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What is the Financial Status of Africa and Why?


Background


Africa is the world’s second-largest continent covering about over 30 million square kilometres. It has approximately 30% of the earth’s remaining mineral resources. Despite a wide range of natural resources, the continent is the least wealthy per capita, in part due to legacies of European colonization in Africa and the Cold War. Despite this low concentration of wealth, recent economic expansion and the large and young population make Africa an important economic market in the broader global context.


Statement of Problem


Although Africa has abundant natural resources, it remains the world's poorest and least-developed continent, the result of a variety of causes that may include corrupt governments that have often committed serious human rights violations, failed central planning, high levels of illiteracy, lack of access to foreign capital, and frequent tribal and military conflict (ranging from guerrilla warfare to genocide). Its total nominal GDP remains behind that of the United States, China, Japan, Germany, the United Kingdom, India and France. According to the United Nations' Human Development Report in 2003, the bottom 24 ranked nations (151st to 175th) were all African. Poverty, illiteracy, malnutrition and inadequate water supply and sanitation, as well as poor health, affect a large proportion of the people who reside in the African continent. In August 2008, the World Bank announced revised global poverty estimates based on a new international poverty line of $1.25 per day (versus the previous measure of $1.00). 81% of the Sub-Saharan Africa population was living on less than $2.50 (PPP) per day in 2005, compared with 86% for India. Sub-Saharan Africa is the least successful region of the world in reducing poverty ($1.25 per day); some 50% of the population living in poverty in 1981 (200 million people), a figure that rose to 58% in 1996 before dropping to 50% in 2005 (380 million people). The average poor person in sub-Saharan Africa is estimated to live on only 70 cents per day, and was poorer in 2003 than in 1973, indicating increasing poverty in some areas. Some of it is attributed to unsuccessful economic liberalization programmes spearheaded by foreign companies and governments, but other studies have cited bad domestic government policies more than external factors. The economy of Africa consists of the trade, industry, agriculture, and human resources of the continent.


Current Africa's Economic Situation

While the rest of the world's economy grew at an annual rate of close to 2 per cent from 1960 to 2002, growth performance in Africa has been dismal. Over the past 40 years, the investment rate in Africa has fallen. Since 1975 the investment rate has declined to 8.5