, countries are paying 30% or more of their export earnings to pay back and repay the debt.

The North African countries were also heavily indebted throughout the 1980s; however, Egypt had its debt down by more than 50% from 1990 to 1991 – a recognition of Egyptian support for the international fight against Iraq’s occupation of Kuwait in 1990.

In close cooperation with the International Monetary Fund (IMF), during the 1980s, the World Bank (IBRD) prepared economic reform programs for a large number of African countries. Structural reforms aimed at a radical liberalization of the economy; By eliminating state control measures and government control, the Monetary Fund and the World Bank hoped that economies could get started. In addition to general liberalization, the two financial institutions demanded that governments try to promote exports. The goal was a growth in foreign exchange earnings to facilitate the repayment of foreign debt. In most countries, the positive results of the economic horse race did not appear or were waiting for. In many places the reforms led to growing social and political turmoil.

It is characteristic that the implementation of economic structural reforms was increasingly conditional on African countries being able to obtain development assistance from the rich world. The EC (later the EU) and including Denmark began to endorse the reform requirements set by the World Bank and the Monetary Fund. This was particularly important as the total aid provided by the Community countries during the 1980s represented more than half of the total assistance to sub-Saharan Africa. In North Africa, too, the EU is an important aid provider.

EU aid is partly channeled from one country to another (bilateral assistance). major French development programs in the former French colonies, partly through the EU’s multilateral agreement, the Lomé Convention, which includes 45 African countries. These are substantial sums; In 1990/91, development aid accounted for 11% of total GDP in sub-Saharan countries, and at least half came from Western European countries.