Global Economy African
To what extent do geographical location and the natural environment constrain the integration of African countries into the global economy?
The term ‘globalisation' and its impact are debated amongst academics (see for example: Edoho 1997, Fardon, 1999, Smith 2003). Economists define globalisation as the flow of capital, commodities and information forming a global economy (Njoh, 2006). Unequal progress is an inherent part of market capitalism and continues to be challenging for some Tropical African countries in amongst others, who experience comparative exclusion from the global economy. However, globalisation has showed to be advantageous to some countries in Tropical Africa. More widespread participation in the trading system has increased access to prosperous markets, enabling some integration (Yeung & Dicken, 2000).
Nevertheless, Sub-Saharan African importance has decreased over the last 30 years with regard to global trade, with exports falling to just 1.2% of world exports by 1990 (UNEP, 2006). Whilst it has been accepted that the global economy has distanced Africa from other continents, who are more engaged with trade and foreign-direct investment, argument exists to why this is the case. This essay will examine whether geographical location and natural environment constrains countries in Africa's integration into the global economy, concentrating on Sudan and Zimbabwe. I conclude that location and environment can hinder global integration to the global economy, but can also be an advantage. In addition, international relations and domestic policies are more significant in hindering integration into the global economy in the cases of Sudan and Zimbabwe.
It has been argued that geographical location can result in advantages for some countries over others. Hausmann (2001: 46) has said that countries that are far from the coastline are often poorer and show lower rates of economic growth than those located by the coast. Many African countries are landlocked and/or far from the coast Some economists have argued that geographical location is of utmost importance for economic development. Adam Smith (1976) states that physical geography can impact countries' integration into the global economy. Countries with access to the coasts and ports tend to outperform those who do not. His argument stems from the belief that productivity gains depend on specialisation, which relies on market size, which depends on the openness of markets and the costs of transport. Geographical location is vital in determining transport costs and the openness of markets. Research using geographic information systems (GIS) also emphasise the importance of location for integration. “Almost all high-income countries are in the mid and high-latitudes, while nearly all countries in the tropics are poor”. Coastal countries usually have higher incomes than those which are landlocked (Gallup, Sachs & Mellinger, 1999).
Landlocked countries face a number of problems related to dependence, relying on neighbouring states for sea access, transit infrastructure, peace and stability (Srinivasan 1986, Faye et al 2004). This has been responsible for integrating Zimbabwe more into the regional economy, but its links to South Africa has enabled some global economic life to continue, albeit decreasing. South Africa has access to the South Atlantic Ocean (figure 1) and because it is in the South, there is access to the Eastern, Western and Southern markets. Yet being landlocked alone need not constrain integration (Hausmann, 2001). Landlocked Botswana has ensured success in the global economy using air travel to export its diamonds, shunning reliance on neighbours for coastal access (Faye et al, 2004).
What is more constraining for Zimbabwe is the international condemnation is receives. Mugabe and his Zanu-PF party have been criticised for widespread human rights violations, including rights to shelter and food, freedom of movement and residence, freedom of assembly and speech, and protection of the law. There are assaults on the media, the political opposition, civil society activists, and human rights defenders. As a result, there is much boycotting and withdrawal of contacts with Zimbabwe on a political and economic level. The UK's Prime Minister Gordon Brown refused to attend the EU-Africa summit, having accused Mugabe of rigging elections. Several airlines have pulled out of Zimbabwe. Australia's Qantas, Germany's Lufthansa and Austrian Airlines were among the first and most recently British Airways suspended all direct flights to Harare, claiming it had become uneconomic. But in Zimbabwe the decision is being seen as part of London's efforts to isolate Mugabe's regime.
Sudan has access to the Red Sea but this leads only to the Indian Ocean and not to the Mediterranean Sea resulting in natural links to the East when shipping, such as China. Human rights organisations have documented a variety of abuses carried out by the Sudanese government recently. This has led to international criticism, the reduction in foreign-direct investment boycotting and internal disruption. Conflicts between the government and rebel groups, and the Darfur conflict involving Arab-tribes people, have resulted in rape, torture, killings, and over two-million displaced persons (2007). Investors will not place money in an unstable environment and are not willing to install the needed infrastructure and educate potential workers. What Sudan has gained, however, is Asian interest in its oil reserves (discussed later), as this commodity is expensive, valuable and politically significant.
Transport infrastructure is of vital importance for the transportation of goods to markets (Njoh, 2006) to ensure easy access. Lack of access therefore reduces the amount of foreign-direct investment. Infrastructure can counterbalance the weaknesses of unsuitable location (see for example Finger & Yeats 1976) using extensive and efficient transportation and communication systems for world market integration. Many countries in Africa, however, are lacking both in infrastructure and independent access to the coast. Amjadi, Reinke and Yeats (1996) research how sub-Saharan Africa's lacking and inefficient infrastructure affects its integration in the global economy by looking at the value, amount and success of its exports. This then relates to policies regarding tariffs and non-tariff barriers. Whilst infrastructural needs such as transport, telecommunications and electricity remains expensive and unreliable, the expenses and gamble of business in these areas are high [FAO corporate document repository].
Zimbabwe has adequate internal transportation and electrical power networks. Roads link the major urban and industrial centres and rail lines tie it into an extensive central African railroad network with all its neighbours. In non-drought years, it has adequate electrical power, mainly generated by the Kariba Dam on the Zambezi River. As of 2006, crumbling infrastructure and lack of spare parts for generators and coal mining means that Zimbabwe imports 40% of its power from its neighbours. On the other hand, Sudan's infrastructure is inadequate for effective integration. Its one single-track railroad, 1900km of road primarily in Khartoum and Port Sudan, and the River Nile provide its only inland transportation routes. Inadequate transportation constitutes a major obstacle to economic development.
Natural environment can impact the integration level of a country into the global economy, especially those dependent on primary products for exports. Sudan and Zimbabwe both have adequate and diverse amounts of natural resources. Most important to Sudan is oil, but also small reserves of iron ore, copper, chromium ore, silver, gold, hydropower. Zimbabwe has reasonable stocks of coal, gold, nickel, copper, iron ore, tin and platinum group metals.
Agriculture production remains Sudan's most important sector, employing 80% of the work force and contributing 39% of GDP, but most farms remain rain-fed and susceptible to drought. Instability from the civil war, adverse weather and weak world agricultural prices are partly responsible for Sudan's switch to oil, despite its agricultural primary resources. Of that what continues of its major agricultural products, cotton remains its main cash after failure to diversify. Problems of irrigation and transportation remain the greatest constraints to a more dynamic agricultural economy. Oil is now Sudan's main export and production is increasing. With rising oil revenues, Sudan's growth rate was nearly 7% in 2005. Estimates suggest that oil accounts for between 70% and 90% of Sudan's total exports. The primary importers of Sudanese oil are Japan, China, South Korea, Indonesia, and India (www.eia.doe.gov; www.ecosonline.org).Exports other than oil are largely stagnant. The small industrial sector remains insufficient, spending for the war is prioritised above other social investments, and Sudan's inadequate and declining infrastructure inhibits economic growth. In 1997, the US government imposed a trade embargo against Sudan (http://www.treas.gov) on the basis of the country's supposed involvement with international terrorism, de-stabilised neighbouring governments, and permitted human rights violations, creating a threat to the national security and foreign policy of the United States. A consequence of the embargo is that US corporations cannot invest in the Sudan oil industry, so companies in China, Malaysia and India are the major investors. Despite the American sanctions, the Sudanese economy is the one of the fastest growing in the world (New York Times Report, October 2006). Sudan has implemented macroeconomic reforms recommended by the IMF since 1997. Increased oil production revived light industry and expanded export processing zones helped sustain GDP growth. These gains, along with improvements to monetary policy, have stabilised the exchange rate.
Asia's high economic growth rate has contributed to fuelling the heightened demand for Africa's natural resources, especially oil. At the same time, Asia has increased its foreign direct investment into Africa, mainly in mineral and oil rich countries. Asia's emergence as an economic giant comes with opportunities for Africa. India seeks secure supplies by investing in oil in Sudan (Broadman, 2007). The main concept in technology for development is that ‘scarcity' does not apply to knowledge. However, countries must develop the needed human capital. Indeed, growth is constrained not by the lack of natural resources, but by the lack of skilled human capacity [2007 Africa development bank group].
Nevertheless, Saudi Arabia has a similar geographical location to Sudan, sharing the Red Sea, having a similar climate, land area and being rich in oil. Saudi Arabia ranks as the largest exporter of petroleum and plays a leading role in OPEC, in contrast to Sudan. This shows the role of political allegiances and economic wealth. Whilst there is some room for expansion, it must be remembered that Sudan's reserves nowhere near the size of Saudi Arabia's. Sudan's economy is booming on the back of increases in oil production, high oil prices, and large inflows of foreign direct investment. GDP growth registered more than 10% per year (2007) compared to Saudi Arabia 4.7%. Agriculture was once the backbone of the Zimbabwean economy before the large-scale eviction of white farmers and the government's land reform efforts. Reliable crop estimates are not available due to the government's attempts to hide the realities following the evictions. Zanu-PF banned maize imports stating record crops for the year of 2004. The University of Zimbabwe estimates that agricultural production decreased by 51% in 2000-2007. Poor government management has exacerbated meagre harvests caused by drought and floods resulting in significant food shortfalls beginning in 2001. The land redistribution has been generally condemned in the developed world. Since the Land Reform programme in 2000, tourism in Zimbabwe has declined with a 75% fall in visitors from 1999 to 2000. For the Zimbabwean economy, thousands of jobs have been lost and isolation from the global economy has been strengthened.
The economy of Zimbabwe is collapsing under the weight of economic mismanagement, resulting in 85% unemployment and the highest rate of inflation in the world. The government has attributed the economy's poor performance to international sanctions. However, the only sanctions in place are personal sanctions against 130 senior Zanu-PF figures; there are no sanctions against trade or investment. As of February 2004, Zimbabwe's foreign debt repayments ceased, resulting in compulsory suspension from the International Monetary Fund. This, and the United Nations World Food Programme stopping its food aid due to insufficient donations from the world community, has forced the government into borrowing from local sources. Poor management of the economy and political turmoil has led to considerable economic hardship. GDP per capita dropped by 40%, agricultural output by 51% and industrial production by 47%. The economic meltdown and repressive political measures in Zimbabwe has led to 3.4million refugees and 0.57million internally-displaced persons.
Similarly, Sudan is suffering under civil war, political instability, adverse weather, weak world commodity prices, a drop in remittances from abroad, and counterproductive economic policies. The private sector's main areas of activity are agriculture and trading, with most private industrial investment predating 1980. Sluggish economic performance over the past decade, attributable largely to declining annual rainfall, has kept per capita income at low levels. The government's continued prosecution of the civil war and its growing international isolation continued to inhibit growth in the non-agricultural sectors of the economy until it began to export oil in 1999.
Many African countries have liberalised trade, usually as part of structural adjustment programmes (SAPs). Rasiah (1998) claims that geographic location of Africa with respect to markets and other production regions are a constraint on development. Africa is located far from the major production and market platform of the Asia Pacific to attract low-wage investment. Europe is closest to Africa, but even here Africa is likely to lose out to the Eastern bloc countries in attracting European investment in low value-added activities. The lack of indigenous capabilities, geographic location with respect to major markets and production regions, and the competition that exist in other low-wage, low value-added areas therefore all combine to make Africa an unlikely destination of foreign-direct investment. But even if Africa had been better located and a capital inflow had taken place to profit from cheaper labour, the lack of indigenous capabilities would prevent these capital imports from being absorbed by society and converted into indigenous initiatives. Linking these characteristics to the fact that whilst most of Africa is well-endowed with natural resources, it is poor in capital and skill and so does not have an advantage in manufacturing goods or processing its primary products (Owens & Wood, 1997).
There are no easy answers to why some countries in Tropical Africa are more integrated into the global economy than others. Each country is unique in its history, culture, traditions, geographical location and policy experience. What works in one context may fail elsewhere. Yet factors that must be looked at in conjunction with geographical location and natural resources include the role of the state, the state of the global economy and international relations. The Darfur conflict, the aftermath of two decades of civil war, the lack of basic infrastructure and reliance by much of the population on subsistence agriculture hinder Sudan's sustainable, long-term integration into the global economy despite rapid rises in average per capita income. Zimbabwe's ongoing political and agricultural crisis has led to economic turmoil and has hampered its progress, along with its isolation from much of the international community, despite its links with South Africa and its solid infrastructure which can enable stronger integration despite its landlocked location. In terms of natural environment, the role of the state must be examined when analysing why Sudan and Zimbabwe have not taken full advantage of natural resources. Although Sudan is reputed to have great mineral resources, exploration has been quite limited and the country's real potential is unknown. Zimbabwe's land reform policy has restricted much production and hence exports, reducing its GDP. Nevertheless, Asia's continued interest and financial support on the continent could see Africa participating more fully in the global market in the near future (Zafar, 2007).
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