In the post-independence period, sub-Saharan Africa’s overall economic performance was poor and growth was slow. GDP per capita (current US$) increased only by around 404.57US$ from 116.85US$ to 551.05US$ from 1960 up until 2000 (World Bank). However, from 2000 onwards there was a substantial increase in the GDP per capita. It reached a peak of around 1,817.286 US$ in 2014 (World Bank). Although this may be an impressive improvement, its GDP growth has underperformed. For example, ten out of 48 African countries experienced sustained economic growth in excess of 5 percent for the past three years or longer, that performance still falls short of the 7% growth needed to achieve substantial poverty reduction (Foster). In addition, the extreme inequality within the sub-Saharan countries and between the countries is still a large problem. South Africa and Nigeria together generate 75% of the whole regions GDP, leaving the rest to share just 25% (Olamosu & Wynne). This increased rate of growth has not matched the exponential growth of the population, and still many live below the poverty line. Reasons for poor economic growth after independence centre on the concepts of institutions, culture and geography. Slavery and colonialism shaped the evolution of institutions in these countries and has affected growth and economic development in the long run.
Before colonialism started, another historical event that may have influenced development occurred, which was slave trading in Africa. Unlike colonial rule which only lasted for approximately 75 years, slavery lasted for a period of nearly 500 years from 1400 to 1900 and thus, is a large part of Africa’s history and a main determinant of today’s economic performance (Nunn, 2008). The largest trade was the trans-Atlantic slave trade where slaves were shipped from sub-Saharan Africa to the European colonies in the New World (Nunn). Nunn (2008) attempts to investigate the relationship between number of exported slaves between 1400 and 1900 and subsequent economic performance and finds a negative relationship between these two variables. However, an alternative explanation could be that countries that were initially the most economically underdeveloped were selected into the slave trades. Nunn (2008) refutes this and finds that those countries that were initially more economically and socially developed, had the most slaves taken from them and that now these countries are the poorest today. Through further investigation he finds that taking slaves through internal warfare, raiding, and kidnapping resulted in subsequent state collapse and ethnic fragmentation, which has had a large impact on today’s poor economic growth and development. Ethnic fragmentation is associated, particularly in sub-Saharan Africa, with low schooling, political instability, underdeveloped financial systems, distorted FOREX markets, high government deficits, and insufficient structure (Easterly & Levine). All of which have secondary effects on economic development. For example, with low quality and quantity of education, people can’t acquire the skills needed to enter employment and live healthy, productive lives. The economic value of their skill set is markedly lower than other countries with high levels of education. This reduces their ability to improve productivity and contribute to economic growth. Therefore, many sub-Saharan countries are not working at their most efficient levels. Below is a production possibility frontier (PPF) which shows the combination of capital and consumer goods that can be produced within the economy. If the economy is producing inside the PPF, at point X, it’s not working at its full productive capacity (point Y) and so is not using its resources efficiently. Many African countries are currently at point X, with high levels of poverty and unemployment. Fragmentation as a result of slavery has therefore caused under-performance of the country’s economic output and this can still be seen today.
May argue, however, that infrastructure has had the largest effect on today’s African economy. The transportation sector, which was heavily invested in under colonialism, has contributed significantly to growth in sub-Saharan Africa. Jedwab and Moradi (2016) use the construction and later demise of railroads in Ghana to demonstrate the effects of transportation investments in poor countries. They found that by 1931, areas close to railroads had more schools, hospitals, and roads. Now, the railroad cities may still retain an advantage in the production of non-food goods and services. However, this has not been enough on its own. The infrastructure sector as a whole, still has a large deficit and has helped contribute to this underperformance of growth. The lack of infrastructure is most severe in long-neglected rural areas and this is where most of the population still live (UN). Infrastructure deficit, particularly in power, is a major constraint on doing business and is found to depress firm productivity by around 40% (Escribano and others, 2008). By suppressing this productivity, it is difficult for firms to survive in competitive markets and can lead to lower growth. Due to lack of investment, especially since independence, Africa’s power infrastructure delivers only a fraction of the service found elsewhere in the developing world and foreign investment is having to help these countries. Poor infrastructure not only affects growth through preventing trade with other countries, it also creates isolated communities within the sub-Saharan African countries themselves. Lack of power, transport to rural areas, etc. means that it is difficult for the communities to come together as one driving force. Communication and the trade of goods within the countries is difficult. Therefore, the lack of infrastructure has resulted in lower economic growth by creating isolated communities and preventing productivity growth within firms.
Another cause of poor economic growth may stem from a theory known as the resource curse. The resource curse refers to the paradox that countries with an abundance of non-renewable natural resources tend to have less economic growth as a country focuses all its energies on a single industry (Investopedia). Natural resource abundance causes lower growth due to three main reasons. It firstly generates large rents, leading to aggressive rent-seeking, this has effects on the political economy and fosters corruption, which has stunted institutional development. Secondly, it exposes countries to volatility, particularly in commodity prices, which could have an adverse impact on growth. Lastly, it makes countries susceptible to the Dutch Disease. This occurs when a sharp inflow of foreign currency leads to appreciation, making the country’s products less price competitive on the export market (Lexicon). This combined with the fact that manufacturing/service sectors are usually superior due to learning-by-doing and other positive externalities, leads to the conclusion that natural resource ownership exerts a drag on long-run growth (Sala-i-Martin & Subramanian, 2003). However, the effects of Dutch Disease are difficult to prove due to lack of evidence and many believe that this isn’t the cause for current poor economic growth in Africa. For example, Nigeria has a large oil supply, Sala-i-Martin and Subramanian suggest it was the resultant waste and corruption resulting from overreliance on oil revenues that cased poor economic growth and not the Dutch Disease. Elements of both sides of this argument can be demonstrated to exist in many of the resource rich sub-Saharan countries today.
In conclusion, the underlying reasons for the current economic state of sub-Saharan countries, in my view, lies primarily in the legacy of the slave trade and poor infrastructure. Certainly, the effects of the slave trade are influential due to the length of its existence and its widespread effects, however, I believe infrastructure today has a much larger impact on current economic under-performance. It is still in large deficit and has major potential to improve. Improving the infrastructure will create a multiplier effect and lead to an improved economic outcome for sub-Saharan Africa.