See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/314216242

The Historical Origin of African Economic Crisis and its Legacy: African
International Trade and Finance -from Colonialism to China

Working Paper · January 2017

DOI: 10.13140/RG.2.2.16358.01606

CITATIONS READS

10 1,977

1 author:

Alemayehu Geda
Addis Ababa University
101 PUBLICATIONS   573 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Growth and Poverty in Fragile State of Africa (With African Economic Research Consortium). I am currently coordinating this project which has about 14 country case studies
View project

An Expororaty Study of the Issue of Minimum Wage and Labour Market Profile in Ethiopia View project

All content following this page was uploaded by Alemayehu Geda on 04 March 2017.

The user has requested enhancement of the downloaded file.

ADDIS ABABA UNIVERSITY DEPARTMENT OF ECONOMICS
AAU Economics
Department of Economics
Working Paper
AAU-E C O N N O 06/ F E B 2017

The Historical Origin of African Economic Crisis and its

Legacy: African International Trade and Finance -from
Colonialism to China

Alemayehu Geda, Department of Economics, AAU, Addis Ababa

Abstract
The literature aabout the origin of the African economic crisis viewed from the external sector
perspective lists a number of factors as its causes. The oil price shocks of 1973-74 and 1978-79, the
expansion of the Eurodollar following this period, a rise in public expenditure by African governments
following rising commodity prices in the early 1970s, the recession in industrial countries and the
subsequent commodity price fall, and a rise in real world interest rate in 1980s, policy failure on the
part of the African governments are usually mentioned as major factors. Surprisingly, almost all the
literature about African external sector problems starts its analysis either in the early 1970s or, at best,
after independence in the 1960s. The main argument in this paper is that one has to go beyond this period
not only to adequately explain the debilitating effect of the external sector on the continent, but also to
propose a policy on how to address them. This historical pattern is re-emerging and further strengthened
by Africa’s recent economic engagement with China. The conclusion that emerges from such analysis is
that the African economic crisis from this perspective is essentially the problem of trading in primary
commodities historically with the West and recently with China and its resulting structure that hinders
structural transformation. Thus, a sustained growth and poverty reduction is impossible without
addressing such structural problems through structural transformation of the continent.

Keywords: Iinternational trade and finance, Debt, Economic crisis, Underdevelopment, Primary
Commodities, Growth, Economic history, Africa, China, Colonialism

JEL classification: F1, F34, F35, N77, E44..

1
 AAU-Department of Economics Working Papers

This working paper series is the result of research conducted by the staff of the Department of Economics and
their associates. The working paper series is an outlet for staff research in progress. It aims at dissemination of
information, and soliciting comments & suggestion for improvement. Views expressed in the AAU-Dept of
Economics Working Paper series are those of the authors and are not necessarily related to the Department of
Economics or AAU. Copies of the working papers can be obtained from:

The Chairperson,

Department of Economics,

Addis Ababa University, 6 Kilo Campus, FBE/CBE Campus

Eshetu Chole Building

An electronic version of the working papers can be downloaded from the following web site of the department:
http://www.AAU.edu.et .

See back cover of the working paper for list of AAU-Econ Working Papers Series publications.

© Department of Economics, Addis Ababa University, all rights reserved.

2
The Historical Origin of African Economic Crisis and its
Legacy: African International Trade and Finance -from
Colonialism to China
Alemayehu Geda
Department of economics
Addis Abeba University
2017

3
 The Historical Origin of African Economic Crisis and its
Legacy: African International Trade and Finance -from
Colonialism to China

Alemayehu Geda1
Department of Economics
Addis Abeba University
E-mail: ag112526@gmail.com Or Alemayehu.Geda@aau.edu.et
Web: www.Alemayehu.com / OR www.researchgate.net/profile/Alemayehu_Geda/
January 2017

I. Introduction
Notwithstanding the recent optimism about African economies, the performance of
these economies since the time of political ‘independence’ can only be described as
dismal. There has been a secular deterioration in their terms of trade for almost a
century; the level of external debt has grown enormously, leading to near insolvency by
the 1990s; dependency on foreign aid and related flows has grown at an alarming rate
(and this has been exacerbated by stagnation in exports); and, finally, levels of
investment have been extremely low. Partly as a result of the latter, physical and social
infrastructures have been also deteriorated. Political instability, poor policy and
implementation, frequent wars, and natural disasters have further aggravated this
situation2. The major question to be asked then is ‘why?’In fact it might be relevant to
ask whether there are special features specific to Africa that can help explain these
features and the massive poverty and inequality that engulfed the continent.In this
paper an attempt is made to explain the historical origin of this African economic crisis.
It will be argued that understanding the African economic crisis and proposing its
solution require understanding its historical origin and its current trajectory.
With this broad objective, the paper is organised as follows. In the rest of this section an
attempt to provide a brief summary of the policy debate about African economic crisis is
given. In section 2, I will focus on the structure of African economies created by its

1
I am grateful to African Export and Import Bank (Afrexim) and its current and former ED Dr. Benedict
Oramah and Mr Jean-Louis Ekra and its former Director of Research Dr Francis Mborh in Cairo; the African
Capacity Building Foundation (ACBF) and its ED Prof. Emmanuel Mendoza in Harare, and the African Economic
Research Consortium (AERC) and its ED and Research Director Prof. Lemma W.Senbet and Dr
Witness Simbanegavi in Nairobi for financing various studies that I have used in the course of writing this article.
Views expressed in this study are not associated with these institutions, however. I am also grateful for many
professors on African studies in US and European universities who adopted the original article as required reading
for their students that motivated me to develop it in this form. My students Addis Yimer and Henock Abadi offered
me helpful assistance throughout this study and I am grateful. Any errors are, however, mine.
2
By 2016 and using the OECD definition of state fragility, 30 out of 54 (nearly 60%) African countries that
are home to more than half a billion African populations could be considered as fragile states (Alemayehu, 2017b).

4
colonial history and its relation to external trade and finance problems of the continent.
Section 3 will examine the implication of this for post-independence Africa. Section 4,
will focus on the recent pattern of trade and finance by focusing on China-Africa
economic relation. It will be argued that China is in the course of strengthening the
historically formed economic structure. Section 5 will conclude the paper.
1.1 The African Economic Crisis and Its Policy Discourse
Before commencing the debate about it, a working definition of the “African economic
crisis” might be in order. In this study the African economic crisis is understood as
failure to achieve a sustained growth and macroeconomic stability that ensure
significant poverty reduction in the short run and its elimination in the long run. In
addition to domestic shortcoming in designing and implementing appropriate policy,
the continent was and still is confronted with a hostile external environment. Cognizant
of the effect of the latter on the former, the focus of this study is on this debilitating
external environment and its effect on sustained growth, structural transformation and
poverty reduction in the continent 3. As one major indicator of this African economic
crisis poverty has been on the rise from the 1980s to 2000. During 1980-2000 there was
a sharp contrast between Sub-Saharan Africa (SSA) where the proportion of the
population below poverty line has increased and the sharp decline in poverty in East and
South Asia. Thus, the absolute number of the poor living on less than a dollar per day
poverty line in SSA have risen from 163 million in 1981 to nearly 313 million by 2000
(McKay, 2004).4
Following the recovery in GDP growth in the last decade, most countries in Africa saw
their per capita income steadily rising for over a decade. The corresponding effect on
poverty reduction however has been less clear and controversial. Following his
comprehensive survey about African poverty, Abebe (2014) concluded “it is difficult to
provide conclusive evidence to the link between growth and poverty”. Be that as it may,
using the widely used data of the World Bank, he noted, poverty in SSA has declined -
although only by about 5 percentage points in the last decade, or by about 1% per
annum. When one compares this with the per capita growth rate of close to 2.5% in the
decade, the pace of poverty reduction was extremely slow5. Although the evidence is
non-conclusive and the reduction in poverty not significant, the growth surge in Africa

3
This study doesn’t attempt to minimize the internal constraint for African economic growth and poverty
reduction (or as the cause of the African economic crisis as defined here). It recognizes it but underscores the impact
of the external sector on this internal constraint itself. Interested readers may consult Mkandawire (2001) for a
political-economy analysis about this internal constraint (or the African state) that corresponds to and compatible
with this study. Thus, Mkandawire’s analysis can be taken as a complement to this study that focused on the
internal aspect of the constraint for African economic development.
4
Despite the impressive growth registered in Africa in the last decade, 47% of the population of sub-Saharan
Africa still lives below the $1.25-a-day poverty line, according to a 2012 World Bank study. Between 1981 and
2008, the percentage of that region’s poverty rate declined only by 4 percentage points. By contrast, East Asia saw
dramatic drops in poverty, from 77% of the population in 1981 to 14% in 2008 (63 percentage points!); and South
Asia saw the percentage of its population in poverty declining from 61% to 36% (McKey, 2012).
5
Abebe (2014), however, noted that alternative approaches that rely on a combination of national accounts
(to estimate mean income) and surveys (to estimate distribution of income) have reported a rapidly falling poverty in
the continent in the last two decades (e.g. Pinkovskiy and Sala-i-Martin, 2014; 2013; cited in Abebe, 2014). These
estimates suggest a fall in poverty at a rate of 1.9% per annum, almost double to that obtained from household
surveys. It has to be noted, however, that even this is extremely low compared to situation in Asia noted above.

5
since the early 2000 seems to be positively associated with poverty reduction (Abebe,
2014; Mckey, 2012; Fosu, 2015). Thus, in this study, the attempt to examine the impact
of the external sector on African economic crisis in general and its growth in particular
assumes growth is linked to poverty reduction. However, this need to be looked at in the
context of the political economy of growth, the nature of growth (that includes
distribution of income and structural transformation) and the power of having policy
options for making relevant policy.
Having such working definition, there are three sets of contending explanations for
Africa’s economic crisis in the post-independence period. The first is set originally out in
World Bank (1981) – also known as ‘the Berg Report’ – and a number of subsequent
World Bank publications (World Bank 1989, 1994). An alternative explanation for
Africa’s economic crisis, which could be described as ‘African structuralist approach”6
is associated with the United Nations’ ‘Economic Commission for Africa’ (ECA). This is
outlined in African Alternative Framework to Structural Adjustment Programmes,
AAF-SAP (ECA 1989a). Finally, there exists a third view, which is less clearly associated
with any particular institution and largely held by academics of a Marxist orientation
(see inter alia Lawrence 1986; Sutcliffe 1986; Amin, 1996). This latter position is often
offered as a critique to the other two explanations. The scope of all three sets of
explanations is general, encompassing every aspects of the African economic crisis.
The Bank argues that, in spite of external shocks, associated particularly with a rise in
oil prices in the periods 1973-74 and 1978-80 and a decline in world demand for
primary commodities, the balance of payments problems experienced by most African
nations since the 1970s cannot generally be attributed to a deterioration in terms of
trade7. With the exception of mineral exporters, it is suggested that terms of trade for
most African nations have, in fact, either been favourable or neutral8. The main cause of
the balance of payments problem, according to the Bank, has been a decline in the
volume of exports attributed to three factors. Firstly, structural changes in the
composition of world trade, with trade in commodities growing at a slower rate than
that of manufactures has resulted in a decline in the African share of total world trade.

6
The African structuralist view seems to begin with this ECA (1989) publication under the then ECA
General Secretary Adebayo Adedeje. The 1989 document appears to draw its main perspective from structuralist
macroeconomics tradition of Latin America, in particular that of ECLAC (Economic Commission for Latin America
and the Carbines) economists (Prebisch, Signer, Sunkel, Furtado, Cardoso etc.. see Palma, 1978; Kay, 1989) and
other structuralist and/or progressive economists that include Lance Taylor, Duncan Foley, E.V.K FitzGerald, Rob
Vos, Marc Wuyts, Krishna Dutt, John Weeks, Marc Lavoie, Francis Stewart, Sanjay Lall, Howard Stien and Fantu
Cheru, among others. In African macro and trade studies the approach of economists such as Jorn Rattso, Raphiel
Kaplenski, Mike Morris, Ademola Oyedeji, Olu Ajakaiye, Tony Addison, Leonce Ndikumana, inter alia, and
including the broader political economy tradition of CODSERIA such as the works of Samin Amin, Archie Maife,
Tandika Makandware, as well as the early works of Claude Ake, Walter Rodeny, M. Mamdani and Collin Leys
could be taken in this African-heterodox tradition.
7
However, the Bank acknowledges that many African nations were faced with unfavourable terms of trade
during the early 1980s.
8
In subsequent publications, notably Africa’s adjustment and growth in the 1980s published jointly with
UNDP, the Bank argues forcefully that Sub-Saharan Africa has been in relatively ‘good shape’ compared to other
parts of the developing world and that policy mistakes have been the principal cause of its economic crisis.
However, the ECA (1989b) argued that the Bank has based its conclusions on ‘pseudo-statistics’ and selective
reporting. Re-examination of the same data by ECA analysts would tend to suggest that the Bank’s argument cannot
be substantiated (See ECA 1989b and Mosley and Weeks 1993 for a brief summary).

6
Secondly, drought and civil strife has negatively affected Africa’s supply capacity. And
thirdly, trade restrictions and agricultural subsidy policies of industrial countries
represent a barrier to African trade9. The Bank goes on to argue that the failure of
Africa’s export sector may be explained in terms of three main factors. Firstly,
government policy has tended to be biased against agricultural and export production.
Secondly, increased consumption associated with rapid population growth has placed a
burden on resources, which might otherwise have been used by the export sector. And,
thirdly, inflexibilities in African economies are seen as representing an obstacle to
diversification. The Bank’s insistence that policy failure represents the main explanation
for Africa’s economic crisis, and consequent emphasis on the need for reforms, has
continued with the publication of its long-term perspective study by the end of the
1980s (World Bank, 1989). Moreover, as recently as mid 1990s, the Bank continues to
argue that orthodox macroeconomic management represents the road to economic
recovery in Africa and, hence, that more adjustment, not less, is required (World Bank,
1994). This assertion has been the subject of various criticism, coming from a host of
different angles (see inter alia ECA, 1989; Adam, 1995; Mosley et al, 1995; Lall, 1995;
White, 1996a; Alemayehu, 2002).
A number of other analysts have arrived at conclusions, in line with those of the Bank.
van Arkadie (1986), while sympathetic to the problems posed by external shocks, argues
that stagnating or falling output has had an important impact on export earnings. On
the latter point the World Bank (1989) argues, rather vigorously, that declining export
volumes, rather than declining prices, account for Africa's poor export revenue. Grier
and Tullock’s (1989) analysis supports this view. Based on their survey of empirical
studies into the causes of the African economic crisis, Elbadawi et al (1992) also found
domestic policies to be important. White (1996b), citing the case of Zambia, argues that
economic decline following Zambia’s independence may largely be attributed to
economic mismanagement. Using a pooled multiple regression equation for thirty-three
African countries, Ghura (1993) also found significant support for the Bank/ IMF
viewpoint. Easterly and Levine (1996) suggest political instability, low levels of
schooling, deterioration in infrastructure, as well as policy failures as representing
possible causes of Africa’s growth problems. They conclude, however, that policy
improvements alone are likely to boost growth substantially. Similar views are also
expressed in Collier and Gunning (1999). Although the above brief survey is not
exhaustive, the aforementioned works would tend to lend strong support to the
Bank/Fund’s viewpoint. The logical conclusion to be drawn from this, therefore, is that
the remedy to Africa’s economic crisis is to implement Structural Adjustment Programs
(SAPs) more vigorously.
In contrast, the ECA (1989) prefers to explain Africa's problems in terms of deficiencies
in basic economic and social infrastructure (especially physical capital), research
capability, technological know-how and human resource development, compounded by
problems of socio-political organization – in short structural problems. The ECA sees

9
However, according to the Bank, the effects of the protectionist policies of developed nations may be
rendered less significant due to the low capacity of African manufacturing, an inability to produce temperate
products as well as the continent’s preferential status within the EEC. See also Amjadi et al (1996), another WB
study, for a similar argument along this line, as well as proposals for a possible policy conditionality plan for
privatizing African shipping lines during that time.

7
inflation, balance of payments deficit, a rising debt burden and instability of exports,
which are focused in the Bank/Fund view, as resulting from a lack of structural
transformation, unfavourable physical and socio-political environment, as well as an
excessive outward orientation and dependence. The ECA study suggests that weaknesses
in Africa’s productive base, the predominant subsistence and exchange nature of the
economy and its openness have all conspired to perpetuate the external dependence of
the continent. Hence, one of the striking features of the African economy is the
dominance of the external sector. This has the effect of rendering African countries
quite vulnerable to exogenous shocks10. Consequently, according to the ECA viewpoint,
perceiving African problems in terms of internal and external balance problems and
seeking a solution within that framework (most notably, through the implementation of
Structural Adjustment Programs, SAPs) implies not only the wrong diagnosis but also
the wrong treatment. The ECA study argues that '...both on theoretical and empirical
grounds, the conventional SAPs are inadequate in addressing the real causes of
economic, financial and social problems facing African countries that are of a structural
nature' (ECA, 1989a: 25).
Based on this alternative diagnosis, and the major objectives of ‘the Lagos Plan of
Action’ (OAU, 1981), the ECA formulated an African alternative framework to the Bank/
Fund’s policy recommendations, which is also effectively endorsed by the OAU. The
ECA framework focuses on three dynamically interrelated aspects, which need to be
taken into account. First, the operative forces [political, economic, scientific and
technological, environmental, cultural and sociological 11], second the available
resources [human and natural resources, domestic saving and external financial
resources] and third the needs to be catered for [i.e. focusing on vital goods and services
as opposed to luxuries and semi-luxuries]. The adoption of this general framework
would allow the different categories of operative force to influence not only the level and
structure of what is produced but also the distribution of wealth. Moreover, these forces
may then influence the nature of needs to be catered for and the degree of their
satisfaction. At a concrete level this is envisaged as taking a number of policy directions.
Firstly, improving production capacity and productivity, mobilization and efficient use
of resources, human resource development, strengthening the scientific and
technological base and vertical and horizontal diversification. Secondly, improving the
level and distribution of income, adopting a pragmatic balance between the public and
private sectors, putting in place ‘enabling conditions’ for sustainable development
(particularly economic incentives and political stability), shifting of (non-productive)
resources, and improving income distribution among various groups. Finally, focusing
on the required needs, particularly in relation to food self-sufficiency, reducing import
dependence, re-alignment of consumption and production patterns and managing of
debt and debt servicing (ECA, 1989).
Just as many have argued in favour of the Bank/ IMF view, so too, many analysts have
come out in support of the ECA’s “structuralist” line of reasoning (Ngwenya and

10
In sharp contrast to this view, Collier and Gunning (1999) argued that lack of openness, not openness,
represents one of the major causes of poor performance of African economies.
11
This basically includes the system of government, public enterprises, the private sector, domestic markets,
research and development, forces of nature and climate, ethnicism and society's value system, external commodity
markets and finance and transnational corporations.

8
Bugembe, 1987; Fantu 1992; Adedeji 1993; Stefanski 1990; Ali 1984; Wheeler 1984;
Stein 1977; Alemayehu 2002). Setting this discussion in a broader historical context,
these studies have highlighted the impact of colonialism in establishing the rules by
which Africa might participate in the world economy. According to these rules, African
nations produced raw materials and agricultural goods for Europe's industries. Further,
it is argued that this pattern of trade has changed very little since the time of political
'independence' (Fantu, 1992: 497-500, Adedeji, 1993: 45). Indeed, Stefanski (1990)
argues that, understood in the context of direct continuum with the colonial experience,
Africa’s economy still depends on external factors to a much greater degree than any
other developing region. As a result of this dependence, Africa’s economic crisis is seen
as being intricately interconnected with external factors such as falling terms of trade,
declining demand for African exports and related external shocks (Stefanski, 1990: 68-
77, Adedeji, 1993: 45). Collier (1991) also argues that abrupt external shocks (be they
negative or positive) have represented important causes of the poor long-term economic
performance of Africa12. Ali (1984) has touched on another dimension of the problem.
He argues that, for most African nations, the mitigation of their problems depends not
only on the characteristics of the commodities they export (and specifically their
elasticities) but also on the presence or absence of the necessary market staying power.
Wheeler (1984) has made an exploratory econometric analysis of the sources of
stagnation and suggests that ‘environmental’ factors (especially terms of trade and
international conditions of demand) have had a greater impact on growth than policy
variables. Indeed, based on Ghura’s (1993) econometric analysis, world interest rates
represent a further significant variable, which should be added to Wheeler’s list of
adverse ‘environmental’ factors.13
The third view differs from the other two in its understanding of what crisis means in
the African context. For these analysts crisis ‘...has a connotation of systemic
breakdown, but more generally it can refer to a moment or a specific time period in the
history of a system at which various developments of a negative character combine to
generate a serious threat to its survival’ (Lawrence, 1986:2). Sutcliffe (1986), for
instance, argues that the African crisis represents the continuation of a complex process
of polarization trends. It emanates from Africa's economic dependence. For him, the
African crisis is best understood in terms of the combined result of long-term secular
effects of imperialism suddenly aggravated by the impact of the world capitalist crisis.
Thus, according to these viewpoints, Africa's problems are best understood as resulting
from long-term underdevelopment, following dependency theory14, and short-term
vulnerability, following international aspects of crisis theory (Amin 1974a, 1974b, Ake

12
Collier (1991) cites the Zambian economy and copper price as a classic example of negative shocks. In
Collier’s opinion two errors are made. Firstly, the price fall was treated as temporary, and, secondly, foreign
exchange shortages were handled by rationing. Notwithstanding an acknowledgment of the effect of negative
shocks, he emphasized poor policies in what he called ‘controlled’ economies as representing a major problem.
However, it could be argued that the root cause of these policy problems lies in the structure of the economy of these
countries, and in their external trade in particular. Taken in this light, policy problems, per se, may be of only
secondary importance.
13
However Ghura (1993) seems extremely optimistic in stating that judicious macro and trade policies may
stimulate growth in Africa, even if external conditions do not improve. This viewpoint is essentially similar to the
types of empirical studies undertaken in support of Bank/IMF type policies.
14
See Leys (1996) and Ofuatey-Kodjoe (1991) for critiques of dependency theory in the African context.

9
1981 cited in Ofuatey-Kadjoe 1991, Sutcliffe, 1986:19-20; Harris, 1986:93; Onimode,
1988: 13, Moyo et al, 1992: 210). In general, these writers are against the view that there
is a ‘norm’ from which African countries are in a temporary deviation, with associated
implications that these countries may return to that norm given a particular adjustment
measure (Harris, 1986:84). Harris (1986) and Mamdani (1994) for instance, argue that
the IMF and Bank’s ultimate objective [using SAPs] is not to correct distortions in a free
market international system, but to construct such a system (Harris, 1986:88). In so
doing, these institutions may undermine any attempt to create an independent,
integrated and self-sustained [African] economy (Mamdani, 1994:129).
While there are areas where the first two approaches both converge and diverge, the
third explanation for Africa’s economic crisis stands firmly in opposition to both. The
core of the disagreement between the Bank/IMF and ECA views centers on 'the role of
the market' mechanism15 (Oskawe, quoted in Asante, 1991:179). While the Bank believes
in the market mechanism as representing the fundamental instrument of resource
allocation and income distribution, the ECA questions this viewpoint. Thus, while the
bank focuses mainly on financial balances, the ECA considers a much broader
transformation as an enabling condition for the former. While the Bank emphasizes the
export sector, the ECA strategy advocates selectivity (See also Asante, 1991:180). While
the Bank expresses concern about anti-export bias and population policy, the ECA
prefers to emphasize the need to ensure total structural transformation and food self-
sufficiency. While the Bank places more emphasis on short-term policies than on
Africa’s long term needs, the ECA Strategy, as defined in the Lagos plan of action,
stresses the importance of also addressing issues of long term transformation, alongside
these short-term policies 16. However, these institutions do agree on some major issues,
such as the need for human resource development, improving the efficiency of
parastatals, and sound debt management. The ECA analysis is quite comprehensive in
addressing the causes of the crisis and in suggesting not only short run solutions but
also a framework for long term structural transformations 17. In addition, we note today,
with the benefit of hindsight, the obsession with macroeconomic stability through SAPs
came at the expense of structural transformation (raising productivity in agriculture,
exports, infrastructure, and human capital formation – supply side policies) that the
ECA was arguing for from the outset. That led to deterioration of the African economy
from the 1980s till the year 2000. Thus, the analysis of the external sector of Africa,
adopted in this study, will be conducted within this broader context where the African
economic crisis has developed as part of the broader and historically formed external
economic problem of the continent.

15
Makandawire (1989 cited in Elbadawi et al 1992) summarizes the two contending views about the cause of
African crisis as structuralist and neoclassical. He notes
The structuralist view is one which highlights a number of features and ‘stylized facts’ that almost every point
contradicts the neoclassical view...class based distribution of income rather than marginal productivity based
distribution of income; oligopolistic rather than the laissez-faire capitalist market; increasing returns or fixed
proportion production functions rather than ‘well-behaved’ production functions with decreasing returns and
high rates of substitution; non-equivalent or ‘unequal exchange’ in the world rather than competitive,
comparative advantage based world system; low supply elasticities rather than instantaneous response to price
incentives (Makandawire (1989) quoted in Elbadawi et al (1992).
16
See Stewart (1993) for a discussion of this issue.
17
See, however, Helleiner (1993) who argued for an emerging consensus on this issue in early 1990s.

10
Finally, it is worth looking at the recent comprehensive study about the political
economy of growth in post-independence Africa and the role of policy in that process.
This study is conducted by the African Economic Research Consortium (AERC) using 27
country case studies (Ndulu et al 2008a; 2008b). The AERC study identified about four
political regimes that characterized the political and policy landscape of post-
independence Africa. These are countries characterized by: State Controls (SC), Adverse
Redistribution (AR), Inter-temporally Unsustainable Spending (IUS), and State
Breakdown (SB); also presented is the complementary Syndrome-free (SF) category (see
Fosu, 2008; Ndulu et al 2008a). The study noted that the quality of economic policy
pursued by each of these regimes has a powerful effect on whether countries seize the
growth opportunities implied by global technologies and markets and by their own
initial conditions (Fosu, 2008).The evidence that the syndromes reduce growth is strong
in the AERC studies. Fosu and O’Connell (2006) find, for example, that avoiding the
syndromes is simultaneously a necessary condition for attaining sustainable growth in
SSA and a nearly-sufficient condition for preventing growth collapse. Indeed, being
syndrome-free may add as much as 2 to 2.5 percentage points per year to per capita
growth (See Fosu, 2008; Fosu and O’Connel, 2006.). This is an excellent and
comprehensive study on Africa’s growth problem since independence. However, one of
its main weaknesses lies in its failure to look at the deeper historical reasons for having a
structure that is vulnerable to syndromes. One of the significant elements of this
structure is the external sector which is established during the colonial period and
hardly changed today. Hence, the resulting growth and developmental policy problems
(or syndromes) is largely the legacy of this structure18. The rest of this study is devoted
to the analysis of this issue. The second weakness of the AERC study is to make the
policy regime analysis delinked from the internal political-economy context African
countries which is a widely examined issue in the literature about “the nature of the
Africa state.” The latter includes: “state-civil society” relation, “the nature of the African
state that includes the potential for African developmental state”, “global capitalist
development and the African dependent state”, and “the African elite and class
relation”, among others (see, inter alia, Hyden, 1983; Sender and Smith, 1986;
Makandawire,2001; Routely, 2012).
Notwithstanding the impact of the external sector on the internal causes or aspects of
the African economic crisis, this internal aspect is not discussed in this study either. This
is aimed at focusing on the external sector.

II. The Historical Origin of Africa’s Economic Linkage

with today’s Developed Countries (The West)
Following Amin (1972), African economic history may be classified into: (i) the ‘pre-
mercantilist period’ (from pre-history to the beginning of the seventeenth century); (ii)

18
This “structure” also has implications for the political regimes witnessed in the post-independence period
as outlined in this AERC studies. This is an interesting area of research. In this study I have focused only on the
economic aspect. The ECA (1989a) defined what this “structure” is broadly. It lists predominance of subsistence and
commercial agriculture; narrow and disarticulated production base; large and neglected informal sector; a
fragmented economy; openness and excessive dependence on external sector and factors; and weak institutional [&
human] capability and a related socio-political structure, among others (See ECA, 1989a: 2-8 for detail).

11
the ‘mercantilist period’ 19 (from the seventeenth century to 1800), characterized by the
operation of the slave-trade; (iii) the ‘third period’ (from 1800 to 1880) characterized by
attempts to set up a European dependent African economy; and finally, (iv) the ‘period of
colonization’ in which the dependent African economy became fully established (Amin,
1972:106). This section will not pretend to discuss the details of Amin’s periodization.
Rather, after briefly reviewing the economic history of the other periods, it will focus
mainly on the colonial period, during which time the economic structure African countries
inherited at the time of independence became established.

2.1 Pre-colonial trade in Africa

African interactions with the rest of the world, and especially Europe, date back many
centuries, before culminating in fully-fledged colonisation in the latter part of the
nineteenth century. During the first part of this period, Africa had autonomy in its
linkages with the rest of the world 20 (Amin, 1972:107-110). However, during the sixteenth
century, African trade centers moved from the savannah hinterland to the coast, in
reaction to changes in European trade, which shifted increasingly from the Mediterranean
to the Atlantic (Hopkins, 1973:87).

Various studies have documented how pre-colonial Africa was characterized by

production of diversified agricultural products (see for instance Rodney, 1972: 257). The
internal trade of the continent was distinguished by regional complementarities, with a
broad natural resource base. Thus, a dense and integrated network was set in place,
dominated by African traders, which included, inter alia, trade among herdsmen and
crop farmers, supply of exports and distribution of imports. This was dominated by trade
in salt, West African ‘spices’, perfumes, resins and kola nuts, of which the latter was the
most important (Amin, 1972:117, Hopkins, 1973: 51-86; Neumark, 1977:128-130, Vansina,
1977: 237-248, Austen, 1987:36). Brooks’ account of the economic conditions prevailing
in this period provides an impressive insight into African trade at the time (Brooks, 1993).
Specifically, one is struck by: (a) the extent of local and long distance trade; (b) the range
of goods traded; and, (c) the degree of processing of commodities (for instance in textile
manufacturing, dyeing and metal working), particularly in West Africa. According to his
account, the major commodities traded among West Africans in pre-colonial times
include salt, iron, gold, kola, and malaguetta pepper and cotton textile. Of these, Kola and
malaguetta pepper were important, not only in West Africa, but also in the trans-Saharan
trade. Indeed, this trade was so extensive that Europeans were able to obtain malaguetta
pepper at inflated prices from Maghreb (North African) middlemen from at least the
fourteenth century onwards (Brooks, 1993: 51-121). Moreover, in this period, Europeans
were able to purchase cloth from Morocco, Mauritania, Senegambia, Ivory Coast, Benin,
Yorubaland and Loango for resale elsewhere (Rodney, 1972:113; Hopkins 1973: 48). (It is
19
See Amin (1974), Chapter two, on the mercantilist period.
20
Wallerstein characterizes the trade of the period as trade in "luxuries", with such trade being undertaken
between external arena and not in an integrated world economy framework. Wallerstein and Amin define luxuries as
those goods, the demand for which comes from the part of the profit that is consumed. Suraffa defines luxuries as
goods, which are not used in the production of other goods. He, however, took it as trade/ exchange in which 'each
can export to the other what is in his system socially defined as worth little in return for the import of what in its
system is defined as worth much'. Or, in Alpers’ phrase 'trade from which each side believed itself to be profiting'
(Wallerstein, 1976:31 and footnote 3).

12
curious to note that, in a geographic and economic sense, North Africa was connected,
rather than separated, by the Sahara to other parts of Africa21.) It is also worth noting that
the quality of many of these processed goods was quite comparable with products
originating in other parts of the world. For instance the level of manufacturing of textiles
in pre-colonial West Africa was so sophisticated that these textiles were not only traded in
West, North and Central Africa but also in the European market (See Hopkins, 1973:48
for detail). Moreover, none of the goods brought by Europeans supplied any of the basic
or unfulfilled needs of African societies. Indeed, similar commodities and/or substitutes
were obtainable through West African commercial networks. Specifically, African artisans
of the time manufactured high quality iron, cotton, textiles, beers, wines and liquors
(Brooks, 1993:56). Austin argues that this trade, sometimes referred to as the ‘Sudanic
economy’, represents “an ideal African development pattern: continuous and pervasive
regional growth with a minimum of dependence upon foreign partners for provision of
critical goods and services” (Austen, 1987: 48). However, this autonomy in traditional
industries was to be undermined by subsequent events (Konczacki, 1990:24).

The early development pattern of Africa varies between regions. In contrast to West
Africa, East and Southern Africa (ESA) were characterized by a well-established economic
interaction with the Arabian and Asian countries, long before the arrival of the
Europeans. More specifically, this part of Africa supplied a range of products, such as
gold, copper, grain, millet, and coconut to the Middle East and Indian Ocean economies.
There also existed a dynamic caravan trade and commercial plantations long before the
onset of European colonial rule. According to Austen, the towns in this part of Africa
degenerated into little more than entrepôts for raw material exports and manufactured
imports, rendering them dependent on the external economy (Austen, 1987:67-74).
However, as documented by Kjekshus, during the mid-nineteenth century, prior to the
onset of the colonial period, the interior of what is now mainland Tanzania carried an
estimated four and a half million head of cattle. Indeed, the entire coastal region also
supported a rich agricultural and pastoral economy (quoted in Leys, 1996:111). Further,
Nzula et al (1979)22 argued that the region was characterized by peasant production,
which was mainly a natural and closed economy, with a substantial number of people
leading a nomadic existence (Nzula et al, 1979: 38). The existence of an independent and
autonomous economy, dating back to antiquity, is also well-documented in Ethiopian
history23. Amin also notes that the African societies of the pre-colonial period developed

21
This stands in sharp contrast to the current categorization of North Africa as geographically and
economically distinct from Sub-Saharan Africa, as can be read from various World Bank/IMF country classification
schemes for Africa. See Alemayehu and Addis (2015) for an alternative, politically correct and economically
sensible, country classification scheme of Africa relevant for economic analysis.
22
The original book was actually published in Russian in 1933 and the English translation appeared in 1979.
23
The commonly argued case that, since Ethiopia was not colonized, it represents a ‘counter factual’ for how
other parts of Africa might have developed, in the absence of colonialism is a very weak one. First, internally, a
good part of the history of Ethiopia has been a history of wars under the ideology of either religion, region,
nationality or a combination of these. This has created a serious crisis in the agricultural sector (See Gebre-Hiwot,
1924). Moreover, Ethiopia’s history has been characterized by two clearly distinct antagonistic classes: the landed
aristocracy and the peasantry, with corresponding state structures (see Gebru, 1995). Given the history of conflict,
which characterizes Ethiopia’s history, the main preoccupation of the landed aristocracy and church has been to
maintain its power. Notwithstanding this, the landed aristocracy was in the course of changing itself into a capitalist
class. Second, colonialism had the effect of disrupting the dynamic caravan trade, which linked the Southwest parts

13
autonomously (Amin, 1972: 107-108). Thus, one may reasonably conclude that, although
its economy was not as complex as that of West Africa, nevertheless, that the ESA region
had some degree of autonomy in its economic activity, and, hence, was not as dependent
on the export of commodities, particularly to Europe.

To sum up, there would appear to be a long history of integrated and autonomous
economic activity in most regions of Africa with local and long distance trade playing a
linking role. This is not an attempt to paint a ‘golden past’ for Africa. Rather, it is meant to
underline the fact that Africa had a healthy and fairly independent economic system,
some degree of processing, before colonialism (and slavery before that) intervened to
force a structural interaction with Europe.

2.2 Formation of a commodity exporting and external finance

constrained economy

The period leading up to the industrial revolution, and the 16th and 17th centuries, in
particular, witnessed the beginning of the shaping of the African economy by European
demand. A clear example is the pressing demand for gold coin in Europe, and the
subsequent search for gold in West and Central Africa (WCA)24. Indeed, demand for
labour, required in the American gold search and plantation, was instrumental in the
formation of the European slave trade too (Rodney, 1972:86-87). Based on recently
compiled data Frankema et al (2015) argued that a significant improvement on the terms
of trade of Africa and the exceptionally sharp price boom for African commodities in the
four decades before the Berlin conference (1845-1885) might explain the European
scramble for Africa in that Berlin conference.Thus, the shaping of the African economy by
European interest began, even before the onset of the formal colonial period.

With the onset of the industrial revolution in Europe, Africa lost its remaining autonomy
and was reduced to being a supplier of slave labour for the plantations of America (Amin,
1972:107-110). The European slave trade, and the so-called ‘triangular trade’, both of
which are beyond the scope of this study, are widely discussed issues in the economic
history of Africa. Any resistance to the slave trade was silenced, not only by the co-opting
of local chiefs, but also by sheer force. Such use of force has been documented in what is
now Angola, Guinea, Senegal and various other parts of the continent (Rodney, 1972:90-
91. See also Bernstein et al (1992) for a brief summary of the triangular trade). Moreover,
this era witnessed a widespread expansion of European control. This expansion was
undertaken with the dual aims of: a] incorporating new areas under primary crop

of Ethiopia to the rest of the East African region. In addition, Ethiopian independence was basically a besieged one
because it was encircled by hostile and powerful colonial forces (British, Italy and France) that used Ethiopian
regional and ethnic differences for ensuing conflict and benefit from that. This and the fear of being colonized one
day like the neighbouring African colonies had an influence on the political and economic structure of the country.
More specifically, Ethiopia developed as a militaristic nation, with a dependent economy based on the export of
commodities and import of manufactures (esp. fire arms) that seems to persist until today. In fact one of the pioneer
economists of the time, Gebre-Hiwot (1924) was worried about this emerging trade pattern and the deterioration of
Ethiopian terms of trade vis-à-vis Europe and advised, inter alia, a policy of protection, skill formation through
education and industrialization following a Japanese model. Other Ethiopian development economists of the time
(1920s ) pursued this argument and they are referred as the Japanaizers in Ethiopian history (see Alemayehu, 2008).
24
First by the Portuguese, and later by the British, Dutch, Germans and Scandinavians.

14
production, using African land and labour (which were priced below world market
prices); and, b] increasing the level of production of existing primary commodities. On the
import side, cheaper and purer iron bars, and implements such as knives and hoes were
made available, displacing some of the previous economic activities undertaken by local
blacksmiths. This had knock-on effects in terms of a reduction in levels of iron smelting
and even a decline in the mining of iron-ore (Wallerstein, 1976: 34-36; Baran, 1957:141-
143.25)

Within the ESA region, cloves grown in Zanzibar and Pemb islands, for export to the
Asian and European markets, were the first cash crops successfully produced prior to
European colonialism. Mainland estates, dominated initially by Arab and Asian traders,
were involved in externally oriented production through sales of copra, sesame seed and
oil-yielding materials, for which France was the principal market (Munro, 1976: 55).
Following colonization, peasant cash cropping developed in East Africa. However, unlike
the WCA region, this was mainly as a consequence of a combination of political injunction
and regulation. Such imposition from above was usually resisted, the Maji-Maji uprising,
in today’s Tanzania, being a case in point. In other instances cash cropping simply failed
to take hold, as in the case of a cotton scheme proposed for Nyanza province, Kenya
(Munro, 1976: 116). However, in spite of these initial setbacks, eventually the colonial
powers were successful in implementing their policy of introducing cash cropping to the
region.

In sum, as described above, there existed a reasonable degree of trade linkage with
Europe in the pre-colonial period. Leaving aside the slave trade, the main feature of this
trade was the export of primary commodities by African nations to Europe. Thus, even
before the onset of the colonial era, the seeds of Africa's subsequent role (as a supplier of
raw materials and foodstuffs for Europe and a market for European manufactures) as well
as its dependence on external finance had already been sown26. Or, to take a slightly
different perspective, a move from the production of primary products to processing of
these products (by Africans and in Africa) was interrupted. This represents the first pre-
designed attempt to articulate African economic activity to the requirements of the
outside world. This development was vigorously followed up during the colonial period as
a consequence of: (i) the so called imperial self sufficiency in raw materials and markets
scheme; (ii) the impact of the first and second world wars; and, (iii) financing
requirements for the creation of public utilities designed to serve (i) and (ii).

25
In describing the impact of underdeveloped nations’ interaction with Western Europe Baran noted “[the
population of these nations] found themselves in the twilight of feudalism and capitalism enduring the worst features
of both worlds. Their exploitation is multiplied, yet its fruits were not to increase their productive wealth; these went
abroad or served to support parasitic bourgeoisie at home. They lived in abysmal misery, yet they had no prospect of
a better tomorrow. They lost their time-honoured means of livelihood, their arts and crafts, yet there was no modern
industry to provide new ones in their place. They were thrust into extensive contact with advance of the West, yet
remained in a state of the darkest backwardness" (Baran, 1957:144). It is striking to note that Baran’s description,
written nearly six decades ago seems to remain relevant even today.
26
Imports of palm oil by Britain, groundnuts by France, palm kernels (for cattle cake) by Germany (and for
the manufacturing of margarine) by the Dutch represented the main items traded during the 19th century, prior to the
onset of formal colonialism at the end of that century. (For a description of this, see particularly Chapter 4 of
Hopkins (1973)).

15
(i) The imperial self sufficiency scheme

As noted above, the export structure associated with colonialism did not arise by accident.
Rather, it was preceded by various experiments to produce agricultural products
demanded by the developing European industries. A French experiment to produce crops
similar to those produced in America, the establishments of plantations in Senegal, during
the 1820s, British experiments with ‘model farms’ in Niger, during the 1840s and cotton
experiments27 in Senegal, Nigeria and the Gold Coast (Ghana) all represent cases in point
(Hopkins, 1973:137). In Germany, Bismarck, initially reluctant to create a colonial empire
was persuaded by German commercial interests that overseas territories could provide
raw materials for German industries, as well as markets for their products (Longmire,
1990: 202). This growing demand for raw materials, the search for a market for finished
products from Europe, inter-European competition, and a number of other factors
conspired to form the basis upon which colonialism was to evolve.28

During the colonial period, one of the main phenomena, which strengthened primary
commodity exports from European colonies in Africa, was the so-called ‘imperial self
sufficiency’ scheme. Thus, British, French and Belgian textile industries sought to obtain
cotton from Africa, and invested accordingly. A similar scheme was also developed for
tobacco. This was administered both by colonial governments and by some European
based companies (Munro 1976: 128-137) and resulted in an expansion in colonial trade.
With the onset of colonialism, the centre of African trade shifted from the hinterland to
the coast, and the composition of this trade also changed in response to the demands of
the increasing external orientation of the economy (Amin, 1972:117). For example,
expansion in the production of palm products and groundnuts in Africa was directly
linked with increased demand for inputs required in soap and candle factories, lubricants
(particularly for the railways) in Europe and European economic growth in general
(Hopkins, 1973:129).

At the same time, the processing of such primary products in Africa, except in white
settler colonies was actively discouraged. Indeed, this was the case even when factories
were owned by Europeans. For example, in Senegal, the proportion of groundnuts, which
could be processed, prior to their export to France, was strictly controlled (Fieldhouse,
1986: 48; Fyfe quoted in Wallerstein, 1976:36; Onimode, 1988:177). In Angola the
Portuguese prevented the operation of flourmills; with the country exporting wheat to
Portugal and importing wheat flour back (Konczacki, 1977:81). According to Austen, the
fact that colonial governments, (with the possible exception of the Union of South Africa),
saw themselves primarily as representatives of the ‘mother’ (colonial) country, which was
benefiting from the existing pattern of trade, explains why they pursued policies which

27
These were prompted by the so called ‘cotton famine’ in Europe, following the American civil war.
28
The motives underlying colonialism represent a widely debated topic. For instance, Austen (1987) argues
that “within [the] general context of intense multifaceted international competition, the economic rationale for
African colonization was to a considerable extent pre-emptive -designed to assure access to potential rather than
actual markets and commodities as well as trade routes to Asia” (Austen, 1987:116). Using recently compiled
historical data, Frankma et al (2015) argue that a sharp rise in African commodity price before the Berlin conference
of the scramble for Africa might have been the motivation for European colonialism in Africa, as noted.

16
were directly and indirectly designed to block efforts at local industrialization (Austen,
1987: 133).

In order to achieve these dual objectives, of inducing the colonies to be suppliers of

inputs, and markets for manufactured goods, various methods of coercion were also
employed. Africans were forced, by superior firepower, to abandon small scale
manufacturing industries and trade with rival European nations (Dickson, 1977:142). At
the same time, large European firms were encouraged to concentrate on growing and
trading in agricultural products. This was easily achieved for a variety of reasons.
Specifically, African peasants moved into cash cropping: (a) to ensure access to European
goods, to which they had become accustomed, in a limited way, in the pre-colonial era; (b)
to earn cash, which was required to pay various taxes; and, finally: (c) as a result of
force29. In other cases, Africans were simply exterminated to pave the way for settlers30.
In other parts of Africa Europeans directly controlled the production of commodities such
as cotton, sugarcane and tobacco (Amin, 1972: 112-113). Indeed, in areas such as British
East Africa the law required that farmers grow a minimum acreage of cash crops.
However, these peasants were not wholly dependent on cash crop production. Rather,
they also produced food for own consumption, this being in the interests of the big firms,
since it enabled them to pay only minimal wages, which did not have to cover
maintenance of the labourer and his family (Rodney, 1972 :172). Nevertheless, the
colonial authorities ensured that the extent of such food production was not large enough
to ensure self-sufficiency. For instance, in British Guinea it was a criminal offence to grow
rice (at a time when it was imported from India and Burma) because it was feared that
rice growing would lead to the diversion of labour from the sugar plantations (Frankel,
1977:236). Thus, in this manner, Africa’s economic role, basically as a producer of primary
commodities, continued to be shaped to serve Europe's industrial and commercial
interests31.

(ii) First and second world wars

The impact of The First World War on African colonies was devastating. Although trade
was disrupted during the period, nevertheless African colonies were forced to supply
commodities to finance the war. The end of the war was followed by a surge in major
commodity prices and hence high export earnings for the African colonies (Munro, 1976:
119-23). Similarly, The Second World War also resulted in an increased demand for

29
There are many examples of Africans being forced into cash crop production. This occurred in Tanganyika
(today’s mainland Tanzania), in the Portuguese colonies, in French Equatorial Africa and French Sudan (today’s
Mali). In Congo Brazzaville the French enforced cotton cultivation by banning traditional agricultural activities.
These policies of coercion were resisted to the extent possible. The revolts in Tanganyika and Angola represent
cases in point (See Rodney, 1972:172-181, Austen, 1987:140-142).
30
This was the policy followed by Germany in what is now called Namibia. Indeed, the extermination of the
Africans was so extensive that, when the Germans discovered diamond and other minerals latter, they had to look
for migrant labour for mining from the region (See Longmire, 1990:203-204). This seems to have a lasting impact
on the pattern of labour movement in that part of the continent that remained to date.
31
See Dutt (1992) for a striking similarity between this process in Africa and the reversal of India’s
specialization from exporter of manufactured goods (better and more sophisticated than British manufactured goods)
to exporter of primary commodities and importer of manufactured goods, following the first three decades of British
colonial rule in early 1800.

17
primary commodities, and especially those with military strategic importance such as
vegetable oils, metals and industrial diamonds (Ibid. 170, Burdette, 1990:84.). This had
the effect of reinforcing the commodity producing and exporting role of the European
colonies in Africa.

In addition to the direct effects of the war, the post-war reconstruction of Europe, rising
levels of European incomes and removal of restrictions on consumer demand and
commodity stockpiling, engendered by the outbreak of the Korean War in 1950, resulted
in the price of African exports surging to unprecedented heights (Munro, 1976: 177). Thus,
when war erupted or was expected to erupt in the colonizing countries, commodity
production and exports by African colonies was boosted by non-price mechanisms.
Further, the end of the war and subsequent reconstruction was usually also followed by a
commodity price boom and associated increase in the level of the commodity exported,
this time through the operation of the price mechanism. In the process, the specialization
of European colonies in Africa as producers and exporters of primary commodities
became firmly established.

(iii) Financing public utilities and commodity exports

In general, in the pre 1929 international financial order, which was dominated by
government bonds (i.e. portfolio investment), Asian and African colonies had little choice
in relation to the nature of their involvement in international financial systems. Political
considerations were at the heart of regulating access to capital markets (Bacha and
Alejandro, 1982: 2-3). Besides, such inflows to Africa were generally negligible (UN, 1949:
26-28). Capital inflows from W.W.II onwards increasingly came in the form of Foreign
Direct investment (FDI). There was a moderate flow of such capital from the United
States and Britain to Africa. However, such investment that did come (especially that
originating in the United States, which was the largest supplier) was concentrated mainly
in South Africa, Egypt and Liberia, the latter relating to the introduction of a shipping line
by the United States (UN, 1954: 15-16). In almost all cases the investment went into
plantations and mineral extraction (UN, 1949: 32-33) 32.

The colonial period also witnessed a flow of loans and grants from European centers to
the African colonies. In almost all cases these funds were spent on public infrastructure
development such as railways and roads to link ports to export production sites, and, to a
lesser extent, on schools and health facilities. This was undertaken with the aim of
developing the primary commodity exporting capacity of the colonies (see UN, 1954: 32-
33). In some circumstances the colonial powers were also motivated by military-strategic
considerations33. It is estimated that, from the mid 1940s to 1960 only 15 to 20 per cent

32
This pattern and the nature of public infrastructure have a striking similarity with the British colonial
legacy in India (see Carey, 2012). Interestingly, it is different from British colonial legacy in New Zeland, however.
In the latter, Carey (1947) noted, unlike in India, “… the British developed the country in such a way that private
property and democratic government did eventually lead to population-wide increases in living standard”; and hence
the contrasting development experience of the two (see Alemayehu, 1998/2002; Acemuglu et al, 2001).
33
This is similar to the British colonialism legacy of India. Carey (1947) noted “ the infrastructure was
seldom targeted at the development of the general population, and investment into primary education and healthcare
facilities remained limited… the legacy of infrastructure left by British has in fact been detrimental to the country’s
development.. rather than developing the economy it may have reduced the protection of Indian industries, and

18
of such inflows were allocated for social and production sectors, while the rest went into
such infrastructural development (Munro, 1976:183). The nature of these financial flows
to the colonies also differs before and after W.W.II. In general, it can be said that the pre-
W.W.II flows came mainly in loan form, while the post W.W.II flows, and especially those
from France, increasingly incorporated a grant element (See also Austen, 1987:197-202
for details). However, the repayment of this debt by colonial administrators created
serious difficulties.

These financial difficulties were exacerbated by instability in the world commodity market
and the vulnerability of the African colonies to this. Indeed, various analogies may be
drawn between the debt crisis in the 1990s and the situation in this period. For instance,
during and after the great depression (1929-1932), African exports declined by about 42
per cent. The depression also resulted in contraction of credit flowing to the colonies.
These events led to a serious incapacity to service debt owed to the ‘mother’ (colonizing)
country. Since colonies were not in a position to default on these debts, there was
effectively no way out for them. This had repercussions for every African economy, with
widespread Bank failures, retrenchment programs in colonial administrations and
liquidation of businesses (See Munro, 1976: 150-53 for details). The SAPs of the 1980s
and 1990s were akin to this.

Setting in place a vicious cycle, the financial difficulties being experienced by colonial
governments forced the colonies to vigorously follow a policy of producing export
commodities, at the expense of other alternatives (Munro, 1976: 155, Austen, 1987:127).
Peasant cropping, with its attractive minimum cost for colonial governors, was chosen as
a convenient vehicle to address this problem. This, the so called the ‘peasant path’ to
financial solvency, became a universal phenomenon throughout the colonies, and
especially in the present day WCA. It was attained by forced involvement of ordinary
peasants in the primary commodity export sector. Indeed, this coercion was sometimes so
harsh that the ordinary peasants were paid not in cash, but in bills of credit to the
administration’s head tax (Munro, 1976:156). In the British colonies of East Africa a
similar emphasis to the ‘peasant path’ was also followed (Ibid. 156-57).

In summary, through the process discussed above, the foundations for the existing
economic structure of African countries were laid during the colonial period. This was
achieved through two channels. Firstly, by directly contributing to the expansion of an
enclave primary commodity exporting economies. And, secondly, by bringing about a
situation of indebtedness, it further accentuated the importance of these activities as
sources of foreign exchange required for settling of this debt. Although this general
pattern was applied throughout the African colonies, some variations existed across the
regions. The following section addresses this issue.

served primarily commercial, manufacturing and military objective rather than the general social objectives. In a
similar way the Ethiopian economist, Gebre-Hiwot (1924), who was also the director of the first railway line of an
independent African country, noted that “infrastructures such as roads and railways are important instruments for
advanced countries. For backward countries, however, they could be important instruments of plundering their
wealth by advanced countries”.

19
2.3 Three macro regions of colonial Africa: The Amin-Nzula category
Although colonialism shaped the production structure in a similar way across Africa,
nevertheless one may observe certain variations in this general pattern between different
macro regions. Leaving aside North Africa, Nzula et al (1979), and Amin (1972) divide the
rest of the continent into three distinct regions, based on their colonial structure. First
Africa of the labour reserves, which Nzula et al (1979) label this ‘East and Southern
Africa’. Second, Africa of the colonial economy. Nzula et al (1979) label this region ‘British
and French West Africa’. And, third, Africa of the concession-owning companies. Nzula et
al (1979) label this ‘Belgian Congo and French Equatorial Africa’. The fundamental
distinction between these regions is derived from the manner in which the colonial
powers settled the ‘land question’ (Nzula et al, 1979: 36).
In West Africa, commodity production did not take a plantation form. Besides, until quite
recently the mineral wealth of the region remained largely untapped (Amin, 1972: 115).
The amount of African peasant land expropriated was also negligible (Nzula et al 1979).
However, in spite of this, the control and growth of the commodity sector was governed
by European interests, while land remained in the hands of small peasants. The
mechanisms for this control were as much political as economic (Amin, 1972: 115).
Hopkins lists a number of reasons why plantation-based production never became fully
established in West Africa. Firstly, some traders were opposed to plantations for fear that
they might compete with the export sector for scarce capital. (Such objections were
voiced, for example, by businessmen such as Lever and Verdier). Secondly, a few
plantations, which were established, failed because of lack of capital and ignorance about
tropical conditions. The third, and perhaps most important, reason why plantations failed
to became fully established in West Africa was that small African peasants had already
succeeded in forming an export economy by their own efforts. Moreover, establishing
plantations would have created conflicts with traditional land rights. Indeed, some crops,
such as groundnuts, would not have been suited to plantation agriculture (Hopkins, 1973:
213-214). Finally, it is worth pointing out that it was not necessary to develop formal
plantation agriculture, since it was possible to influence the nature of production and
control the export supply of peasants through monopolistic trading practices, customs
restrictions, fiscal controls and appropriate credit arrangements (Nzula et al, 1979:38).34
In much of today’s Central Africa, and part of Southern Africa, concessionaire companies,
usually supported by their European state, dominated the entire economic structure
through their involvement in mining, fishing, public works and communication
[infrastructure], and even taxation (See Seleti, 1990:40). In these regions, the indigenous
population were reduced to semi-slavery, and exploited by open and non-economic forms
of coercion on the plantations and mines (Nzula et al, 1979: 37, Austen, 1987:140-142).
The establishment of such concessionaire companies was further facilitated by the
indigenous population fleeing and seeking refuge in the more inaccessible parts of the
region. Discouraged by this population exodus, the colonial authorities encouraged
adventurer companies to ‘try to get something out of the region’ (Amin, 1972: 117). The
activities of these companies were organized in line with demand in the 'mother country’.
One example of this was the demand for raw materials required in the European war

34
See also Amin (1972) for a political and social analysis of how the region’s commodity production and
exports were controlled.

20
effort. Thus, the mining companies, in co-operation with colonial officials, designed and
determined the nature of their enclave activity to meet the increased demand for copper
and other base metals required by the European war industries (Burdette, 1990:84).
In Southern and Eastern Africa both systems referred to above were intricately
interwoven with a number of specific features (Nzula et al, 1979: 36). In this region the
extraction of mineral and settler agriculture was accompanied by the creation, often by
force, of a small, and often insufficient, reserve of labour comprising land owning
peasants and the urban unemployed. This was undertaken with the labour demands of
mineral extraction and settler agriculture firmly in mind (Amin, 1972: 114, Nzula et al,
1979:37). This labour was further supplemented by inter regional migration. Other
economic instruments, such as taxation, were also used to create reserve labour for
European plantations and mining (Seleti, 1990:34; Konczacki, 1977:82). The reduction of
the cost of labour in such regions to mere subsistence levels rendered the exports of the
colonies competitive, in comparison to similar goods produced in Europe and elsewhere.
Clearly, the formulation of such a structure was 'as much political as economic' 35 (Amin,
1972:115; Seleti, 1990:47). However, since the focus of this study is on the economic
aspect, we do not go further into such political considerations here. Rather, we would
simply observe that, during this period, an economic structure was set in place,
characterized by the export of primary commodities.
By the end of the colonial period, what had been achieved in all these macro-regions was
the creation of a commodity exporting economy and virtual monopoly of African trade
(both import and export) by Europe (see Hopkins, 1973: 174). The commodity export-led
strategy was vigorously followed during this period. As a result, not only did production
for overseas markets expand at a high rate, but also several new items (especially
foodstuffs) began to appear on the import list (Hopkins, l973:178). In some cases,
European business interests were so pervasive that they created a protected market, on
which to dump their manufactured goods36. Summarizing the stylized facts in the colonial
period, Konczacki (1977) described the economic pattern of what is called ‘matured’
colonialism37 as having three distinct components. Firstly, both imports (which were
mainly manufactured goods), and exports (mainly raw materials), were fixed with the
'mother' country. Secondly, capital investment in the colony was determined by the
trading interest of the 'mother' country, and concentrated in exporting enclaves. Finally, a
supply of cheap labour was ensured through a variety of mechanisms (legal, monopolistic
employment and through other economic and non-economic instruments.) (Konczacki,
1977:75-76). Finally, another important characteristic of this period relates to
technological change. For example, if one focuses on cotton production, during the

35
Pim places this at the center of his investment analysis and argues that the main investment was in areas
with extensive mineral wealth, plantation possibilities and a mass of unskilled labour. This involved heavy
expenditure in communications [infrastructure], which required an expansion of the export sector for its finance. The
latter, in turn, required a large labour supply, which was secured by direct and indirect compulsion, affecting every
aspect of native life (Pim, 1977:229). This is strikingly similar to the current pattern of China-Africa economic
engagement discussed in section four below.
36
France was in possession of such a protected market in West Africa. The protectionist policy was the result
of pressure from French metallurgical, textile and chemical industries, which had difficulty competing with Britain
(Hopkins, 1973:160). Portuguese industrialists had also created such protected markets in Africa, especially for their
textile industry (Seleti, 1990:36).
37
Portuguese colonialism does not qualify as ‘matured’ in his analysis.

21
colonial era, Africa ‘...was concentrating almost entirely on export of raw cotton and the
import of manufactured cotton cloth. This remarkable reversal [compared to the pre-
colonial period] is tied to technological advance in Europe and to stagnation of technology
in Africa owing to the very trade with Europe’ (Rodney, 1972:113). Colonialism further
exacerbated this situation. Thus, as Amin notes, when we speak of the exchange of
agricultural and mineral products against imported manufacture goods (i.e. the terms of
trade), "the concept is much richer: it describes analytically the exchange of agricultural
[and mineral] commodities provided by a peripheral society shaped in this [colonial] way
against the product of a central capitalist industry (imported or produced on the spot by
European enterprises)" (Amin, 1972: 115).
To sum up, it has been shown that African nations were in possession of an integrated and
autonomous economic structure prior to their intensive interactions with Europeans
during the colonial period. It is hard to speculate what the future of such a structure might
have been, in the absence of colonialism. However, it goes without saying that it would
not have been what it is now, since clearly the present is the result of this specific
historical process. More specifically, historical interaction with today’s developed
countries has shaped the structure of the economic activity of African nations, particularly
in the areas of international trade and finance. Indeed, economic domination,
accompanied by colonization, has further cemented this structure. Thus, given such
historical process it is not surprising to find that almost all African nations had become
exporters of a limited range of primary products, and importers of manufactured goods,
by the time of independence, in the 1960s.38 This was further accompanied by a demand
for external finance, when export earnings were not sufficient to finance the level of public
expenditures required for maintaining and expanding the commodity exporting economy.
This structure has not changed in any meaningful way in the post-independence era, as
discussed in the next section.

III. The Implications for the Post-Independence Africa

In the previous section I have shown how a primary commodity and external-finance
dependent economy has been created. The impact of the subsequent (after political
independence) events of the boom in commodity prices after independence, the oil price
shocks of 1973-74 and 1978-79 and the evolution of African external sector that include
indebtedness from the early 1980s onward would be difficult to understand unless an
explicit link is made between this historically formed structure as described above and the
pattern of trade and finance in the post-independence period. This section briefly
presents this phenomenon.

3.1 Commodity price cycles, growth and the African external sector
The pattern of African commodity prices and the attendant growth and external finance
issues in the post-independence period could be categorized into three periods: (i) the
first period related to a rise in commodity prices, with a brief decline in these prices by

38
In virtually all African countries, one to three commodities account for 50 to 90 per cent of total exports.
Indeed, in the period 1982-86, in 13 African countries 1 product, in 8 countries 2 products, in 6 countries 3 products,
and in another 8 African countries 4 products accounted for over 75 per cent of export earnings (see Adedeji, 1993).
This pattern has hardly changed today (see sections three & four below).

22
mid 1970s that followed by the second commodity price rise at the end of the same decade
– we may call this the “μ-curve pattern period”, (ii) the second period of a decline and
stagnation of prices, 1980-2000, and (iii) the third and the final period of sustained rise in
prices of commodities observed since the year 2003 – we may call this the “Chinese
period” (see Figures 1a and 1b). In this, third, period the continent saw the longest
commodity price rise in its history. Since this price rise is related to the emerging China-
Africa economic relation, it will be discussed at length in section four. Thus, we will focus
below in first two periods.
i) The first period of a rise in commodity prices (late 1960s- to 1980)
This period is characterised by a general rise in price of commodities that included the
first and second oil price shocks. The commodity price boom that began in early 1970s is
followed by a sharp but brief bust in 1974-76. Following this brief decline, the mid to the
end of the 1970s had witnessed the second oil price shock and the second phase of the
continuous rise in major commodity prices in 1978-1980. Following the first phase of this
price rise, Africa’s GDP grew by an average growth rate of 4.7 (from 1967-1974) per
annum39. As the second phase of this period was characterized by a brief downturn that
followed by a sharp rise in prices –a μ-curve pattern, in tandem with this pattern, after a
brief decline to 3.5% in 1975 (from the pick growth rate of 6.3% in 1974) GDP grew by an
average annual rate of 4.2% during 1975-1981.
Following this price rise, the response in most African countries has been a rise in
government expenditure in which imports of capital and intermediate goods (mainly to
develop infrastructure) increased40. This rise in public spending saw the seeds of the
continent’s financing problem in the subsequent period that followed the commodity
price decline and its volatility. International Financial Institutions (IFIs), the World Bank
and the IMF in particualr, were critical of this surge in public spending. True, there were
some domestic policy problems in managing public expenditure in some countries as
indicated by IFIs. However, in general the nature of public expenditure did not constitute
a reckless spending as is usually implicitly portrayed in the ‘policy problem school’ (ie.;
the IFIs) of the African literature. For instance, after the first oil boom in Nigeria, nearly
80% of public expenditure was on physical and social infrastructure. Capital expenditure
was twice that of current expenditure. Public expenditure on trade, industry and mining
rose from 7.3% in 1970-74 to 26% in 1975-80; transport from 21.3% to 22.2% in the two
periods while general administration dropped from 22% to 13.6% (Mohammed, 1989). On
the other hand, if we take another extreme case, contrary to the case of Nigeria, current
expenditure in Zambia was nearly 75% of total expenditure in 1970-74. This was largely
attributed to the Zambianisation policy, which itself is dictated by the inherited colonial
structure (Mwale, 1983). Nonetheless, from 1972 (strengthened in 1974) the government
of Zambia attempted to curb current expenditure. For instance, consumer durable import
39
The African growth rates in this section are based on World Bank, African Development Indicators (ADI),
2005 database. As argued by Jerven (2015) there was growth in this period, contrary to the picture given by the
‘policy problem’ school. However, this growth has decelerated and even become negative in percapita terms in the
1980s and 1990s. As will be argued in this study, this is strictly related to the dependence on primary commodities.
40
The analysis of the pattern of trade, public spending and finance based on a sample of African countries in
this section is drawn from the three regions noted in the previous section and given in detail in Alemayehu
(1998).The analysis is based on annual reports of Central Banks and Planning and Statistical offices covering 1970-
90. To ensure uninterrupted flow of the text, proper citation to these reports is not made here. However, the
references used are provided in Alemayehu (1998; 2002).

23
was reduced from 28% in 1974 to 18% in 1978. Similarly, subsidies, with attending
political costs, had been reduced in the 1970s (Mwale, 1983). In general, by the mid 1970s,
public and private consumption in Zambia had been substantially reduced from its high
level in 1970 (Mulalu, 1987). In Sudan, the rise in government expenditure following the
early 1970s was largely owing to decentralisation, infrastructure development and debt
servicing (Galil 1994, 31-33). This pattern was similar in many African countries
discussed in detail in Alemayehu (1998).
For oil importing countries the first oil price rise was also a major external shock. This
shock was tackled, partly by resorting to external financing in these countries. This was
the case in Ghana, Malawi, Sierra Leone, Tanzania, Zambia, Sierra Leon, for instance
(Mistry, 1988:7; Alemayehu, 1998; 2003). The same was true in Kenya (although the price
of coffee and tea rose in the first half of the 1970s but fell in the second half leading Kenya
to finance its balance of payment deficit by a rise in private capital inflow). Malawi also
experienced similar problems, and private capital inflows (especially of supplier’s credit)
were important in tackling the balance of payment difficulties. When the commodity
prices briefly fell beginning in 1975, governments were not only unable to cut expenditure
but also in need of maintaining ongoing projects. This has been accomplished by
increased borrowing owing to improved credit worthiness when prices of export
commodities rose beginning around 1977 and due to belief in the cyclical nature of prices
when commodity prices decline (see Figures 1a and 1b). This pattern of trade and finance
was common in a number of countries examined in detail in Alemayehu (1998).
In this first period, the early 1980s was also characterised by a hike in real interest rate in
industrial countries, chiefly due to lax fiscal and tight monetary policy of the USA. By
1981, the real foreign interest rate was 17.4% compared to -17.9% in 1973 (Khan and
Knight 1983, 2). The latter aggravated the interest rate cost of non-concessional and
private debts that became increasingly important during this period (Alemayehu 2003).
This development prompted many African governments to continue borrowing (and get
credit) on the assumption of a cyclical turn around in commodity prices. This is
understandable given the short period decline and quick turnaround (the μ-curve pattern)
of commodity price between 1974 and 1978 (see Figures 1a and 1b). This pattern was
compounded by another development in the global financial markets. The oil price hikes
not only forced oil importers to become more dependent on borrowing, they also created
what is called the OPEC surplus – pax-Arabica? (Bacha and Alejandro 1982). This
surplus was circulated through the international banking system. The Euro market
became an important source of financing for a number of African countries, which had
never borrowed before (Mistry 1988). This situation that began in the wake of the first oil
price shock was reinforced by a second oil price shock (Salazar-Carrillo 1988 in Taiwo
1991, 39; Ezenwe 1993). The new funds borrowed were spent on mining companies and
major public projects. But, in general, these loans were characterised by harder terms.
When the second oil price shock came in the late 1970s, with commodity prices declining
since the 1980s (Fig. 1a &1b), most countries were unable to absorb the shock.
Thus, as argued by the ‘policy problem school’, following the rise in commodity price and
access to loans there was a rise in public expenditure. However, this in itself did not
constitute a mistake. Given the inherited colonial structure that necessitated spending on
social and physical infrastructure to address the problem of the hitherto neglected
sections of the population; prevailing hope in technology transfer through import

24
substitution; and the uncertainly about commodity prices, the expenditure was not
reckless. In fact, the relative share of functional expenditure hardly changed following the
commodity boom of 1973-74 and 1976-77. The capital expenditure did change, however,
owing, as noted above, to the import substitution strategy and the spending on
infrastructure pursued (see Alemayehu 1998). In retrospect, it might appear a policy
problem. However, it is difficult to expect that such infant government structures (which
themselves were the result of the historic structure noted in the previous section) would
have had full foresight of commodity price decline and could managing spending
accordingly41. Even had they had such insight, the root cause of the problem was the
specialization in primary commodity trade. The policy problem that emanated from
failing to predict commodity price collapse and mange demand accordingly was a
secondary one.
Perhaps the major domestic policy problem associated with the rise in government
expenditure in this period was the way in which the import substitution (IS) strategy was
conducted. While the IS strategy was a sound one, it was carried out in the context of a
disarticulated production and consumption structure (i.e.; neglecting the industrial and
agricultural linkages) as it was largely based on the urban elite's patterns of consumption.
The strategy was also characterized by failure to plan future demands for recurrent cost of
intermediate inputs; as well as failure to develop the human capital and the export sector
required to sustain it simultaneously. From politics and policy making perspective, as
argued by Mkandawire (2001), the IS strategy in Africa “..was neither the result of
successful lobbying by rent seeking groups [African entrepreneurs] nor a consciously
devised strategy to support the emergence of national bourgeoisie” – it was never a “class
project”. This has also limited its successes. In conclusion, notwithstanding such possible
policy mistake, the fundamental problems emanate from the historically created
structure and the resulting policies are reflections of this reality and hence secondary in
importance42 (Alemayehu, 1998, 2002).

41
Let alone the then African governments’, even international institution like the IMF which was supervising
some countries’ economic evolution like Zambia did not foresee some of the events. Observing this, Mulalu (1987)
noted the irony of IMF blame of the Zambian government despite its close monitoring of that country from 1975.
42
One common view in this debate is that East Asian countries (such as Korea, Taiwan, Singapore and Hong
Kong) which were under colonial rule have developed while Africa is not. Such argument is weak because the
historical parallel is completely different. Hong Kong and Singapore prospered as enterpots owing to direct British
colonial interest. Moreover, they are city states incomparable to African colonies. Probably the only comparable
country is Korea and to some degree Taiwan. However, the Japanese colonialism (which of course was as harsh as
the others) had an aim of creating heavy industry and self sufficiency in its empire, and, hence, has done better than
the colonizers in Africa. Some figures may substantiate this point. Taiwan and Korea experienced higher GDP
growth than their colonizer (Japan) during 1911-1939; their infrastructure has also developed (Taiwan having 600
kilometres of rails and 3,553 kilometres of road where there were none before). The establishment of the industrial
base by Japan in Korea which subsequently contributed to Korean industrialization is also a well established fact in
Asian studies (see Amsden, 1989). By the end of the colonial period primary school enrolment in Taiwan stood at
71% and similar pattern is observed in Korea (this was almost none in Africa). Owing to geopolitical factors (the
cold war) Korea, for instance, obtained US $6 billion grants from USA during 1946-78 compared to US $6.89
billion for the whole of the 50-plus African countries. US military delivery to the two countries in 1955-78 stood at
US $9 billion, the combined figure for Latin America being US $3.2 billion- with significant economic impact (see
Chowdhury and Islam 1993). In Korea alone aid financed nearly 70% of total imports and equalled 75% of total
fixed capital formation (See Haggard 1990 who also provides the political economy of this event). Hopefully, these
points show that this experience is incomparable to the situation in Africa.

25
An alternative way of viewing this phenomenon is to consider the additional external
finance (which eventually turned into debt) requirements of African countries as a policy
response to the external shocks they were facing (Balassa 1983 and 1984; Ezenwe 1993).
The question, then, is whether such policy responses were rational. Should the shock be
seen as a temporary one? Both on the part of African governments and their creditors,
these shocks were believed to be temporary. Given this belief which implicitly has the
expectation of an eventual rise in commodity prices, and given the then prevailing low
real interest rate which was even negative (see Khan and Knight 1983), it seems rational
that both lenders and borrowers responded in this way. As it turned out, the frustration of
these expectations (secular decline in commodity price and rise in real world interest rate
since 1980) put an enormous burden on Africa and not on Northern creditors.

Figure 1a: World Commodity Prices Trend, 1960-2014

400.0
The 1st Period The 2rd Period The 3td Period

200.0

0.0
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Price index - All groups (in terms of current dollars)
ALL FOOD
AGRICULTURAL RAW MATERIALS
MINERALS, ORES AND METALS

Source: Author’s Computation using UNCTAD database, 2015

Figure 1b: World Commodity Prices Trend, 1960-2011

Copper Pice Trend,1960-2011 Gold Price Trend,1970-2011

6000 2000
5000
1500
4000
3000 1000
2000
500
1000
0 0
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008

1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009

26
 Coffee Price trend ,1960-2011 Cocoa Price Trend,1960-2011
200
250
150
200
150 100

100 50

50 0

1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
0
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
Cotton Price Trend,1960-2011 Crude petroleum Price Trend,1960-
200 2011

150 400
300
100
200
50 100
0 0
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008

1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
Source: Author’s Computation using UNCTAD database, 2012

(ii) The second period of a decline in commodity prices (1980s-and 1990s)

The second period begins in the 1980 and covers the whole of the 1990s. The hike in price
eventually began to decline after 1980 prompted, inter alia, by the recession in the
industrial countries (Figures 1a &1b). This period was generally characterised by
continually declining commodity prices and the deterioration of the terms of trade of
Africa. During this period, according to World Bank data, GDP growth decelerated to an
average annual growth rate of 2.8% in the 1980s (1982-1989) and further down to 2.4% in
the 1990s (1990-1999). These are growth rates below the population growth rate and
implied a decline in percapita income growth in the continent43. For the period 1985-90,
when a large number of African countries undertook structural adjustment programs

43
In fact the ECA (1989) data shows much worst performance where the average GDP growth for the whole
region and the period 1980-87 was just 0.4% ; this low figure is influenced significantly by the significant negative
growth (-8%, 1980-81; and -1.5% during 1980-87) effect of strongly adjusting SAP implementing countries,
according to ECA. Thus, per capita income which was already low at the end of 1970s has decelerated by 2.8% per
annum during this time. Unlike ECA, but being a litter different from the World Bank, the UCTAD data for the
1980s and 1990s shows a GDP growth rate of 2.2 and 2.3 %, respectively -percaptia growth being negative in both
periods. Notwithstanding such difference, all the sources indicate a decline in percapita income of the region.

27
(SAPs), the deterioration in the barter terms of trade of nine major export commodities
resulted in a 40% decline in average export revenue (compared to the 1977-79 average),
despite a 75% increase in export volume (Husain 1994:168). Across the continent
countries were suffering from shortage of foreign exchange and growth deceleration. As a
result, apart from investment in infrastructure which needed external finance for its
maintenance, almost all countries had also become dependent on external finance for
securing imported intermediate inputs and ensuring the smooth functioning of their
economy. In addition, servicing of the growing external debt put both fiscal stress and
eroded the foreign exchange reserves of countries, which might otherwise have been
available for purchase of imports. The latter has led to the ‘import compression
problem’ in which shortage of foreign exchange adversely affected levels of public and
private sector investment and production activities – and, hence, growth. This recurrent
import demand problem was compounded by actual running down of the capital stock,
including infrastructure built following independence (See Ndulu, 1986; Ngwenya and
Bugembe, 1987; Fantu, 1991; Rattos 1992; Mbelle and Sterner, 1991; Alemayehu 2002).
The SAPs followed in this period have also aggravated the economic crisis44.
Starting from the late 1980s such historically structured African economies were also
vulnerable to global events such as the industrialised economies recession, following the
global monetary shock of 1979-81, which depressed commodity prices. This is also a time
when the world economy witnessed: (i) the emergence of high, positive real interest rate
throughout the 1980s which increased the debt service burden of indebted countries, (ii)
protectionism in the world market for agricultural products and low technology
manufacturing which hampered diversification attempts and, finally, (iii) the prevalence
of repeated official and private debt rescheduling, often at punitive terms (Mistry 1991,
10-11). This generally led to a major debt problem by the 1990s (Alemayehu, 2003).

3.2 Implications for external finance problems of the continent

44
The impact of SAPs both in Africa and other developing countries is a contested issue in the literature.
Suffice to note that at times books are produced with conflicting results (see for instance Sahn et al 1997 whose
book basically says adjustment was good for the poor and Mohan et al (2000) who reported the opposite). The
overwhelming evidence on Africa, however, support the view that the obsession with SAPs was not only bad for
growth and poverty reduction (growth decelerated and stagnated at best during SAPs period) but also carried out at
the expense of more important policies aimed at bringing about structural transformation to address the structural
problems of Africa inherited from the colonial period. After a review of SAPs’ studies in Africa, Klick’s conclusion
is revealing. He noted “Given shortfalls in implementation [sic] and the limited impact of SAPs on policy variables
(to say nothing of a tendency for SAPs to be associated with reduced levels of capital formation), it would be
surprising if they had accelerated economic growth to an extent that would make much contribution to the reduction
of poverty. The result of research on the growth effects of SAPs in Africa (or in low-income countries) bears out this
skepticism.” Elbadawi (1992) has also obtained no significant growth effect in African countries that implemented
SAPs. Klick’s survey further shows that Faini et al (1991) and Mosley et al (1991) find no consistent influence in
either direction for low-income countries. Klick (1995a, cited in Klick, 1999) concluded that there is little evidence
that IMF programmes are associated with any significant change, in either direction, in the growth rates of
programme countries (all cited in Klick, 1998). ECA (1989), on the other hand, noted the effect of SAPs on growth
to be negative. Thus, according to ECA, strong adjusting countries saw their GDP growth declining by 1.5% during
1980-87 (in the initial years this being as low as negative 8%). On the other hand, weak adjusting and non-adjusting
countries performed better, having a growth rate of 1.2 and 3.1 percent, respectively, during the same time (ECA,
1989).

28
The first implication of this historically formed pattern of trade for external finance
condition of the continent is that by the end of 1990s African countries found themselves
not only being extremely indebted but also structurally unable to pay back their debt.
Debt by the end of the 1990s reached US$ 324 billion, 20 fold the level in the mid 1970s
(Table 1). Moreover, the capitalisation of amortisation and interest payment through the
Paris and London clubs rescheduling had also pushed the debt stock upward in many
African countries (van der Hoeven 1993) – the latter constituted nearly a quarter of the
external debt burden of the continent (Alemayehu, 2003; Table 1).This pattern is
observed across countries in the continent as can be read from the central banks and
Ministries of finance reports of many countries described in detail in Alemayehu (1998).
By 2013, compared to 1970, the total external debt of Africa has increased twenty-eight
fold to more than USD 482 billion. The major component of this debt are official flows,
and about two-third of it is generally obtained on non-concessional terms (Table 1).

.Table 1: Indebtedness in Africa (Average Annual, in billions of USD, unless stated otherwise)
1970-74 1975-791985-89 1995-99 2000-05 2005-10 2011 2012 2013
Total External debt stocks (EDT,DOD) 17.1 61.7 228.4 323.7 311.9 314.0 397.2 447.6 482.3
Multilateral debt, PPG (% of total) 8.9 9.6 14.6 20.9 25.1 22.3 20.8 19.7 20.2
Bilateral, PPG (% of total) 50.5 35.4 38.8 39.7 38.2 26.3 20.6 18.5 19.8
Private creditors. PPG ( % ) 25.1 32.6 27.7 16.6 14.3 17.1 19.7 22.3 23.0
Net transfers on debt, total (US$) 2.0 10.5 1.9 -5.9 -9.8 1.1 19.6 30.6 30.2
Concessional debt/Total debt (EDT) (%) 47.4 33.6 28.2 37.0 42.4 37.7 32.1 29.3 30.9
Total debt stock/Exports of goods
&services (%) 101.0 684.0 1476.50 806.0 851.3 355.7 335.5 375.8 319.2
Total debt sock (as % of GNI) 97.4 221.6 395.0 306.3 230.2 140.6 123.6 135.9 137.7
ODA (% of Public Expenditure)* 21.35 32.26 32.6 21.1.5 22.73 89.1* 68.7* 55.3* -
Source: Author’s computation based on WB, Int’l Debt Statistics Database 2015 (All Africa, except Libya), and ADI, 2013
*From 1970 to 2000-05 for all Africa countries based on ADI (2013) data; and from 2005 onwards based on WDI, 2015 for 17
SSA countries for which complete data is available;

Second, the continent’s economic crisis in 1980s widened the role of multilateral and
bilateral finance despite being available at unacceptable terms – policy conditionality.
Thus, another major development in the 1980s and 1990s was the growth of bilateral and
multilateral debt especially that is owed to the World Bank, IMF and African
Development Bank (Table 1). The main reasons for this were: (a) the stepping-in of these
multilateral banks to finance the partial bail-out of commercial banks and countries in
distress in the 1980s and 1990s (Alemayehu 2003), (b) the fact that these debts were
denominated in SDR and ECU while most African countries earned their currency in US
dollars, which had depreciated against both SDR and ECU for the 3o years before this
time that aggravated this type of debt (see Mistry, 1994, 1996) 45 and finally (c) since the

45
According to Mistry (1996) if this fact is taken into account one needs to question the concessionality of
this debt. For instance the effective average annual exchange rate-risk adjusted cost of Africa’s concessional debt in
US dollars may be between 4-6% annually instead of the 1% or lower coupon rate which such debt nominally carry.
Besides, the residual principal value of the concessional debt which needs to be repaid had increased by 30 to 45%
in US dollar terms, aggravating the debt servicing capacity problem of African countries. Thus, with this effect such
‘concessional’ debt is as expensive as market debt. This exchange rate effect not only effectively reduced the

29
1980s IFIs were convinced that the African economic crisis is a policy problem as noted
in section one. The latter entailed a rise in multilateral and bilateral flows following the
acceptance of the conditionality based policy packages aimed at correcting these “policy
problems” - the SAPs initially and the PRSPs lately. In addition, since private capital
inflows such as FDI, portfolio and bank flows were not generally important in Africa
during this period (FDI being just US$5.5 billion or 1.5% of global FDI inflow in 1996),
the dependence on multilateral and bilateral flows was significant (see Table 1).

Third, the SAPs not only aggravated the crisis in the 1980s and 1990s but also were
accompanied by significant outflow of capital from the continent – this seems in line
with the empirical regularity of the inverse relationship between economic performance
and capital flight in the continent (see Alemayehu and Addis, 2016). Although the share
of African debt as a proportion of the total debt of all developing countries is low, the
relative debt burden born by African countries compared to their debt servicing capacity
is extremely heavy (debt service to export share being 1470% in 19985-90, over 800% in
1995-99 and over 300% today).Regarding such debt creating flows to Africa, although
‘total such inflows’ to Africa were generally positive, ‘net transfer on debt’ (i.e.;
excluding grants and net FDI from total inflows on debt) to the continent which was
positive in the 1970s (USD 62.5 billion) and 1980s (USD 44.4 billion) became negative
since the 1990. That is, there was actually an outflow of capital from Africa worth 125.7
billion in the period 1990-2006. This became positive only after 2009 (see Table 1).
Moreover, in the 1990s, nearly 35% of grants to Africa, in fact, went back to ‘technical
experts’ that usually come from donor countries (Alemayehu, 2003). This is in addition
to unrecorded capital outflow in the form of capital flight that Ndikumana et al (2015)
estimated for 39 African countries during 1970-2010 at US$1,273.8 billion (at constant
2010 US$). The latter is more than three times the total stock of debt owed by the
continent, thus, making Africa a net lender to the rest of the world. Primary commodity
trade and debt creating flows are both the vehicles and the sources of such capital flight
(see Alemayehu and Addis, 2016).

Fourth, the indebtedness and foreign exchange constrained nature of growth in the
continent led to a fiscal and foreign exchange stress. The accumulation of debt results in
a ‘debt overhang’ problem, which together with shortage of foreign exchange tends to
undermine the confidence of private investors. A decline in levels of private investment
as a share of GDP from the late 1970s onwards as well as the high level of fiscal deficit in
many countries in the continent during this time could partly be attributed to this factor
(Elbadawi et al., 1997; Alemayehu, 2003). The combined effect has contributed to the
depressed growth in the 1980s and 1990s. The fiscal deficit has also led to the
dependence of financing the deficit through aid (ODA) and monetisation. Thus, from
mid 1970s on wards ODA as share of public expenditure ranged from 21 to 33% for the
continent (and from 55 to 89 % for 17 SSA countries during 2005-2013) (Table 1). In
2003, net ODA to Africa reached a record high level of US$ 26 billion.

concessionality of such debt (form 80% which donors usually say to 40-50%) but also made African countries
vulnerable to macroeconomic policies of industrialized countries (Mistry, 1996: 26).

30
In sum, the historical legacy of dependence on primary commodity has made the
African economy and its growth disproportionally dependent on the external sector
(external trade and finance). This has taken shape through three interrelated
phenomena. First, the cyclical nature of commodity prices led to indebtedness of the
continent. It also ushered the importance of commodity trade both to service this debt
and secure new debt creating flows. This has further strengthened the dependence of
Africa on primary commodity trade in the post-independence period. Second, growth
has also accelerated and decelerated in tandem with this commodity price cycles. Such
growth performance coupled with the mounting debt burden indicates that African
countries were incapable of simultaneously servicing their debt and attain a reasonable
level of economic growth and poverty reduction by the end of the 20th century. Thus, we
note, as one of the legacy of the colonial structure, the external finance problem of the
continent may not be solved by mere debt cancellation (and this has been attempted in
the past)46 because the African external finance problem is essentially a manifestation of
its trade problem (Alemayehu, 2002, 2003).

3.3 Summing Up

In finalizing this section, it is interesting to ask whether the financial, physical, human
and institutional ‘capital’ inventories from colonial era have somewhat reproduced
themselves in the post-independence period. The answer is unfortunately in the
affirmative. There are at least four fundamental reasons for this. First, the demand from
the previous colonial powers and hence the pattern of trade and finance is not
fundamentally changed (see next section on China, however). This old division of labour
was strengthened by what is called the Lomé Convention (Amin 1996) and the Economic
Partnership Agreement (EPA) with Europe. Second, the new agents that came to power
after ‘independence’ attempted diversification. This was largely a failure not only due to
failure in the conceptualisation of the whole process of IS as we noted above, but also
fundamentally because such efforts required huge investments with significant foreign
exchange component, which were beyond their capacity. This severely limited the policy
options available. Third, on continental political front, despite both the politically
radical, i.e., radical departure from colonial pattern – Casablanca (Nasserism, Algerian
FLN, Nkrumahism and to a degree followers of Lumumba), and the moderate, i.e.,
adaptation to the pattern – Monrovia groups (Ivory Coast and Kenya being the main
ones) after ‘independence’, have been reconciled to an African perspective by Emperor
Haileselassie of Ethiopia and hence the formation of the OAU in 1963 (Amin 1996), their
subsequent existence in power is informed by myopic pursuit (or maximisation) of
short-run gains subject to the constraint of inherited trade and financial structure. This
necessarily implies relying on primary commodities and loans instead of structural
transformation. This is aggravated by selfish leaders engaged in looting the continent
and engaging in capital flight. The OAU/AU as an institution of these countries has also
failed to realize its long term structural transformation objective agreed upon in the

46
The Highly Indebted Poor Countries (HIPC) initiative that was on the table since 1996 was partly triggered
by the recognition of the severity of this debt problem. However, it was not only besieged by much conditionality
but also didn’t offer a lasting solution to Africa’s external finance problem which is intricately related with trading
in primary commodities. Thus, countries found themselves as indebted as before no sooner than they get debt
cancelation.

31
Lagos plan of action in early 1980s (OAU, 1981) as well as in the late 1980s (ECA, 1989).
Finally, from policy perspective, as noted in section one, since the early 1980s the
economy of Africa was essentially (miss) managed by the Bank and the Fund, which
itself was generally a failure. Thus, regarding such lack of “policy ownership”, not only
at that time but also even today, as noted by Mkandawire (2001), “…lack of policy
ownership [was] not a new thing in Africa, and, alas, [it is] not a thing of the past”.
Sadly, this structure has not changed in any meaningful way by the beginning of this
century either. Today, as has been the case during the early independence period, based
on the average figure for the period 2004-2009, 40 of the 54 African countries are
dependent on 1 to 10 commodities for more than 75 percent of their export earnings; 28
of these being dependent on just 1 to 5 commodities (Alemayehu, 2012) 47. Thus, the
structural problems remained to date. Today, the emergence of China and India as
important economic partners of the continent is strengthening this pattern of trade and
finance by raising the price of major African commodities, triggering new resource
discoveries and raising indebtedness. This, ‘the third’ or ‘Chinese period’ in terms of the
African commodity price cycles since independence (see Figure 1a), is discussed next.

IV. Is History Repeating Itself? The Current Africa-

China Economic Engagement & Its Implications
In the last two decades, Africa is becoming an important trading partner of China and
the emerging South (the BRICX, henceforth)48. This is related to the significant mineral
resources of the continent and its potential in terms of market and cheap labour having
a population of over a billion. It is estimated that the continent hosts about 30% of the
world’s total mineral reserves and even a higher share of deposits of diamonds,
vanadium, manganese, platinum, cobalt and gold (ADB, 2015; JRank, 2015; Table 1).
Such potential resources and market are not only leading to the growth of China-Africa
trade but also bringing significant flow of Chinese finance to Africa. This has brought
both challenges and opportunities. These issues are examined in this section.

47
This is not unique to Africa either. Citing South Centre (2005), Brown and Gibson (2006) noted that 95 of
the 141 developing countries derive at least 50 per cent of their export earnings from primary commodities.
48 The analysis in this section draws from a wider study for eight emerging South economies (developing
countries) that could be referred as BRICX. The term refers to Brazil, Russia, India, China as well as other emerging
South countries (X) that includes the Republic of Korea (South Korea), Malaysia, Turkey and Thailand that have
relatively significant impact on African trade and finance. South Africa is left out of this category deliberately so as
to present it as part of Africa. Owing to disproportionate share of China among these countries, I have focused on
China. This is because, for instance, Africa’s exports to the BRICX in 2015 is about 24% of its exports to the world,
of which half of this (11 percentage points of the 24%) went to China, followed by India (7 percentage points of the
24%). Similarly, in terms of imports 32% of Africa’s imports from the world in 2015 came from these countries-the
Chinese and India’s share being 18 and 5 percentage points of this, respectively. In terms of finance China
dominates all (see below). Apart from this relative share, the rapid rate of growth of Africa-China trade and finance
and its potential warrants a separate section for analysis. Despite the focus on China, the analysis in this section
could equally be generalized for the other BRICX too.

32
 Table 1: Africa’s Major Mineral Potential: Production and Reserves (% World Total)
Mineral Production Reserves Major African Producers
2005 (%) (%)
Aluminium 15-25. 45 Mozambique, S. Africa, Cameroon, Egypt, Ghana
Chromium 50% Africa [Coastal belt of West Africa from Guinea to
Togo, with the largest reserves in Guinea]
Cobalt, refined 51.8 54.5 DRC, S. Africa, Madagascar, Sudan, Zimbabwe
Diamond 57.3 75 Angola, Botswana, C.A. Republic, DRC, Cote d'Ivoire,
Ghana, Guinea, Liberia, Sierra Leone, Tanzania
Manganese 44.4 26.1 Morocco, S. Africa, Algeria, Namibia, Tunisia
Phosphate 31 Egypt, Morocco, Senegal, W. Sahara, S. Africa, Togo,
Tunisia
Gold 47.6 54.7 S. Africa, Algeria, Benin, Botswana, Burkina Faso,
Burundi, Cameroon, DRC, Cote d'Ivoire, Ethiopia,
Gabon, Ghana, Guinea, Mali, Namibia, Niger, S.
Africa, Sudan, Tanzania, Uganda, Zimbabwe
Bauxite 11 43 Ghana, Guinea, Sera Leone, Mozambique
Nickel 7.5 9.4 Botswana, S. Africa, Zimbabwe, Morocco
Copper 15 (2007) 17 Zambia, Botswana, DRC, Morocco, Namibia, S. Africa,
Tanzania, Zimbabwe
Oil 12.5 (2007) 10 Algeria, Angola, Cameroon, Chan, Rep of Congo,
Egypt, Equatorial Guinea, Gabon, Libya, Nigeria,
Sudan, Tunisia, Ghana*, Uganda*, Kenya*
Natural Gas 6.5 (2007) 8.2 Algeria, Egypt, Libya, Nigeria, Ethiopia*, Tanzania*,
Mozambique*
Uranium 15.9 18 Niger, Namibia, S. Africa
Platinum 45 90 S. Africa 97% Africa or 88% of World; Zimbabwe
Aluminium 15. 45 Mozambique, S. Africa, Cameroon, Egypt, Ghana
Source: Based on Custers and Matthysen (2009) and JRank (2015) * discovered recently.

4.1 Trade with China: Akin to ‘the imperial self sufficiency

scheme’ of the colonial period?
4.1.1 The Emerging Pattern of Trade, Trade Balance and Its Potential

The share of the emerging South (the BRICX) in Africa’s export to the world reached
24% in 2015, up from 13.5 % in 1995. The comparable figure for imports of Africa from
these countries being 32.3% in 2015 - up from 10.65 % in 1995. Among the emerging
economies China and India, followed by Brazil, are the most important trading partners
to the continent (see Figures 1 and 2.). Trade between Africa and China, for instance,
surged from US$ 3 billion in 1995 to over US$200 billion in 2015. Despite this surge,
Africa makes up only about 2% of China’s world trade. This constitutes, however, about
12% of Africa’s world trade. This Africa-China trade is expected to expand a lot since the
two managed to exploit less than 13% of the trade potential between them (Alemayehu
et al, 2013; Alemayehu, 2013). In addition, trade similarity index based empirical
analysis shows that, on the average about 40% of all African economies' export structure
matches with the import structure of China, India, and South Korea. This shows a
reasonable match and potential although there is significant variation among individual
African countries' export structure and the import structure of these countries. When

33
this finding is taken together with the fact that the import structure of Africa (which is
manufactured goods) matches very well with current export structure of the BRICX, the
potential trade between Africa and China/BRICX is even larger (Alemayehu et al 2013).

According to Edinger and Pistorius (2011), China is the top consumer of key resources,
consuming about 30% of global aluminium and copper resources, 40% of iron ore and
lead, and more than 50% of coal. If we take just copper as illustration, according to Dyer
(2006, cited in Brown and Gibson, 2006), in 2003 China overtook the U.S. as the
world's largest consumer of copper. By 2004, it was consuming 46 per cent more copper
than the U.S. and accounting for 20 per cent of global demand. China is also the second
largest consumer of oil after the USA, importing about one quarter of its oil needs from
Africa. Based on 2010 data, over 93% of Africa’s exports to China are based on “natural
resources”: metals, minerals, and petroleum products—a similar structure as Africa’s
exports to the USA and other partners. The small remainder is in most part made up of
timber, cotton, and primary agricultural products (Sandrey and Edinger, 2011, cited in
Edinger and Pistorius, 2011). This has hardly changed in 2015. Thus, engaging in the
African resource sector is strategically an important issue for China. Partly as a result of
this, the African pattern of trade is shifting, and also bound to change in a significant
manner, from African traditional partners such as the EU and USA to China - the EU
and, in particular, the USA share continuously falling in the last decade49.

Figure 1: Share of Emerging Economies in Africa’s Total Export (to the World), in %.

23.7
Total Emerging Economies
1.3
Turkey
0.4
Tahiland
0.4
Russian Federation
1.2
Republic of Korea
0.5
Malaysia
7.0
India
10.6
China
2.2
Brazil

0.0 5.0 10.0 15.0 20.0 25.0

2015 2011 2005 2000 1995

Source: Author’s Computation based on UNCTAD 2016 data

49
EU’s and USA’s share as destination of Sub-Saharan African exports has declined by 15 and 10 percentage
points between 2003 and 2013 while China’s and India’s share of this has increased by 21 and 7 percentage points,
respectively, during the same time. The share of China, EU, USA and India in SSA exports in 2013 being 27, 23, 10
and 9 percent of the total, respectively (see Pigato and Tang, 2015).

34
 Figure 2: Share of Emerging Economies in Africa’s Total Import (from the World), in %.

32.3
Total Emerging Economies
2.4
Turkey
1.2
Tahiland
1.5
Russian Federation
2.0
Republic of Korea
0.9
Malaysia
4.6
India
18.2
China
1.6
Brazil

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

2015 2011 2005 2000 1995

Source: Author’s Computation based on UNCTAD 2016 data

Although Africa is benefiting from the rising demand and hence prices for its
commodities, it registered an overall deficit with China and the emerging South since
the early 2000. The trade balance with India and to some degree with Brazil was
generally positive throughout, however (Alemayehu 2013, 2017b). With regard to
Africa’s trade with China, except to the brief recovery from the 2008/09 global
economic crisis, and hence, a trade surplus observed in 2010 and 2011, the trade balance
of Africa has continuously deteriorated since 2003 (Alemayehu, 2017b). Generally, we
may conclude that African trade with the emerging South was almost in balance in the
late 1990s.This begun to deteriorate after this period. However, this picture of balanced
trade by the late 1990s and the moderate deficit then after masks a sharp deterioration
in Africa’s “non-Mineral fuels” trade balance with these countries in the entire period.
When mineral fuels are excluded, Africa has a negative trade balance with each of the
emerging economies for more than two decades. This deterioration of the Africa trade
balance is most evident in the case of trade with China. With a deficit of about USD 82
billion in 2015, China is driving the group’s average deficit further down (Figured 3).

35
 Figure 3: Total Trade Balance excluding Mineral fuel, lubricants and related materials
exports of Africa with the Emerging South (In Billions of USD, 1995-2015)

20.0

0.0

-20.0 -15.7

-40.0

-60.0

-80.0
-82.2
-100.0
Brazil China India
Korea, Republic of Malaysia Russian Federation
Thailand Turkey

Source: Author’s computation using UNCTAD 2016 data

In sum, countries in the emerging South, compared to their imports, do export more to
Africa in 2015 – this is the reverse of the pattern observed 5 years ago. Second, generally
China followed by India and Brazil are the most important trading partners of Africa.
Third, most of Africa’s exports are mineral fuel, lubricants and related materials,
products which have widespread demand in BRICX, except in Russia, and are
characterized by supply-constrained markets in the world (UN, 2010). Its imports are
manufactured goods, however. The nature of these goods and the concentration of this
trade are further described next.
4.1.2 The Nature f Commodities Traded and the Direction of this Trade
The bulk of African imports from the emerging South are in the category of
manufactured goods. This constitutes over 70% by 2015. As noted by IMF (2010) and as
given by Figure 4, the nature of manufactured goods imported did not change much in
terms of skill and technology intensity over the last decade. They are characterized by
low and medium skill technology intensity (about 50%). Labour-intensive and resource
based manufacture products rank next (about 24%). This leaves manufacture goods
with high skill technology intensity to be about 19%. This latter category generally refers
to the increasing importance of construction machinery imports from the BRICX in
general and China in particular in relation to the growing construction activities of these
countries in the continent (UN-OSAA, 2013; Figure 4). This structure of imports has a
detrimental impact on the continent’s structural transformation (see below).

36
 Figure 4:Manufacture Export technology intensity & Structure of BRICX Exports to Africa (% total merchandise
exports to Africa, 2005-2011)
1.88
2011 24.34 25.91 28.88 18.99
1.81
2010 23.42 25.45 30.56 18.76
1.77
22.27 25.69 30.83 19.44
2009
33.54 1.51
2008 21.42 24.63 18.89
31.03 1.53
2007 25.17 23.60 18.68
24.43 30.78 1.50
2006 25.05 18.24
1.56
2005 25.18 25.42 29.52 18.32

0% 20% 40% 60% 80% 100%

Labour-intensive and resource-based manufactures
Manufactures with low skill and technology intensity
Manufactures with medium skill and technology intensity
Manufactures with high skill and technology intensity

Source: Authors' computation based on UNCTAD 2016 data

In contrast to the well diversified manufactured goods dominated export of China (and
the BRICX) to Africa, most of Africa’s exports to China and BRICX comprise
unprocessed primary commodities that include mineral fuel, lubricants and related
materials, of which oil and gas takes the major share (UN, 2009; Figure 5). In 2005,
mineral fuel, lubricants and related materials accounted for 77.7% of Africa’s exports to
China. This has declined to 60% in 2015. Mineral fuel, lubricants and related materials
exports also accounted for more than half of Africa’s exports to the other emerging
economies in 2015 (UN, 2010; Figure 5). Exports of non-oil primary commodities have
also risen rapidly, particularly to China, India and the Republic of Korea, save the slight
decline during the 2008/09 global economic crisis. Generally unprocessed primary
products account for more than 80 per cent of the total imports of the emerging South
from Africa. Malaysia and the Russian Federation are the exceptions in this as both of
them are also important oil-producers (see Figures 5).

37
 Figure 5b Proportion of Mineral fuel, lubricants and related materials in Africa’s Total Export to
Emerging South (2005-2015)

100.0 90.7
84.0 77.7
76.7
80.0 65.9
59.5 58.9
60.0 54.2
36.9 39.7
40.0 31.7 30.2
18.7
20.0
3.1 0.2 0.9
0.0

2005 2015

Source: Author’s computation using UNCTAD 2016 data

The Direction of China-Africa Trade
Notwithstanding the Chinese (BRICX) engagement with all countries in the continent,
in substance this engagement is limited to a few countries. As can be gleaned from
Figure 6, China’s (84%), Thailand’s (70%), Republic of Korea’s (56%) and India’s (52%)
imports from Africa originate predominantly from seven countries. It is only Russia for
which dependence on these seven countries is less than a quarter.
Figure 6:Total Imports of Emerging Economies in 2015 from the Dominant-Seven African Countries (South Africa,
Nigeria, Algeria, Angola, Congo, Sudan, and Dem. Rep. of Congo) as % of African total

Turkey 39.4
Tahiland 70.4
Russian Federation 22.7
Republic of Korea 55.8
Malaysia 32.4
India 51.6
China 84.4
Brazil 46.4

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

Source: Author’s Computation using UNCTAD, 2016 data

Chinese (and other BRICX’s) exports to Africa are also concentrated in few African
countries. Figure 7 shows BRICX’s export is concentrated in Algeria, Angola, Egypt,

38
Ghana, Kenya, Morocco, Nigeria, South Africa and Tunisia. In 2015, these nine
countries were a destination for 65% of the BRICX's exports to Africa -this figure is over
80% for Russia and Brazil. The fact that these important market destinations are
countries characterized by relatively rich, dynamic and well diversified economies and
endowed with a growing middle class suggests at the importance of growth and
structural transformation in Africa to enhance the China/BRICX-Africa trade that could
be in the interest of both.
Figure 7: Share of Nine African Countries in Total Export of BRICX to Africa (2015)

82.7 85.2
90.0
80.0 62.9 63.0 62.5 67.2 66.1 68.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0

Source: Author’s Computation using UNCTAD, 2016 data

4.2 The Pattern of Chinese Finance: Akin to the ‘Financing

Public Utilities’ Scheme of the Colonial Period?
As has been historically the case with the European colonial powers, Africa’s trade
engagement with China is bundled with Chinese financing. Financial flows from China
include FDI, aid and credit financing. Since aid50, in the conventional sense of the term
is extremely negligible, I will focus on FDI and credit provision through China’s Exim
(export and import) and other Banks (CEB, hence forth51). It is striking to note the
similarity of Pax-Arabica that followed the 1973 and 1978 oil price hike for oil producers’
and noted in the previous section and the USD 3.5 trillion reserve of China (in 2013) –

50
The modality of Chinese engagement using this Exim bank and related financing schemes is distinct from
aid and loan from OECD and IFIs in a significant way. From the AERC's China-Africa study that is based on case
studies of 22 African countries (see Ajakaiye et al, 2008), first, the grant component of the Chinese finance is
generally negligible (being about 1% of the loan in Ethiopia and Madagascar, for instance) and hardly qualify as aid.
Moreover, based on estimates made between 2004 to 2010, ODA equivalent Chinese aid in Africa is in the vicinity
of USD 1 to 2 billion per annum (see Stragne et al, 2013). Second, as discussed below, the terms of CBE financing
and its level of concessionality is not usually transparent; and when it is, it is expensive even compared to most
Western commercial banks, not to speak of the World Bank’s IDA window loans.
51
The CEB is solely owned by the Chinese government and established in 1994. In 2013, the Bank’s total
amount of loans signed reached about USD 162.8 billion (from USD 78.6 billion in 2011), with disbursement
standing at USD 130.9 billion (from USD 75.6 billion in 2011). The Bank played a key role in supporting Chinese
companies to go global. Thus, CEB claims, its business has firmly tightening China’s international economic and
trade ties, including its exports (Exim Bank of China 2011; 2013).

39
Pax-China – and the Chinese “loan pushing” to Africa and the rest of the world in a
similar manner. The only difference being the latter is pushed, not through international
banks as the days of Pax-Arabica, but rather through the Exim bank of China, which is
planning to handle 70-80 % of the USD 100 billion or more that China is planning to
provide to Africa until 2025 (AFP, 2013).
4.2.1 FDI form China and Primary Commodity Trade
Notwithstanding the media exaggeration about Chinese FDI dominance in Africa, still
the bulk of FDI to Africa comes from the Western countries where France, UK, Germany
and the US are the most important actors. The OECD countries command over 90% of
the stock of FDI in Africa that is estimated at USD 740 billion in 2015. FDI flows from
the emerging economies, although growing very fast, are not that big - Chinese stock of
FDI in Africa being USD 24 billion in 2014 according to Chinese Ministry of Commerce
(Leung and Zhou, 2015). UNCTAD (2016) put this figure in 2014 at USD 32 billion,
however. “The Economist” estimated this to be USD 32 billion in 2015 too, which
implies no change from the 2014 UNCTAD based data 52 - in any case this is a very small
figure being about 4.3% of the African total FDI stock in 2015 ( and only 4.1% China’s
global FDI of USD 531.9 billion).
Between 2000 and 2010 about 75 percent of FDI to Africa from the BRICX went to oil-
exporting countries (Alemayehu 2013). FDI in the oil sector of Africa from the
traditional partners (the OECD) at 85% is even higher (OECD et al, 2011). The level of
FDI from China (and other BRICX) 53 is not only very small but also located in a
meaningful way in the extractive sectors of a few resource rich countries such as South
Africa, Nigeria, Zambia, Algeria, DR Congo, Sudan and Angola, in order of importance.
These seven countries account for about 70% of the total stock of Chinese FDI in the
continent in 2010, the South Africa’s share alone being about 30%. This pattern shows
trade in the continent is bundled with FDI. More specifically for China, the top ten
Chinese investment receiving African countries are resource rich, and account for 76%
of the stock of China's FDI in Africa (see Edinger and Pistorius, 2011; Alemayehu 2013).
The contribution of oil for this is significant as oil makes up to 71 percent of the total
African mineral and energy exports to China (Osei-Hwedie, 2012; Alemayehu, 2013).
About one-third of China’s energy imports also come from SSA. This is an important
trade link as energy consumption rates in China have grown by more than twice the
global average over the past 10 years (Pigato and Tang, 2015)54.

52
Depending on the sources of information, there is significant variation about the level of Chinese FDI in
Africa, “The China Global Investment Tracker (CGIT)” estimated this to be US$61 billion (stock) in 2014. This
total differs significantly from the Ministry of Commerce data of USD 24 billion noted. The Ministry normally
records only those Chinese FDI projects over US$100 million, however. Its data is also based on publicly stated
commitments, which often differ from actual investment flows (see Pigato and Tang 2015).
53
India is the second important source of FDI to Africa among the BRICX countries. It’s stock of FDI in
Africa being half the level of China.
54
In some studies there is a misleading portrayal of Chinese FDI diversification in Africa. Such studies and
data state that Chinese FDI in Africa is increasingly being diversified. They note, however, that the extractive sector
is still dominant at 30% but meaningfully followed by finance (19.5%), construction (16.4%), manufacturing
(15.3%) and others (18.2%) (See for instance, Pigato and Tang, 2015). This is, however, based on the annual
Chinese FDI flow figure of about USD 2.5 billion in 2015. This annual FDI flow figure is not only less than 1% of
the total gross capital formation of Africa in one year but also extremely insignificant compared to about USD 67 to

40
In general, FDI from China (and the other BRICX) to the continent is characterized by
the following major features. First, it is largely motivated by the desire to secure sources
of energy and raw materials as well as to exploit both domestic and preferential third
markets which are accessible to African countries (Alemayehu 2013; Alemayehu and
Addis, 2015). Second, over 75 per cent of total FDI to the continent went to resource-
rich economies with a weak impact on employment, weak linkages with the domestic
economy, and limited transfers of skills and knowhow (UNCTAD, 2011; Alemayehu
2013). Third, such FDI flows are accompanied by the proliferation of a number of small
and medium size firms that usually come with the big Chinese TNCs. However, their
total investment in terms of value is very small (see ft note 54; Gu, 2009; UNCTAD
2014; Shen 2013; 2014; Leung and Zhou, 2015). Fourth, such FDI flows do not seem to
be deterred by the nature of governance and fragility of countries in the continent (see
Alemayehu and Addis, 2015; Chen et al, 2015). Finally, FDI and other forms of
development finance from China are interwoven with provision of infrastructure and
trade, with no political conditionality attached to them. This strategy of 'bundling' trade,
FDI and development finance through the operation of Chinese TNCs and Exim (and
other) banks is the sine qua non of Africa’s economic engagement with China. As a
result, trade in primary commodities with China has grown in tandem with its FDI and
credit flows to the continent. This approach is increasingly being reproduced by the rest
of the BRICX countries too. This is complemented by political diplomacy such as the
China-Africa, the India-Africa etc forums (See IAGS, 2006; Alemayehu 2013).
Notwithstanding this, the non-FDI type of Chinese financing is more important and,
hence, worth discussing it in detail. This is done next.
4.2.2 Chinese Development Finance: The Angola Model and Beyond
Analysis of Chinese investment engagement in Africa using FDI figures leads to a
significant understatement of the Chinese financial engagement in the continent. This is
because credit from CEB and similar banks of China and Chinese special funds designed
for Africa (such as the China-Africa fund) play a much more significant role55. Indeed,

100 billion credit China is providing to Africa for the infrastructure and resource sectors through its EXIM bank (see
next). Moreover, it also doesn’t refer to the USD 24 billion (in 2014) stock of Chinese FDI in the continent, the bulk
of which is located in the resource sector as I noted above. In fact, by 2013 the Chinese announced that Chinese
investment in African manufacturing from 2009 to 2012 made up just $1.33 billion – about USD 0.5 billion per
annum (State Council, 2013; cited in Brautigam and Tang ).The other confusion arises from studies that attempt to
show such diversification using the number of projects by sector instead of the value of such projects (see for
instance Chen et al, 2015 who claim it is the service sector at 60%, not the extractive sector, that dominates the
Chinese investment in Africa). In fact, if we compute the sectoral share in value terms from such data, between
2000-2011 the share of the manufacturing sector using the AidData (Strange eta al, 2013) is just 1.9% while
infrastructure (transport and storage), the extractive sector and unallocated sectors have a combined share of 62%,
the first two having 22.1 and 20.6%, respectively. In addition, even the limited shift towards services (construction)
and manufacturing projects shown in such studies relate to new green field projects playing supporting service to the
resource sector such as the coal fired power stations in Nigeria, oil refinery in Libya etc (see UNCTAD, 2012). Be
that as it may, notwithstanding its limited importance in value terms, according to the Chinese government record
there were 2,282 Chinese projects in Africa by 2013 and of theses 1,217 (53%) were held by private firms (Shen
2014). In terms of value, private investment made up about 45 percent of this total Chinese FDI flows in SSA in
same year. This is attributed to Chinese government policy of promoting Chinese investment overseas that includes
a number of funds set up by the Chinese government to support such investment (see Pigato and Tang, 2015).
55
A good illustration of this magnitude and the official data of FDI is the USD 2 billion credit line by CEB to
Angola in 2004 (famously called the 'Angola model'), and the officially recorded figure of USD 14 million as FDI

41
such financial flows are not FDI in the conventional sense of the term (see Diagram 1).
However, such flows do finance large investment by African countries, in particular in
infrastructure and extractive sector projects, that wouldn't have been carried otherwise.
Hence, we may refer to such investments as Quasi-FDI. Understanding such financing is
crucial to understand the nature and magnitude of Chinese investment engagement in
the continent and its effect in locking-in Africa in primary commodity trade.
Diagram 1 summarizes the general picture of Chinese finance in Africa. According to
Brautigam and Gallaher (2014) Chinese bank financing which is part of the OOF in
Diagram 1 during 2003-2011 was estimated at USD 52.8 billion. This is in Addition to
the USD 32 billion FDI stock (in 2014/15) noted above (Pigato and Tang, 2015). ODA
like Chinese financing is generally negligible but its estimated annual figure between
2002 and 2009 was in the range of USD 1 to 2.7 billion (see Strange et al, 2013). If we
assume this to grow by its average annual figure which is about USD 1.5 billion, such
ODA flows might be about USD 12 billion during 2003-2011. If we assume further this
trend to persist to date, this ODA like flow might have reached about USD19.5 billion in
cumulative terms during 2003-2016.
Diagram1: Chinese Financial Flows to SSA

Source: Pigato and Tang, 2015 which is based on Strange et al, 2013.
One of the famous schemes of this CBE finance in Africa is what is referred as the
“Angola model”56. The term is related to the USD 2 billion Chinese credit to Angola in
2004. This was later increased to USD 3 and 4.5 billion in 2006 and 2007, respectively.
The loan – payable at 1.7 percent over 17 years – intended primarily to rebuild Angola's
vital infrastructure. In exchange, Angola is to provide China with 10,000 barrels of oil
per day. Tied to the loan is the agreement that Chinese firms will take Angola’s
reconstruction to the tune of 70 percent, the rest being left for the Angolan private

from China in the same year; as well as the over USD 17 billion similar financing by the CEB in Ethiopia as of
2015, compared to the USD 32 million flow and USD 600 million stock of FDI recorded officially as Chinese FDI
in Ethiopia in the same year.
56
In October 2004, as India was preparing to close a deal for about 620 million dollars to buy Shell’s 50
percent share in “Block 18,” in Angola, China entered at the last minute to win the major oil deal. In an effort to
swing the deal in its favour, China offered USD 2 billion in line of credit for various projects in Angola in return for
oil – this is what is referred since then as the 'Angola model'. IAGS (2006) noted, “India’s offer of USD 200 million
for developing railways paled in comparison”.

42
sector, if there are any. This model has been used widely by CEB and Chinese TNCs in
other African countries both in the oil and non-oil sectors. Such loans accounted for
56% of the USD 52.8 billion Chinese loans to Africa between 2003-2011, according to
Brautigam and Gallagher (2014) (see also CCS, 2006; Mlachila and Takebe 2011;
Kaplinsky and Morris, 2009; Alemayehu 2013; Getachew 2011). It has to be noted,
however, that the 'Angola Model' is not new. The West (North) used about 48 oil-backed
loans with this lending modality in Angola before China, as noted by Bautigam (2010) 57.
In addition to the pure credit of CEB, this modality is still in use by China as the 2010
Chinese Exim bank credit to Ghana and the related oil deal shows.
Although CEB doesn't offer geographically disaggregate picture of its credit flows, there
are various estimates about its African portfolio that includes the USD 52.8 billion (for
the year 2003-2011) estimate of Brautigam and Gallagher (2014) noted above. Similarly,
according to Fitch Ratings (2012), during 2001-2010 such flows to Africa are estimated
to be about USD 67.2 billion. Stragne et al (2013) using their media based aid data
estimation method put this figure at USD 75.4 billion for the period 2000-201158. Using
the average annual increase of Fitch Rating’s and Stranger et al (2013)’s estimate, this
type of Chinese finance might have reached USD 105 billion by 2016 – this is over 30
and 4 times the 2015 flow and stock of Chinese FDI in Africa, respectively.
Three features distinguish this type of Chinese financing from traditionally dominant
financing schemes in the continent. First, the bulk of these loans were infrastructure
and extractive sector related. Chinese firms are also often the one that are building such
infrastructure, which invariably are directed at facilitating the export of primary
commodity from the continent 59(see Fitch Ratings., 2012; Alemayehu and Atenafu
2009).
Second, compared to the concessional financing that the continent used to get from IFIs
such as the IDA window of the World Bank, these loans are very expensive. The ODA
equivalent part of such flows is also very small in size as noted above. Apart from its
size, it is also difficult to know exactly the level of concessionality of the CEB credit to
Africa owing to lack of transparency in reporting as well as the existence of many
variations in the nature of Chinese deals with each African country. The concessionality
is unlikely to be significant, however, as the lack of transparency by itself suggests. In
fact, the terms of CEB loans in Africa are invariably expensive and their interest rate is
generally higher than the LIBOR rate. In Ethiopia, for instance, the CEB credit interest
rate is as high as LIBOR plus 2 to 2.95% for some projects for which information is
available. Its grace and maturity periods are also on the average 3 and about 8 to 10

57
Beginning in 2001 Western Banks from France, UK and Germany provided Angola up to USD 3.55 billion
secretive high cost oil backed loans, not speak of the Barclay and Royal Bank of Scotland oil-backed loan for
Angola of USD 2.35 billion that followed Chinese loan in 2004 (see Bautigam, 2010).
58
It is interesting to note that the USD 67 billion figure of Fitch Rating is above the USD 55 billion that the
World Bank provided to the continent during the same time; and also equivalent to the USD 66.3 billion (the sum of
USD 13.5 billion and USD 52.8 billion noted as ODA and OOF during 2003-2011, respectively) given above. Thus,
the Fitch Rating estimate of USD 67.2 billion seams a reasonable estimate (and hence my use of it for my forecast of
over USD105 billon CEB credit during 2001-2016). Note also the ODA and OOF based estimate above includes one
more year, 2011; and it may also include concessional loans by CEB.
59
For instance, this includes the USD10 billion loan to Ghana for railway and energy infrastructure agreed in
2010; as well as the over USD 8 billion for Ethiopian telecom and railway corporations.

43
years, respectively. The comparable terms for IDA based loans are: interest rate of
0.70% and an average grace and maturity periods of 10 and over 40 years, respectively.
As Table 3 shows the possible quantifiable cost of CBE credit to Africa in 10 years, bench
marked against such IDA terms, is more than twice the amount of credit contracted (ie;
is expensive by 219%) – or fetches a return of about 7.2% per annum60 (see Table 3,
column 2). If we bench mark it using lending rates of commercial banks in the USA and
UK instead, the CBE loans would be expansive by about 25% to 117% - the 117% is
obtained assuming the grace and maturity period the USA and UK banks to be half the
IFIs level (Table 3, column 3). This is without quantifying the possible cost of tying the
credit to Chinese global firms and its possible related problems.
Table 3 Possible Scenarios about the Cost and Benefits of Chinese Finance in
Africa (in Billion USD).
2010 2010
IDA loans Bench Commercial
The CBE loan used here is the USD 67.2 billon between 2001-2010 Marking [0.7%; Bank Lending
this is also similar rate Bench
to 3 month LIBOR Marking
rate in 2010] (1.9%)
Implicit Costs/Loss in Borrowing from CEB compared to IDA/IFIs
a) Loss in terms of interest cost (compared to concessional IFS 24.88 Bln 17.43 Bln
loan): {[LIBOR+3%]-0.7%} for 10 years, the maturity date of
CBE loans.
b) Loss in terms of grace period (return on investment): Must be 16.58 Bln 00 [8.29]*
above LIBOR+3% which CEB is charging at the minimum for
7 [10-3] years, which is the grace period difference between
IDA and CEB credit.
c) Loss in terms of short maturity date (return on investment for 105.69 Bln 00[52.84]*
lost maturity years: which is LIBOR+3% at minimum for the
years between IDA and CEB maturity date [for [40-10]=30
years]).
Total Minimum Quantifiable Implicit Cost of CBE financing in Africa 147.55 Bln 17.43[78.56]*
As % of CBE loan contracted. (219%) (26%)[117%]*
d) Cost of tying the Aid to Chinese firms (quality, corruption; Difficult to Difficult to
locking-in effect etc). quantify quantify
Benefits:
Provision of: financing option; policy space, infrastructure, &terms Difficult to Difficult to
of trade improvement, and short term growth. quantify quantify
Note: I have assumed the Chinese terms of engagement in Ethiopia is similar in all African countries:
thus the CEB interest rate is LIBOR +3% of the year 2010 (the average annual LIBOR rate for 2010
was 0.92%); maturity date of 10 years and grace period of 3 years. The comparable WB/IDA terms
assumed are: interest rate 0.7%, maturity date of 40 years and grace period of 10 Years. Low
maturity period implies countries are paying for China in 10 years rather than in 40 years as in
WB/IDA financing. Thus, a country would have invested what it paid for CEB 3 times more; ie.,
for 30 years (and hence the return, which at the minimum is assumed to be LIBOR+3% is the cost of

60
Using the rule of 72 in finance, the return on this CEB credit in Africa is about 7.2 % per annum. Since we
have assumed the minimum opportunity cost of the CBE loan to Africa to be LIBOR plus 3% in Table 3, the cost of
the CBE loan given in Table 3 is understated. If instead, this 7.2% is taken as the minimum return, the cost of the
CEB loan to Africa would have been 3.5 times the original credit given in Table 3.

44
 borrowing from CEB assuming further inflation is not important). Interest cost is computed on
compounded basis. Based on the World Bank & IMF data in 2010, the UK&USA commercial
lending rates were 0.5% & 3.3%, respectively -the average being 1.9%. Column 3 used this bench
mark.
[..]*assuming the grace and maturity period of commercial loan to be half the IFIs level (ie., 5 and
20 years, respectively).
Third, they are characterized by potential risk that include indebtedness as such loans
are generally less concessional and very large in size (Table 3). They are also usually
offered to institutionally weak countries that have weak debt management capacity with
poor transparency regarding loan terms (Fitch Ratings, 2012; World Bank 2011, cited in
Morazan et al 2012). Moreover, since the repayment of loans is linked to commodity
export to China, this indebtedness is making African countries vulnerable to the global
commodity trade in general and the condition of Chinese economy in particular.
Forth, if individual African countries exposure to CBE credit is growing significantly, as
is the case in Ethiopia for instance, it wouldn’t be surprising if such strategic
vulnerability is used by China to advance Chinese interest in each country. This is highly
probable because the CEB loan is also a vehicle for Chinese Multinational firms’ global
strategy of expansion. The sheer relative magnitude of CEB loans in the continent shows
its importance as an instrument of bundling trade, FDI and Chinese government and its
TNC’s global operational and strategic interest in Africa. Similar modality of financing is
now increasingly being used by the other BRICX’s economic engagement in Africa (see
Alemayehu 2013 for detail)61.
In sum, the motive behind Chinese FDI and development finance in Africa is
multifaceted: desire to position itself in countries with potential domestic market as can
be inferred from the size of the population and/or potential middle class (North Africa,
Nigeria, Ethiopia, South Africa etc); the desire to have a political and diplomatic
presence in Africa and demonstrate its [or its development model’s] ability to transform
an African country to the rest of the continent and the world (Ethiopia, and the six
industrial zones in the continent) as well as the desire to secure access to strategic
resources through the operation of its TNCs (Angola, Zambia, Sudan, Nigeria etc). The
balance, however, tilts to this last motive. In line with this last motive, through bundling
trade, aid and finance, as well as the operation of its TNCs in infrastructure and
extractive sector related development projects, China’s economic engagement does both
the provision of infrastructure and facilitates the exploration and exploitation of African
natural resources which is the collateral for the finance provided. To the extent that the
quality of the infrastructure, the development in the extractive sector and their
economy-wide benefits offer value for money, this could be a beneficial engagement for
both parties. On the other hand, if it makes the resource sector an enclave to the rest of
the economy and lock-in Africa in primary commodity export sector for the foreseeable
future, it contributes less to structural transformation and sustainable growth aspiration
of Africa, as has been the case with Africa's historic engagement with the West. The
challenge is whether African countries have the required institutions, political will and
capacity to carry such evaluation and see to it this phenomenon is unfolding in their

61
There are also positive effects of this finance on Africa. These are discussed in section 4.3.2 below.

45
interest. These challenges, potential opportunities and their implications for structural
transformation are discussed in detail below.
4.3 Implications of the Current Pattern of Trade and Finance
for Structural Transformation in Africa
Africa’s primary commodity based trade and related financial engagement historically
with the West and currently, in particular, with China has brought with it both
challenges and opportunities. These issues are discussed in detail below.
4.3.1 Challenges of Primary Commodity Dependence in Africa
The cyclical nature of price of primary commodities and the deterioration of their terms
of trade vis-à-vis the manufactured goods is a well established fact in the literature (see
foot note 64 below and Figure 8). The challenge of dependence on exports of such
primary commodities in Africa is reflected in three interdependent phenomena. First,
the African external trade became vulnerable to the volatility of commodity prices and
their long term deterioration vis-a-vis manufactured goods prices (Figure 8). Second,
the cyclical nature of commodity prices has challenged the sustainability of growth in
Africa. It has also brought about challenges of macroeconomic management and
governance that further aggravated the growth problem. Third, when prices are good it
brought a competitive threat to industrialization. Africa’s trade and financial
engagement with China, by locking-in Africa in the primary sector, is exposing the
continent to these adverse effects. These are discussed here.
(i) Terms of Trade Deterioration and Primary Sector Locking-in Effect
of Trading with China.
In line with the historical trend for more than a century (Figure 8), the secular decline in
Africa’s terms of trade also persisted after independence. Before the year 2000 and
beginning in the 1970s attempts to compensate for this relative commodity price decline
by increasing supply have resulted in a further decline in prices (Fantu, 1992:502,
Stefanski 1990; Stein 1977; Alemayehu 2002). In addition, since virtually all developing
countries were advised to undertake liberalization policies by IFIs during this time, their
simultaneous action has also resulted in what is called the ‘adding-up effect’, or the
‘fallacy of composition in policy advice’. This refers to simultaneous increase in exports by
all developing countries, which shifts the global supply curve to the right, relative to its
weak demand, with a consequence for a price decline. If the effect of the price decline is
more pronounced than the effect of quantity increase, then export revenues would decline
and hence the producers would face real welfare loss (Balassa, 1988; Panagariya and
Schief, 1990; Akiyama et al, 1993; Coleman and Thigpen, 1993; Goldin et al, 1993;
Akiyama and Larson, 1994; Schief, 1994; Gilbert and Varangis, 2003; Alemayehu,
2017a).62The adding up effect is primarily prevalent in primary, as opposed to
manufacturing products, owing to the inelastic demand for the former and the existence
of product differentiation in the latter case; as well as owing to lack of barriers in the case
of commodities as argued by Kaplenski, 2006. Notwithstanding this, studies also show
62
The notion of the adding-up effect originated from Johnson (1958; 1953), where he showed that expansion
of an economy may lead to worsening of the terms of trade against it in the course of international trade. It was also
raised by Bhagwati (1987; 1958), in his theory of 'immiserizing growth', where deterioration in the terms of trade
would outweigh the primary gains from trade (see Alemayehu, 2017a).

46
that exports of even manufactured commodities from the low income countries may not
be immune to terms of trade deterioration either – thus pointing at bleak prospects even
for African manufactured exports63 (see Akiyama and Larson, 1994; Akiyama et al, 1996;
Goldin et al, 1993; Schief, 1994; Akiyama et al, 1996; Maizels et al (1998); Maizels, 2000;
2003; Sarkar and Singer, 1991; Maizles, 2000; 2003; Kaplenski, 2006; Alemayehu
2017a).

Figure 8: The Deterioration of the Terms of Trade of LDCs: the Extended GY-PNR Series
200.0

150.0

100.0

50.0 y = -0.796x + 149.4

R² = 0.662

0.0
1900
1903
1906
1909
1912
1915
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
GYCPI_MUV[ToT] Linear (GYCPI_MUV[ToT])

Note: The Grilli and Yang (1988) [GY] terms of trade series is a trade-weighted average of major 24 food,
non-food and metal commodity price deflated by an index of the manufacturing unit value index,
which is a trade-weighted index of the five major developed countries’ (France, Germany, Japan,
United Kingdom, and United States) exports of manufactured commodities. The original series that
ends in mid 1980s is updated by Pfaffenzeller, Newbold, and Rayne in 2007 that is used in Figure 8.
Theoretical explanations about this terms of trade deterioration and its impact on the
South range from the “unequal exchange theory” (See Emmanuel, 1972; Bettelheim, 1972;
Amin, 1974; Bacha, 1978; Kay, 1975; Sau, 1978; Gibson, 1980; Johnston, 1980; Ocampo,
1986) to what I would like to call the “Gebre-Hiwot-Prebisch-Singer” hypothesis (Gebre-
Hiwot, 1924; Prebisch, 1959; Singer 1950, 1987; Alemayehu, 2017a). The proponents of
the Prebisch-Singer hypothesis, specially of the ECLAC economists in 1950s, argued,
contrary to mainstream trade theories, against specializing in the export of primary
commodities by developing countries. The main reasons being (i) it removes the
secondary and cumulative effect of investment in the sector as it is usually done by foreign
capital and (ii) it diverts developing countries to areas where the scope for technical
progress is limited and worsening terms of trade prevail (Singer, 1950: 477; Prebisch,

63
The hypothesis of a deterioration of the terms of trade of manufactured exports of the South with the North
is a reminder of Emmanuel’s observation about primary commodity trade of the South nearly half a century ago
which is worth quoting at length; he noted:
The copper of Zambia or the Congo and the gold of South Africa are no more primary than coal, which was only
yesterday one of the chief exports of Great Britain; sugar is about as much ‘manufactured’ as Scotch Whisky or
the great wines of France; before they are exported coffee, cocoa and cotton have to undergo a machine
processing no less considerable, if not more so, than in the case of Swedish or Canadian timber;...bananas and
spices are no more primary than meat or dairy products. And yet the price of the former decline while those of
the latter rise, and the only common characteristic in each case is that they are, respectively, the product of poor
countries and the product of rich countries (Emmanuel, 1972: xxx).

47
1950). The ECLAC economists further provided theoretical underpinning for the
Prebisch-Singer hypothesis which they noted is the result of: (a) the nature of markets
where primary commodities and manufactured goods are sold. The former is sold in a
flexi-price market while the latter is sold in a fix-price oligopolistic market. Benefits of a
rise in productivity in such different markets accrue to the two trading partners differently
to the disadvantages of the South; (b) the nature of demand elasticity for the commodities
and manufacture differs to the disadvantage of the South; and (c) the cyclical nature of
economic activity in the North and its implications for the South is generally detrimental
(See Prebisch, 1950; Singer, 1950; 1987; Kaldor, 1976; Alemayehu, 2017a).64
One of the significant implications of the new economic engagement of Africa with
China is to further strengthen this historic specialization of the continent in primary
commodity trade that is further exposing the continent to its detrimental effects alluded
above. This effect is more pronounced recently as the price of primary commodities and,
hence, the terms of trade of Africa has significantly improved since the years 2003 (see
Figure 11). This has further strengthened Africa’s specialization in primary commodity
trade. Empirical analysis about China-Africa trade also shows the existence of a
significant potential for expanding this trade as they have exploited only 13 percent of
their potential trade (Alemayehu, et al 2013). Exploiting such potential in years to come
may entail locking-in Africa in primary commodity exports while China supplying
manufactured goods, as has been the case historically with the West. Already, as the
empirical analysis in Alemayehu et al (2013) and Alemayehu and Atnafu (2008) show,
Africa has seen the risk of increased degree of specialization in primary commodity
trade. It is also in the course of moving away from its manufacturing sector owing to its
trade with China. The evidence on the impact of China’s engagement with Latin
American countries shows that countries in that region become more sensitive to
cyclical movement in the economy of China, their manufacturing firms were displaced,
and most of them were led to regressive specialization in primary commodities and saw
over exploitation of their natural resources (Chunha et al, 2012). The evidence on Africa
shows a similar trend and is a major challenge for the continent (see Alemayehu, et al
2013 and below).
(ii) Primary Commodity Dependence and Poor Quality of Growth 65
Though African primary commodity exporters have benefited from the recent increase
in commodity prices, they have also experienced increased price volatility (Figure 9; see
also World Bank, 2009; IMF, 2012). As Figure 9 shows, in general, short term instability

64
The Prebisch-Singer hypothesis has also led to a vast empirical literature that I left out here to save space.
Interested reader may refer to Sarkar, 1986; Grill and Yang, 1988; Cuddington and Urzua, 1989; Cuddington, 1992;
and Kaplenski, 2006; and Pfaffenzeller et al 2007; among others. The Ethiopian development economist, Gebre-
Hiwot Baykedagn has already discovered this theory in 1924 (see Alemayehu, 2008c, 2011).
65
There could be various way of looking at a particular growth of a country as good or poor quality. One such
criterion is related to distribution of income issues and hence whether it is a shared growth or not (or whether it is
pro-poor or not). In this study I am not taking such issues. Rather, I have assumed a particular growth is poor quality
if it is unsustainable. That is if it is vulnerable to global commodity price (or weather shock) and hence characterized
by significant variability that comes with such commodity price movement. I have also assumed it is poor quality
growth if it hinders structural transformation.

48
of prices is inherent in commodity markets in the last 50 years 66. The annual variability
of this price since 1960 (Figure 9) ranged from -40% in 2009 (for minerals, ores &
metals) to around 80% which is the highest positive deviation recorded in 1973 (for fuel,
food and agricultural raw materials). As noted by Brown and Gibson (2006), at a very
basic level, such short-term price volatility is driven by a wide variety of factors
including: changing weather patterns, business cycles in key markets, price speculation,
conflict in producing or transit countries, exchange rate reforms, breakdown of
international commodity agreements, demand cycles and export dumping. Because of
this volatility African countries are facing an export-earning instability and related
balance of payment difficulties with detrimental effect on growth.
Figure 9: Annual Percentage Change in Major Commodity Prices of Africa, in %, 1960-2013
100.0
80.0
60.0
40.0
20.0
0.0
-20.0
-40.0
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
ALL FOOD AGRICULTURAL RAW MATERIALS MINERALS, ORES AND METALS

Source: Author’s Computation using UNCTAD Database, 2016

Focusing on the recent excellent growth of the continent, Arbache and Page (2012)
found the role of openness, investment, and institutional quality improvement, which
are believed to be fundamentals for sustained long term growth, being insignificant in
driving this growth surge. Rather, it is the rapid growth of demand for natural resources
and subsequent price rise as well as the concentration of good economic times in the
resource-rich economies that were found to be very important. This can also be read
from Figure 10. The 2009 drop in growth of Africa as well as the recent commodity price
decline that began in 2012/13 that impacted the continent’s growth negatively further
show this growth vulnerability. This raises the issue of Africa’s growth sustainability
and, hence, the poor quality nature of its recent growth.

66
Between 1977-2001 all non-fuel primary commodity prices exhibited an average deviation from the trend
price (price instability) of 12%; this was about 21% for tropical beverage, 14% for minerals, ores and metals; and
about 12% for agricultural raw materials, 16% for food (Alemayehu, 2017b). On half-decade basis and compared to
the late 1960s, the standard deviation of the aggregate commodity price index (which is 100= in 2000 USD) has
jumped from 1.9 in 1966-70 to 35 in 1970-75. It then fell back to 11 in 1991-95 and jumped again to 40.8 in 2006-
2011 – thus volatility has not changed recently.

49
 Figure 10: Growth rates in Export, Commodity price, Terms of Trade (ToT) and Real GDP for
Developing African Economies, in % (GDP Growth in Right Axis)
40 8

20 6

0 4
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014
-20 2

-40 0
Tot Growth Expor Growth (Value)
Commodity Price Growth (All) GDP Growth
Linear (GDP Growth)

Source: Author’s Computation using UNCTAD Database, 2016

Notwithstanding the voluminous study about Africa’s growth that includes the AERC’s
comprehensive two volume study with 27 case studies (Ndulu et al, 2008a; 2008b),
empirical studies that link African growth with commodity trade are limited. The lesson
from these limited studies, however, is that specialization in primary commodities
reduces growth primarily because such commodities are characterized by adverse terms
of trade and volatility of prices. This in turn brings about export earning and investment
(capital formation) instability - rendering exports a relatively unreliable source for
financing investment (Fosu, 1991). This has adverse effect on the quality of growth as it
also inhibited structural transformation. As Deaton (1999) rightly noted a decade and
half a go, “difficulties of handling price fluctuations are so severe, and policy-making in
African countries so dysfunctional, that price booms and price slumps are equally to be
feared”. This has also forced countries to depend on external finance when commodity
price fall. The latter invariably led many in Africa to indebtedness and related
macroeconomic challenges (MacBean, 1966; Fosu, 1991; Bleaney and Greenway, 2000;
Alemayehu 2002, 2003; Ocran and Biekpe, 2008). Second, such commodity
dependence could also lead to poor governance and violent conflict which harms growth
(Deaton, 1999; Collier, 2002; Alemayehu, 2011; Fosu, 2013).
The empirical evidence on the 'resource curse' paradox that includes the rise in
commodity prices similar to the one under discussion is generally mixed (see
Alemayehu, 2012). Some authors confirmed Sachs and Warner’s (1995; 2001) result that
countries with great natural resource wealth tend to grow more slowly than resource-
poor countries. They argued, resource-abundant countries tended to be high-price
economies and, perhaps as a consequence, these countries tended to miss-out on
dynamic source of growth such as export-led growth (Gylfason et al, 1999; Bulte et al,
2005, Sachs and Warner, 1995, 2001; among others). Other studies provide evidence
against the resource curse paradox (see, among others, Brunnschweiler and Bulte,
2008; Alexeev and Conrad, 2009; Stijns, 2005; Cavalcanti et al, 2011a; Esfahani et al,
2009). Again some other studies noted that it is not the nature of commodities but the
nature of institutions that matter. Fosu (2011), for instance, found the effect of such

50
resources on growth to be positive and negative for Botswana and Nigeria, respectively.
He argued, superior institutional quality in Botswana, relative to Nigeria, is likely to be
responsible for the contrasting results (Fosu, 2011; 2013).
Most of these studies focused on the effect of the level of resource abundance, not its
price rise and price volatility (as well as the related export earnings volatility) on growth,
however – the recent exception being Collier and Goderis (2012). Using similar growth
model to that of Sachs and Warner (2001), but employing a panel co-integration
approach, Alemayehu (2017b) attempted to capture the effect of the recent China-
induced commodity price boom on growth dynamics of Africa. Employing two separate
growth equation for “mineral & oil” and “agricultural” commodity exporter African
countries, he found the commodity price boom has fostered economic growth only in
the short run. It is also found to have no long-run growth effect. This is a poor quality
growth not only because it has not long run effect but also because even the short run
positive effect hinges upon what happens in the global commodity market. That is, both
long and short run growth in Africa are found to depend positively and strongly on
investment, stable macroeconomic environment and a country’s openness (openness
being important for oil and mineral exporters and only in the long run) 67. As all these
growth deriving variables, in turn, are strongly related to what happens to commodity
prices as shown in Figure 9, even these other factors behind the recent growth are
vulnerable to global commodity price, which in turn is strongly influenced by economic
condition in China.
This result is in line with similar econometric study of Collier and Goderis (2012).
Collier and Goderis’ (2012) result is much more pessimistic, however. These authors
found the long run effect to be negative, in particular for oil exporting economies. Based
on a simulation exercise they undertook, Collier and Goderis (2012) noted that half of
the current surge in growth of African commodity exporting economies is attributable to
short-term effects of the post-2000 boom in global commodity prices, leaving a residual
of underlying growth that remains low. Since commodity price is likely to have strong
adverse long term effects, argues Collier and Goderis (2012), the recent acceleration in
growth is particularly misleading. With benefit of hindsight and observing the growth
collapse from 6% to below 3% following the recent global commodity price decline since
2012, we note the realistic nature of this conclusion. In addition, this growth challenge is
further compounded by macroeconomic management and governance challenges of

67
Alemayehu’s (2017b) result about openness is interesting. The African literature on openness ranges from
the view of openness is bad for growth (ECA, 1989) to lack of openness as the major problem of growth (Collier
and Gunning, 1999). Fosu (2000) after reviewing many of these studies, somewhat hesitantly suggested ‘the
evidence tilts towards openness is good for growth in Africa’. Widely cited studies about openness and growth such
as Dollar (1992), Ben-David (1993), Sachs and Warner (1995), Edwards (1998) and Frankel and Romer (1999),
using different measures of openness asserted that openness is positively associated with growth. This assertion is
not without problem, however. Rodrik (1992, 1999, 2001) and Rodrigues and Rodrik (2000) noted that measures
used in much of the empirical literature do not really pick trade policy/openness indicators. Some of the widely used
openness indicators in the above studies serve as a proxy for a wide range of policy and institutional differences;
they are also measure of trade barriers or are highly correlated with other source of bad economic performance, and
that they could give biased results to openness – and hence the finding that openness matters for growth is largely
spurious (Rodrigues and Rodrik, 2000). The result in Alemayehu (2017b) shows first it is much more important in
the short than in the long run (nearly three times better). Second, it varies across country groupings - being positive
for oil exporting but not for agricultural commodity exporters in the long run.

51
such resource flows, as well as the competitive threat to local manufacturing they pose,
which is discussed next.
(iii) The Competitive Threat to Industrialization and the Challenge of
Structural Transformation
The intensifying economic engagement of Africa with China could also potentially
thwart Africa’s effort at structural transformation through industrialization. There are
two channels through which this could happen. The first one comes from the
competitive threat to Africa’s manufacturing which takes both direct and indirect form.
The second channel is through what is called the “Dutch disease” and “fiscal response”
problems – the macroeconomic effect.
a) The Competitive Threat and de-Industrialization
Cheaper manufactured exports of China although beneficial to African consumers and
African producers that import inputs from China, they are also a competitive threat to
Africa’s manufacturing sector. This takes both direct (in the importing African country
in question) and indirect (in the third market) form (Kaplenski 2006; Kaplenski and
Morris, 2006; Ajakaiye et al, 2008; Alemayehu and Atenafu, 2008). The price gap
between Chinese and African producers in all goods show that the Chinese price is on
the average more than 50% lower than that of African producers - the gap in optical and
medical instruments and textiles for instance being 70 to 80% (see Pigato and
Gourdone, 2014). Similarly, the revealed comparative advantage of China is also three
times better than all African countries and 50% better than the best potential African
manufactured goods suppliers such as Egypt and South Africa (Alemayehu and Edris,
2015). Furthermore, according to Kaplenski (2006), based on 151 major product-
groupings imported into the EU from developing countries for which the unit-price of
imports fell between 1988 and 2001, in almost one-third of these sectors, the price of
Chinese-origin products fell. As a general rule, Kaplenski (2006) observed, the higher
the per-capita income group of the exporter, the less likely unit-prices were to fall.68 He
drew two conclusions from this price analysis. First, the greater China’s participation in
global product markets, the more likely prices will fall. And, second, this seems to have a
disproportionate impact on the low income country groups, such as Africa, which face
intense competition from Chinese producers (Kaplenski, 2006) both at home and in the
third market.
Based on data generated by the AERC scoping studies of 21 African countries trading
with China, Ajakaiye et al (2008) provide evidence of significant losses of African
manufacturers from such threat. This is found to be the case, especially, for textiles,
clothing and furniture producers in Ghana, Kenya, Mauritius, South Africa and
Swaziland (Kaplenski and Morris, 2006; Finger, 2007; Burke et al, 2008; Tsikata et al,
2008); for general manufactures in Cameroon where Khan and Baye (2008) offered
similar evidence; for various manufacturers in Kenya (Onjala, 2008); and for clothing
and footwear in Ethiopia (Alemayehu, 2008; Tegenge 2006).
With regard to the indirect effects, based on a study on textile and furniture exporters in
Africa, Kaplenski and Morris (2006) found that both sectors are facing indirect
competitive threat from China and other Asian countries, the threat to the furniture
68
See Emmanuel’s (1972) observation of the same nearly 5 decades ago in footnote 62.

52
sector being much more acute. Thus, Kaplenski and Morris (2006) noted “in the face of
this inability to compete with Asia in general and China in particular, SSA’s furniture
manufacturers are moving backwards into their resource sectors, exporting raw logs,
chips for the paper industry and sawn timber …”. Similar results are also reported in
Edward and Jenkins (2014) study of 44 South African manufacturing firms. Based on a
‘gravity’ and ‘a flying-gees’ models with a panel data for thirteen African countries’
exporters of clothing and accessories, Alemayehu and Atenafu (2008) and Alemayehu
et al (2013) found a strong evidence that China has been displacing African manufacture
goods exporters from the third market. They also found no evidence of shifting
comparative advantage from China to Africa as China moves up in the manufacturing
technology ladder of exporting – the only exception being South Africa. On the contrary,
there is evidence of regressive specialization in to primary sector. It is for this reason
Kaplenski and Morris (2008) concluded “without sustained trade preferences over
Asian producers, SSA’s clothing and textile industry will be largely excluded from global
markets and face significant threats in its domestic market and this has generalisable
implications for other sectors”.
b) The Dutch Disease, the Fiscal Response and de-Industrialization
This is related to the macroeconomic ramifications of resource flows, including related
financing, from the booming commodity trade with China. This takes two forms - the
“Dutch disease” (see Salter 1959; Swan 1960; Corden, 1984; van Wijnbergen 1984;
Youner, 1992; Alemayehu, 2012) and the “fiscal response” problems (see Griffin, 1970;
Heller 1975; Mosley et al 1987; White 1992; Alemayehu 2002; Addison and Tarp, 2015).
These challenges could be summarized using Diagram 1. The Y axis in quadrant one
(North-East quadrant) shows the resource flows from the booming sector (which has
increased from point a to b due to commodity price rise or resource discovery). The
fiscal response of an increase in public spending and a possible decline in tax revenue
which normally follows this phenomenon is summarized in the X axis of the same
quadrant using public deficit (public spending minus public revenue) that increased in
absolute value terms from c to d. The latter is explicitly given in panel b for
completeness. In quadrant 2 (North-West), the exchange rate appreciation effect of
these flows is shown by a decline in real exchange rate (appreciation) from point f to e.
Quadrant 3 (South-West) shows the de-industrialization effect of this real exchange rate
appreciation as marked by a decline in manufactured (or non-booming tradable sector)
exports from point h to g. An inward shift of the schedule in the 4th (South-East)
quadrant indicates the long term growth and de-industrialization effects of the
specialization in primary commodity production.

53
 Diagram 1: Resource Flows from a Booming Sector and Its Ramifications.

Resource Flows from the Booming sector

Panel (a) The Dutch Disease Panel (b) The Fiscal Response

Deficit [d]

b E
c

f e c d R
Real Exchange Rate Public Deficit Revenue (R),
g Expenditure (E)
RER=eP*/Pd

De-industrialization

Export of Manufacture (or Export of Non-

booming Tradable Sector)

Recent empirical study using 41 African countries shows an appreciation of the

exchange rate following the recent China-induced commodity price rise. This in turn led
to the contraction of the traditional tradable (export) sector and the expansion of the
non-traded one (Alemayehu, 2012, 2013; Ismail, 2010 cited in Brahmbhat et al 2010;
ACBF 2013; Renard, 2011)69. If the traditional export sector in such African countries
happened to be manufacturing, it leads to de-industrialization -a Dutch disease
problem.
The second macroeconomic problem relates to the “the fiscal response or challenge” of
such booming commodity trade which includes: (a) a surge and volatility in government
revenue, (b) an associated surge and volatility in spending, and (c) the problem of
carrying out an optimal level of savings and a likelihood of indebtedness. Empirical
studies in Africa and other developing countries show the prevalence of this problem
following an inflow of resources from a booming commodity trade (Avendaño et al's
2008; Dehn, 2001; Gary and Karl 2003; Westerhoff, 2004; Mehrara and Oskoui, 2007;
69
A striking recent example is that of Sudan where its traditional exports of cotton and oilseeds nearly
disappeared following its recent oil discovery and export to China in the last decade.

54
Obinyeluaku and Viegi, 2009; Budina, et al 2007; Viegi, 2007; Hawthorne et al., 2005;
Humphreys and Sandbu, 2007 cited in ACBF 2013; Heinrich, 2011; Alemayehu 2012;
2013). These challenges are further accentuated by the monetary policy implications of
the balance of payment volatility that is triggered by such foreign exchange inflows 70.
Such fiscal posture could reduce the incentive to deviate from primary commodity trade
to other activities (such as industrialization and availing the resource for financing that)
as things are as good as they are during boom, and smoothing fiscal spending takes
precedence over everything else during bust. This could keep countries stuck in the
primary commodity sector.
Leamer's (1999), and Alvarez and Fuentes’ (2006) summary of these macroeconomic
challenges pointed out four related problems (Leamer et al., 1999, Alvarez and Fuentes,
2006 both cited in Avendaño et al 2008). First, the absorption of low-skilled labour in
manufacturing is foregone; hence, inequality is deepened. Second, those manufacturing
activities that do emerge are capital and skill intensive with limited effect on
unemployment. Third, human capital accumulation may be impeded, as skills in the
resource sector are very specific and spill-over effects limited. Fourth, volatility in the
prices of commodities may raise capital risk in resource-dependent, undiversified
countries, which might deter investment and other tradable activities to emerge
(Avendaño et al, 2008; Alemayehu, 2012). On top of exposing countries to such
features, the Chinese-Africa economic engagement is in the course of hindering
structural transformation of the continent by locking-in Africa in primary commodity
sector.
c) Governance and Conflict related challenges
A rise in government revenue from a booming commodity trade generally leads the
political elite to either directly seize the rents from the booming sector or wants to
control its allocation, especially in a weak institutional environment. Thus, commodity
dependence could bring with it the risk of transforming resource-producing countries
into reinter states. This distorts allocation of resources and limits growth. Such state
also become less dependent on taxes and hence becomes less accountable and corrupt.
This situation could encourage governments to devote more attention to distributive
and interventionist functions than to functions related to the regulation, supervision,
investing in fiscal capacity and management of the economy (Moore, 2004 cited in
ACBF, 2013; Bardhan, 1997- cited in Gylfason, 2000; Little et al, 1993; Moore, 2004;
Arezki et al 2012; AERC, 2007; Edinger and Pistorius, 2011; Heinrich, 2011; Cárdenas et
a, 2011; Ramírez et al, 2011). This, combined with lack of transparency on how the
wealth is distributed, makes it very difficult for governments to alter the spending habits
when a downturn in prices occurs (Auty, 2001; Alemayehu, 2012; ACBF, 2013).
In addition to such governance challenges, dependence on primary commodities is also
found to be associated with conflict in Africa. Elbadawi and Sambanis (2000b) found
four important factors that trigger war in Africa: dependence on natural resource, low
level of percapita income, having an educated and poor young males and failure to

70
That is, during booms the level of foreign assets and hence the monetary base (high-powered money) will
grow up while a balance of payment deficit related money supply contraction ensues during bust. Unless properly
managed, this may lead to inflation and related exchange rate appreciation, which in turn aggravates the Dutch
disease problems.

55
develop strong democratic institutions (Elbadawi and Sambanis, 2000b: 9-10).
Similarly, Collier and Hoeffler (2002b) identified three common sources that could give
rise to opportunities for conflict: extortion of natural resources, remittances from the
Diaspora and subversion from hostile governments. Using an empirical model and
comprehensive data of civil wars over the period 1960-99, they arrived at concrete
empirical findings about the risk of civil wars in relation to such primary commodity
dependence. At its peak (primary commodity export being 32% of GDP) the risk of civil
war owing to this dependence is about 22 percent. Weak institutional capacity and
deficiency in human capital are also found to be some of the defining characteristics of
such African economies. As other facets of the economy, the governance of revenue from
a booming commodity trade and avoiding the related conflict requires institutional and
human capacity building aimed, inter alia, at diversification and good governance
(Cramer, 2006; Ali, 2009; Ajakaiye and Ali, 2009; Alemayehu, 2011, 2017d; Jones,
2013; ACBF, 2013).
4.3.2 Potential Opportunities of Engaging with China
Africa’s engagement with China has also the positive effect of availing finance, in
particular for infrastructure and the extractive sectors, supply of producer (machinery)
and consumer goods at relatively cheaper price as well as offering market for African
commodities and contributing to the rise in their global price. It has also led to the
development of some manufacturing activities in some countries. In addition, it has
strengthened Africa’s bargaining position in global political and economic sphere. These
issues are briefly discussed in this sub-section.
(i) Improvement in Terms of Trade and the Position of Africa in Global
Politics
Notwithstanding the theoretical rationale and the empirical regularity about the
deterioration of the terms of trade of developing countries as noted before, there is a
new phenomenon of sustained improvement in terms of trade of Africa since the year
2003 (Figure 11). This is owing to the effect of China’s and other BRICX’s demand surge
for primary commodities and the subsequent global price rise. It is also related to the
fact that Chinese are efficient manufactured goods exporters to Africa. As noted by
UNCTAD (2012), historically, commodity price cycles have consisted of short-lived
booms followed by longer periods of bust - thus there has only been one previous major
commodity price boom, between 1973 and 1980 (Figures 1a & 8). The current boom that
began in 2003 has been both the longest in the historical record and the broadest
affecting all categories of commodities (UNCTAD, 2012; Alemayehu 2012).

56
 Figure 11: Trends of Terms of Trade (TOT) and overall Commodity Price Index for All Africa
(index in USD, 2000=100)

500.0
450.0
400.0
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013
ValueAll VolumeAll UnitExport Price UnitImport Price Tot (Barter)

Source: Author’s Computation using UNCTAD, 2015 Database

This Chinese-induced commodity price surge and the resulting terms of trade
improvement for Africa (Figure 11) is one of the opportunities for Africa as it was also
the major reason behind the recent impressive growth of the continent which was about
5 percent per annum during 2003-2012. This is significant, especially when compared to
the average annual growth of 2.4 percent or below registered in the 1990s and 1980s
(see Collier and Goderis, 2012; Arbache and Page 2009; UNCTAD, 2012; Alemayehu
2017b). Notwithstanding this, the drop in this growth rate by nearly half, to about 3
percent during 2014-2016, following the global economic slowdown and the drop in
commodity price since 2012, further shows how African growth is connected to the
global economy in general and the Chinese economic condition in particular.
In addition, from global political-economy perspective, Africa’s engagement with China
has strengthened its barraging position with its traditional financers – such as the
OECD/Western countries and IFIs whose finance in Africa generally comes with
conditionality. Since Chinese finance is not tied to any political or policy conditionality
(except the recognition of Taiwan as part of China), it has offered African governments
the chance to have their own policy space. This has adverse effect on governance and
human right issues, however (see Alemayehu 2013).
(ii) Infrastructure Building and Financing Development in Africa
The other positive impact of China in Africa relates to its engagement in the
development of Africa’s infrastructure including railroads, roads and hydroelectric
power, and communication that are generally financed by CEB as noted above (Myers,
2011: 20; cited in Osei-Hwedie, 2012; see also UN-OSAA, 2013 for detail). Since the

57
Forum for China-Africa Cooperation of 2000, development of infrastructure has
continued to receive priority. For instance in 2006, China invested USD 7 billion in
constructing infrastructure in Africa. In 2007, China made available US$20 billion to
Africa for infrastructure development (Jobarteh, 2009, cited in Osei-Hwedie, 2012).
During 2005-2012, on average, China financed about USD 2 to 4 billon worth African
infrastructure per annum - although this at times reached as high as USD 8 billion as in
the year 2010 (see Dollar 2016). According to Dollar (2016), out of the USD 30 billion
external finance that Africa is receiving per annum for infrastructure projects, Chinese
provide one six (about 17%) of it. However, Chinese TNCs are the one that generally
undertake such infrastructure projects as accessing such Chinese finance is conditional
on this - thus crowding out domestic and other firms (Asche, 2008: 167, cited in Osei-
Hwedie, 2012; Alemayehu 2013).
Although they at times use the oil (or resource) for infrastructure modality, typically, the
cost of Chinese large infrastructural projects, according to Kaplinsky and Morris (2009),
is 20-30 percent lower than those of Northern, South African and Brazilian competitors
and engaged widely in infrastructure building. Thus, the Chinese are making a
significant contribution to Africa in addressing the infrastructure bottleneck of the
continent. However, local content in the African recipient economies is low (Burke and
Corkin, 2006 cited in Kaplinsky and Morris, 2009). Moreover, such Chinese financed
infrastructure projects have also the Chinese strategic interest of securing strategic
commodities by linking resources centers to ports as the days of the colonial period.
Most such infrastructure projects across the continent, thus, indicate this pattern. For
instance, in Angola, the refurbishment of the rail network is linked strategically to the
export potential of resources in that country, according to Kaplinsky and Morris (2009).
The railway line will run in the D.R. Congo with strong possibility to link it with Zambia,
providing a direct line of transport from the Zambian copper mines to the Angolan ports
(Burke and Corkin, 2006:49, cited in Kaplinsky and Morris, 2009). In addition, other
recent CEB financed mega infrastructure projects that include the Coastal Railway in
Nigeria worth USD 12 billion; the Bagamoyo Port in Tanzania worth USD 7 billion; the
Chad-Sudan Railway worth $5.6 billion, the Port Sudan-Khartoum Railway worth $1.3
billion; as well as the infrastructure projects in Malawi and Mozambique of about USD
1.7 and 3.1 billion, respectively, are among the top 10 Chinese mega project in Africa
which are cases in point. Similarly, the railway construction in Northern Ethiopia by
Chinese (USD 2.1 billion) and Turkish (USD 1.7 billion) firms aims at linking the
potential potash mining and exportables producing areas with the port of Djibouti. So is
the CEB financed USD 3.8 billion Kenya’s Mombasa port to Nairobi Railway project that
eventually will also link with Uganda, Rwanda and South Sudan71. The mere size of
these top mega infrastructure projects (valued at USD 26.6 billion) also shows the
significant involvement of China in African infrastructure building. However, despite
the provision of such significant finance to Africa, the pattern of infrastructure building
is a clear example of bundling FDI, financing, infrastructure provision, Chinese TNCs’
operation and trade aimed at securing resources and access to markets in a strategic
manner

71
The data is from “Chinese mega projects in Africa” based on various internet sources given at
http://afkinsider.com/, accessed on December, 1, 2016.

58
In general, including such infrastructure financing, China has provided about USD 137
to 157 billion development finance to Africa by 2016 (32 billion FDI stock, plus or minus
19.5 billion in ODA and about 105 billion CBE credit during 2003-2016).
Notwithstanding its challenges, this is significant opportunity that the China-Africa
economic engagement brought to the continent.
(iii) Chinese Rebalancing and Its Implications for Manufacturing in Africa
The government of China has recently initiated a new policy of economic rebalancing
designed to shift its economy towards more sustainable model where growth will be
driven less by investment and exports and more by domestic consumption. This
consumption-driven rebalancing will have significant implications for Africa as it affects
Chinese global pattern of trade and finance. As noted by Pigato and Tang (2015), lower
Chinese growth rate that most likely comes with this change (at least in the short run)
will decrease global demand and hence price for natural resources. As noted by
Drummond and Liu (2013, cited in Pigato and Tang, 2015) a 1 percentage point decrease
in China’s real domestic fixed investment growth rate would lower SSA’s aggregate
export growth rate by 0.6 percentage points and this effect is going to be larger for
resource-rich countries. This will have detrimental implication for Africa’s growth.
On the positive side, China’s rebalancing also presents new export opportunities in the
agricultural and manufacturing sectors (Pigato, and Tang, 2015). As wage rates in China
continue to rise – it has increased from USD 150 per month in 2005 to USD 500 to 600
in 2012, according to Dihn et al, (2012) - and firms refocus their attention on domestic
demand, African countries could be able to exploit this opportunities for investment in
export-oriented manufacturing (Piato and Tang, 2015). This requires, however, ability
to attract such Chinese investment by maintaining logistic and labour cost at
competitive level, among others.72 This underscores at the need to have a well thought-
out and pro-active policy on African side.
This rebalancing is also related to the six economic zones that China helped create
across the continent as part of its “going global” strategy. These are located in Mauritius,
Nigeria and Egypt that have some experience with such zones and in Ethiopia and
Zambia who had no such experience. These zones are also part of the 19 such zones
China is building across the world. According to Brautgam and Tang (2013), Chinese
zone developers believe that China will continue to need to export its manufacturing
over-capacity overseas and, “Africa is the future for Chinese companies, because the
weaknesses of China in land and natural resources are precisely the strengths of Africa”.
In general, this policy has the strategic objective of (see Brautgam and Tang, 2013): (i)
securing market for Chinese-made machinery, (ii) benefiting from preferential access to
Africa in Europe and North America, (iii) help Chinese own domestic restructuring and
move its firms up in the value chain, (iv) create economies of scale for Chinese firms by
helping them venture overseas, and (v) transfer China’s success to Africa and benefit
both China and Africa from this. From international diplomacy perspective, as
Brautgam and Tang (2012) noted, this sharing the lessons of China’s own developmental

72
The experience of the Chinese largest leather shoe company, the Huajian Group, which had opened an
assembly line in Ethiopia and employed more than a thousand workers, is instructive. Following its move to
Ethiopia it saw its labour cost dropping by 22%. However, its logistic cost has increased eight folds- thus indicating
the importance of keeping the latter lower for competitiveness.

59
success to Africa will boost China’s ‘soft power’ and reflects the internationalization of
its developmental state model. If successful, these zones could be a potential instrument
for the structural transformation of the continent.
However, the success in these zones to date is not impressive. Thus, as can be read from
Brautgam and Tang (2012, 2013) studies, first (i), almost all the zones couldn’t realize
the targets they put in their plan up to now and are way behind schedule; second (ii), the
effort to promote linkages with local companies and ensuring the participation of the
locals in its management appeared minimal; third (iii), the overseas zones are at present
unevenly linked into local training and research and development networks and finally
(iv) in general for all the zones developers, negotiating preferential policies was found to
be the largest challenge for success of the zones. Stressing this last point, Brautgam and
Tang (2013) concluded that “a major obstacle to realize the zones’ potential of bringing
structural transformation is the difference held by Chinese developers and African
governments”. Chinese developers like to use the special zones in China as an example
and transplant them in Africa and the African’s do not seem to see it this way as they
have much broader national objectives too. As a result, the Chinese and Africans have
“different plans and conflicting interests, and it is not clear how both sides will be able
to effectively coordinate their goals and activities” (Brautgam and Tang, 2013) – thus
limiting the expected effect of the zones in bringing about structural transformation.
In sum, notwithstanding such potential opportunities, the evidence about the possibility
of African firms to be part of the global supply chain of Chinese (and other BRICX)
firms, whether in special zones or outside of it, and benefit from it is not encouraging.
Analysis conducted using a flying gees model shows that Africans are not filling the
place left by their Chinese partners, when the latter proceeds in the hierarchy of
manufacture export sophistication, the only exceptions being South Africa (Alemayehu
and Atnafu, 2008). This cross-country based finding is also in line with the 22 countries
case studies conducted by AERC in its China-Africa study (see Ajakaiye et al, 2008).
Similar concern about failure of African firms in positioning themselves within Chinese
value chain is reported in the recent study of Pigato and Tang’s (2015). Finally, I have
also noted earlier the misleading nature of some recent studies claim about “the trend of
Chinese investment diversification”, especially when such Chinese investment projects
are examined in terms of value and the nature of their diversification (see ft note 54).
This calls for a conscious policy intervention to benefit from such potential
opportunities and limit their threats.

V. Conclusion
In this paper an attempt to examine the impact of the external sector on African
economic development is made. This is done by looking at Africa’s economic
engagement with Europe historically and with China and other emerging economies
today. This engagement is found to explain the specialisation of the continent as
exporter of primary commodities, importer of manufactures goods as well as the
external finance constrained nature of its economy. Africa’s growth is also found to be
significantly dependent on this external sector. Two important issues need to be raised
by way of conclusion. First, is the evolving China-Africa economic engagement similar to
Africa’s historical engagement with the West and hence is in the course of leading the

60
continent to problems associated with specialization in primary commodity trade?
Second, if the answer to this is in affirmative, what are the implications of this for
Africa’s structural transformation? And what should be done.
One of the most important implications of this study is that the analysis of the African
economic crisis from the external sector perspective needs a historical explanation of
how a weak and vulnerable economic structure has been built as a result of Africa’s
specialisation as a primary commodity exporter. Such analysis also explains how such
structure paved the way for indebtedness by creating the necessity for indebtedness and
making debt servicing difficult. This structure also led to the vulnerability of African
growth to vagaries of nature and the external sector (or the global economy). Thus, it is
within this broader framework the specific problem of the African external trade and
finance and its macroeconomic ramifications as well as any policy to address them
should be understood. Such a broader framework in the last two decades would be
incomplete without understanding the role of China and the emerging South in this
process, however.
Since the turn of this century, China’s (and the rest of the emerging South’s ) growth and
rising power is not only shaping the global economy but also in the course of
significantly altering Africa's hitherto economic engagement with its traditional trade
and financial partners – the West. Primary commodity trade accompanied by financial
flows from China is the vectors through which this engagement is increasingly being
built. In general, the motive behind Chinese trade, FDI and development finance in
Africa is multifaceted. However, the desire to position itself in the continent’s potential
domestic market as well as the desire to secure access to strategic resources through the
operation of its TNCs is the overriding motive. In line with the latter objective, through
bundling trade, FDI, and development finance, as well as the operation of its TNCs in
infrastructure and extractive sector projects, China’s economic engagement does both
the provision of infrastructure and facilitates the exploration and exploitation of African
natural resources which is the collateral for the finance provided.
To the extent that the quality of the infrastructure, the extractive sector development
and their economy-wide benefits offer value for money and facilitates the structural
transformation of the continent, this could be a beneficiary engagement for both parties.
On the other hand, if it makes the resource sector an enclave to the rest of the economy
and lock-in Africa in primary commodity export sector for the foreseeable future, it
contributes less to structural transformation and sustainable growth aspiration of
Africa. The evidence in this study points to the dominance of this latter effect. The
challenge, then, is whether African countries have the required institutions and
expertise (or capacity) as well as political will to carry such evaluation and see to it
this phenomenon is unfolding in their interest.
This implies African countries need to have a strategic engagement with China since
China seems to have a fairly clear strategy of how to deal with Africa. This needs to be
guided by the principles of using the current engagement: (i) for structural
transformation and hence building up of a resilient and sustainably growing African
economy as well as (ii) for job creation which is central for poverty reduction and social
stability. The link between structural transformation, job creation and poverty reduction
is very strong. According to Abebe’s (2014) recent survey about African poverty, the

61
experiences of other developing countries and the condition of growth and poverty in
Africa in the last decade suggest that structural transformation is more powerful than
average growth in per capita GDP to bring about meaningful impact on poverty
reduction. Thus, it is highly unlikely that a simple market based engagement with China
will ensure such African aspiration that may transcend the primary commodity-driven
nature of the current engagement. The burden of designing and realizing such strategy
primarily rests on African countries and institutions. This study has shown that there
are limited opportunities and significant threats to Africa in this engagement. The
question is how to manage them.
In managing this engagement to Africa’s advantage, meeting China’s demand for
primary commodities and market should be conditional upon meeting Africa's
complementary developmental needs in general and its structural transformation in
particular. Such negotiations and deals could be done in a cascading manner: that is at
continental/regional and country level. Each country’s individual deals with China, then
need to be framed in the context of the continental and/or regional deals agreed. This is
important for Africa because it avoids the 'race to the bottom' by avoiding unnecessary
and harmful competition. The details of such strategy might be country and region
specific but its generic direction needs to be guided by the above two principles.
For this to happen sound and evidence based policies, as well as good institutions
(including good governance), capacity, collective foresight and political will aimed at
ensuring that market driven specialization of Africa is not biased against the future
structural transformation and good quality growth of the continent is needed. The
persistence of challenges, as opposed to opportunities, on the current engagement as
documented in this study shows the lack of such capacity (both human and
institutional) and the resulting lack of informed-policy. Without such capacity and
informed-policy, the engagement with China and other countries is likely to be nothing
more than an offer of strategic advantage to China and other countries and repeating the
type of historical engagement that Africa had with the West again.
In sum, from an examination of the Chinese-Africa current economic engagement in
historical perspective it is hard to escape from the rather disappointing conclusion that
this engagement is reminiscent of Africa’s historic engagement with West – hence
history seems to be repeating itself. The similarity is striking: (i) both have strengthened
and are also in the course of strengthening the specialization of Africa in primary
commodity sector and impeded structural transformation in the continent (ii) both
were/are motivated by desire to control natural resources and market for their
manufactured goods, and (iii) both have used finance, infrastructure and trade to
achieve their strategic objective. The only difference seems on the scale of the Chinese
engagement which is leap-forging by the day.
It is worth concluding, then, by asking what is the way out? The generic answer to this
is: through human and institutional capacity building for structural transformation.
This is because Africa’s engagement both with the West and China and the resulting
Africa’s economic crisis in general and the crisis in its external sector in particular has
given rise to a “structure” that hinders structural transformation. As I have shown in
this study, African economies have a structure primarily built by its historical
interaction with today’s developed countries (the West) and recently with China and the

62
emerging South. As Taylor (1983) has defined it more than three decades ago ‘an
economy has a structure if its institutions and the behaviour of its members make some
patterns of resource allocation and evolution substantially more likely than others.” 73
The impact of such macro structure in shaping micro level agents’ (households, farms
and firms) behaviour and performance is significant because, as Shaikh (2016) shows,
since such macro structures or aggregation is robustly transformational, it must have
significantly shaped micro processes and hence determined their final outcome, no
matter how efficient they are at micro level. The historical legacy of Africa and its
current trajectory show that African countries have inherited extractive and vulnerable,
as opposed to developmental, economic structure and institutions (See ECA, 1989;
Alemayehu, 1998, 2002, Acemoglu et al, 2001). This structure has shaped and is
shaping the behaviour of economic agents and the nature of institutions and hence the
economic outcome documented in this study. From the external sector perspective,
African poor quality growth and international finance related problems are essentially a
trade problem. The trade problem in turn relates to its specialization in primary
commodity production and export for historical reason. Such structural problems need
structural solution – structural transformation. Thus, from this perspective short term
solution such as debt cancellation, aid as well as simple free market based trading
approaches are not panacea for African economic crisis. Given such path-dependent
nature of economic performance in the continent, it is imperative to take such structural
problems on board in any meaningful approach aimed at bringing about structural
transformation, good quality growth and poverty reduction in the continent.

References
Abebe Shimeles (2014) ‘Growth and Poverty in Africa: Shifting Fortunes and New Perspectives’,
IZA Discussion Paper No. 8751 (December), Institute for the Study of Labor (IZA) Bonn,
Germany.
ACBF, African Capacity Building Foundation, (2013). African Capacity Indicators 2013: Capacity
Development for Natural Resource Management. Harare: ACBF.

73
Following this quotation, Taylor (1983) further noted, “… eeconomic analysis is structuralist when it takes
these factors as the foundation stones for its theories’. Shaikh (2016) refers to such economists as “the Kaleckian-
Structuralist wing of Post-Keynesians”. This approach is what Lin (2011) termed as ‘old structuralist’ as opposed to
his ‘new structuralist approach’. His ‘new structuralist’ (which could better be termed as ‘neoclassical
structuralism’) approach does not seem to be adequate for Africa for two reason. First it is extremely dependent on
the importance of the theory of comparative advantage which I have shown here is not conducive for Africa’s
sustained growth. Moreover, it is also theoretically challenged as it is less important to developing countries
compared to absolute advantage (see Porter, 1995; Shaikh 1984, 2016; Alemayehu 2017a). Second, although his
approach recognizes the role of active government and the importance of provision of infrastructure, it is completely
devoid of the political economy analysis such as the role of interest groups stressed in the structuralist tradition.
Given his important position as chief economists of the World Bank at the time of his writing, this might be an
understandable omission. Thus, what he called ‘old structuralist’ and what I referred here as ‘structuralist’ or Shaikh
referred to it as the ‘Kaleckian-Structuralist’ approach is quite a relevant approach to Africa (see Alemayehu,
2017c). Incidentally, although the government is not well- informed and hence Lin’s ‘soft infrastructure’ is largely
missing, my home country, Ethiopia, is experimenting with this structuralist approach – called ‘growth and
structural transformation plan’ with significant Chinese support for the last couple of decades with some success in
Lin’s ‘hard infrastructure’ and growth terms - although lack of political analysis (along “Structuralist” line) and
hence related political development is thwarting this development lately.

63
Acemoglu, Daron, Simon Johnson and James A. Robinson (2001) 'The Colonial Origins of
Comparative Development: An Empirical Investigation', The American Economic Review, 91(5):
1369–1401.
Addison, Tony and Finn Tarp (2015), ‘Aid Policy and the Macroeconomic Management of Aid’,
World Development, 69(x):1-5.
Ajakaiye, O. and Ali A.A. (2009) ‘Managing Post-Conflict Recovery in Africa: An Over- view’
Journal of African Economies, 18 (1):PP. i3–i11.
Ajakaiye, Olu, Ademola Oyejide, Felix F. N’Zue and Damiano K. Manda (2008), “Analysis of
China-Africa Trade Relations: Insights from AERC Scoping Studies”, Policy Issues Paper
No. 3, AERC China-Africa Study, AERC, Nairobi
Ajayi Ibi and M Khan (eds) (2000). External debt and capital flight in sub-Saharan Africa, Washington
DC: The IMF Institute.
Ajayi, Ibi S. (1997), ‘An analysis of external debt and capital flight in the severely indebted low
income countries in sub-Saharan Africa’, IMF, Working Paper WP/97/68.
Akiyama, T. and D., Larson (1996), Does the Adding Up Problem Add Up? DEC Notes, No. 13,
World Bank.
Akiyama, T., T.R. Coleman and P.N. Varangis (1993), How Policy Changes Affected Cocoa Sectors
in SSA Countries, Policy Research Working Paper 1129, World Bank.
Akiyama, Takamas and D.F. Larson (1994) ‘The Adding-Up Problem: Strategies for Primary
Commodity Exports in Sub-Saharan Africa’ World Bank Policy Research Working Paper
1245, Washington D.C: The World Bank.
Alemayehu Geda (2017a). Fundamentals of International Economics for Developing Countries: A Focus
on Africa. Nairobi, AERC (forthcoming).
Alemayehu, Geda (2017b), ‘African Economic Engagement with China and the Emerging South:
Implications for Structural Transformation’, forthcoming, Journal of African Economies.
Alemayehu Geda (2017c), ‘African Economies and Relevant Economic Analysis: A Structuralist
Approach to Economic Research in Africa’, unprocessed, Department of Economics,
Addis Ababa University (also at www.Alemayehu.com )
Alemayehu Geda (2017d), ‘Macroeconomic Management in Fragile States of Africa” (A
Framework Paper for African Economic Research Consortium, AERC, Nairobi, Kenya;
(at www.aercafrica.org ))
Alemayehu Geda (2013), ‘Africa's Economic Engagement with the Emerging South’ (A
Background study for African Export-Import Bank, Afrexim Bank, Cairo).
Alemayehu Geda (2012), ‘Resource Flows from Booming Natural Resource/Primary Commodity
Sectors in Africa and Their Macroeconomic Policy and Capacity Building Challenges’
(Background Study for African Capacity Building Foundation, ACBF, Harare, Zimbabwe).
Alemayehu Geda (2011). Readings on Ethiopian Economy. Addis Ababa: Addis Ababa University
Press.
Alemayehu Geda. (2008a), ‘Scoping Study on the Chinese Relations with Sub-Saharan Africa:
The Case of Ethiopia’, unprocessed, AERC, Nairobi (at www.aercafrica.org ).
Alemayehu Geda (2008b), ‘The political economy of growth in Ethiopia’, in Benno Ndulu et al The
Political Economic of Growth in Africa, 1960-2000. Cambridge: Cambridge University Press.
Alemayehu Geda (2008c), ‘Ethiopian Macro Modelling in Historical Perspective: Bringing Geber-
Hiwot and his Contemporaries to Ethiopian Macroeconomic Realm,’ Journal of North East
African Studies, 10(1):177-199.

64
Alemayehu Geda (2006a), ‘The impact of China and India on Africa: Trade, FDI and the African
manufacturing sector: Issues and challenges’. A framework paper for AERC project: The
Impact of China and India on Africa, September 2006, at www.aercafrica.org .
Alemayehu Geda (2006b), ‘Openness, inequality and poverty in Africa: Exploring the role of
global interdependence’. UN DESA Working Paper No. 6, New York.
Alemayehu Geda (2003), ‘The historical origin of African debt crisis’, Eastern Africa Social Science
Research Review, 19(1): 59-89.
Alemayehu, Geda, 1998, 2002. Finance and trade in Africa: Macroeconomic response in the world
economy context. Basingstoke: Palgrave-McMillan.
Alemayehu Geda and Addis Yimer (2015) “Determinants of Foreign Direct Investment Inflows to
Africa: A Panel Co-integration Evidence Using New Analytical Country Classification”,
Department of Economics Working Paper Series, Econ-AAU No. 04, Addis Abba
University.
Alemayehu Geda and Atnafu G. Meskel (2008) ‘China and India's Growth Surge: Is it a curse or
blessing for Africa? The Case of Manufactured Exports’, African Development Review,
20(2):247-272
Alemayehu Geda, Solomon Mosisa & Matias Assefa (2013) ‘To be or not to be: dilemma of
Africa's economic engagement with China and other emerging economies’, Africa
Review, 5(2): 118-138.
Alexeev, Michael and Robert Conrad (2009) The elusive curse of oil, Review of Economics and
Statistics, 91(3): 586–598.
Ali, Liaqat (1984) ‘Africa’s Commodity Trade and Structure of Marketing and Distribution of
Primary Commodities’, Foreign Trade Review, 19 (3): 367-389.
Amin, Samir (1972) ‘Underdevelopment and Dependence in Black Africa: historical origin’,
Journal of Peace Research, 9: 105-119.
Amin, Samir (1974a) ‘Accumulation and Development: A Theoretical Model’, Review of African
Political Economy, 1: 9-26.
Amin, Samir (1974b). Accumulation on a World Scale: A Critique of the Theory of Underdevelopment,
Vol. II. London: Monthly Review Press.
Amin, Samir (1996) ‘On the Origin of the Economic Catastrophe in Africa’ in Sing C. Chew and
Robert A. Denmark (eds.). The Underdevelopment of Development. London: Sage
Publication..
Amoako, K. Y. and Ali G. Ali. 1998. "Financing development in Africa: Some exploratory
results", African Economic Research Consortium Collaborative Project on Transition from
Aid Dependency.
Amsden, Alice (1989). Asia’s Next Giant: South Korea and Late Industrialization. Oxford: Oxford
University Press
Arbache, J.Saba and John Page (2009) “How Fragile Is Africa’s Recent Growth?”, Journal of
African Economies, 19(1): 1–24.
Asante, S.K.B. (1991). African Development: Adebayo Adedeji’s Alternative Strategies. London: Hans
Zell Publishers.
Austen, Ralph A. (1987). African Economic History: Internal Development and External Dependency.
London: James Currey.
Avendaño, Rolando Helmut Reisen and Javier Santos (2008) 'The Macro Management of
Commodity Booms: African and Latin American Response to Asian Demand' OECD
Development Center, Working Paper 270.

65
Bacha , E.L. and C.F. Diaz Alejandro (1982). International Financial Intermediation: A Long and
Tropical View. New Jersey, International Finance Section, Department of Economics,
Princeton University.
Bacha, Edmar (1978) ‘An Interpretation of Unequal Exchange From Prebisch-Singer to
Emmanuel’, Journal of Development Economics, 5: 319-330.
Balassa, B. (1988), The Adding Up Problem, Policy Research Working Papers 30, World Bank.
Balassa, Bela (1967). Trade Liberalization among Industrial Countries. New York: McGraw-Hill.
Balassa, Bela (1983) ‘Policy Response to External Shocks in Sub-Saharan African Countries’,
Journal of Policy Modeling, 5 (1):75-105.
Balassa, Bela (1984) ‘External Shocks and Policy Response in Sub-Saharan Africa, 1973-78’,
Finance and Development, 21 (1): 10-12.
Baran, Paul and Paul M. Sweezy (1966). Monopoly Capital: An Essay on the American Economic and
Social Order. England: Penguin Books Ltd.
Bates, Robert (2008) ‘Political Reform’ in Benno Ndulu, S. O'Connell, R. Bates, P. Collier, and C.
Soludo (2008). The Political Economy of Economic Growth in Africa: 1960-2000. Cambridge:
Cambridge University Press.
Bates, Robert (2008a) ‘Domestic Interest and Control Regimes’ in Benno Ndulu, S. OConnell, R.
Bates, P. Collier, and C. Soludo (2008). The Political Economy of Economic Growth in Africa:
1960-2000. Cambridge: Cambridge University Press.
Bates, Robert (2008b) ‘Political Conflict and State Failure’ in Benno Ndulu, S. OConnell, R.
Bates, P. Collier, and C. Soludo (2008). The Political Economy of Economic Growth in Africa:
1960-2000. Cambridge: Cambridge University Press.
Bayart, J.F. (1993). The State in Africa: The Politics of the Belly. London: Longman.
Ben-David, Dan (1993) ‘Equalizing Exchange: Trade Liberalization and Income Convergence’,
Quarterly Journal of Economics, 108(3).
Benno Ndulu, S. OConnell, R. Bates, P. Collier, and C. Soludo (2008a). The Political Economy of
Economic Growth in Africa: 1960-2000, A Synthesis. Cambridge: Cambridge University
Press.
Benno Ndulu, Benno, Stephen A. O’Connell , Jean-Paul Azam, Robert H. Bates, Agustin K.
Fosu and Jan Willem Gunning (2008b). The Political Economy of Economic Growth in
Africa: 1960-2000, Country Case Studies. Cambridge: Cambridge University Press.
Bernstein, Henry, T.Hewitt and A.Thomas (1992) ‘Capitalism and the Expansion of Europe’ in
T.Allen and A.Thomas (eds.). Poverty and Development in The 1990s. Oxford: Oxford
University Press and The Open University.
Bettelheim, C (1972) ‘Theoretical Comments’ in A. Emmanuel. Unequal Exchange: A Study of the
Imperialism of Trade. New York: Monthly Review Press.
Bhagwati, J. N. (1987: 1958), ‘Immiserising Growth’, in Eatwell, T., Miligate, M. and Newman P.
(eds.), 626-628, The New Palgrave: A Dictionary of Economics, London: Macmillan.
Bhattacharya, Amar, P. J. Montiel and Sunil Sharma. 1997 ‘Private capital flows to sub-Saharan
Africa: An overview of trends and determinants’, in Zubair Iqbal and Ravi Kanbur (1997)
External finance for low-income countries, Washington DC: International Monetary Fund.
Bhattacharyya, Sambit and Roland Hodler (2010), ‘Natural resources, democracy and
corruption’, European Economic Review, 54(4): 608–621.
Bhinda, Nils, Stephany Griffith-Jones, Jonathan Leope and Matthew Martin. 1999. Private capital
flows to Africa: Perception and reality, The Hague: Forum on Debt and Development.

66
Bleaney, Michael F and David Greenaway(1993), ‘Long-run trends in the relative price of
primary commodities in the terms of trade of developing countries’, Oxford Economic
Papers, 45(3): 349–363.
Bornhorst, Fabian and Sanjeev Gupta and John Thornton (2009) Natural resource endowments
and the domestic revenue effort, European Journal of Political Economy, 25(4): 439–446.
Brahmbhatt, Milan', Otaviano Canuto, and Ekaterina Vostroknutova (2010) 'Dealing with Dutch
Disease', Economic Premise, June 2010, No. 6. The World Bank.
Brautigam, D., and X. Tang (2013). “Going Global in Groups”: Structural Transformation and
China’s Special Economic Zones Overseas, World Development ,
http://dx.doi.org/10.1016/j.worlddev.2013.10.010
Brautigam, Deborah and Kevin P. Gallagher (2014) ‘Bartering Globalization: China’s
Commodity backed Finance in Africa and Latin America’ Global Policy Volume 5 . Issue
3 . September 2014: 346-352
Brautigam, Deborah and Xiaoyang Tang (2012) Economic statecraft in China’s new overseas
special economic zones: soft power, business or resource security? International Affairs
88 (4 ): 799–816
Brooks, George E. (1993). Landlords and strangers: Ecology, society and trade in Western Africa: 1000-
1630. Oxford: West view Press.
Brown, O and Gibson, J. (2006). Boom or Bust: Developing Countries' rough ride on the
commodity price rollercoaster. Manitoba, Canada: International Institute for Sustainable
Development (iisd), http://www.issd.org site visited 10th April, 2010.
Brunnschweiler, C. N. and E. H. Bulte (2008). The Resource Curse Revisited and Revised: A Tale
of Paradoxes and Red Herrings’, Journal of Environmental Economics and Management ,
55(3), 248–264.
Budina, N., G. Pang, and S.Van Wijnbergen (2007), Nigeria’s Growth Record: Dutch Disease or Debt
Overhang?, Working Paper 4256, World Bank, Washington, DC.
Bulte, Erwin H., Richard Damania and Robert T. Deacon (2005), ‘Resource intensity,
institutions, and development’, World Development, 33(7): 1029–1044
Burdette, Marcia (1990) ‘Industrial Development in Zambia, Zimbabwe and Malawi: The
Primacy of Politics’, in Z.A. Koncazcki, J.L. Parpart and T.M. Shaw (eds). Studies in the
Economic History of Southern Africa Vol. 1, The front-line States. London: Frank Cass Ltd.
Burke, C., S. Naidu and A. Nepgen (2008), “Scoping Study on China’s Relations with South
Africa”, mimeo, AERC, Nairobi.
Bussolo, M. and H.B. Solignac Lecomte. 1999 "Trade liberalization and poverty", ODI Poverty
Calvo, Guillerom A., Leonardo Leiderman and Carmen M. Reinhart (1993), ‘Capital inflows and
the real exchange rate appreciation in Latin America: The role of external factors’, IMF Staff
Papers, 40(1): 108-51.
Calvo, Guillerom A., Leonardo Leiderman and Carmen M. Reinhart (1996),’Inflows of Capital to
Developing Countries in the 1990s’, Journal of Economic Perspectives, American Economic
Association, vol. 10(2), pages 123-39, Spring.
Cárdenas , Mauricio, Santiago Ramírez, Didem Tuzemen (2011) Commodity Dependence and
Fiscal Capacity , Latin America Initiative at the Brookings, April, 2011.
Carey, Simon (2012) ‘The Legacy of British Colonialism in India Post 1947’, NZREF, 2(n): 37-47.
Cavalcanti, Tiago V. de V. Kamiar Mohaddes, and Mehdi Raissi (2011), ‘Commodity Price
Volatility and the Sources of Growth’, IMF Working Paper WP12/12, IMF, Washington,
D.C.

67
CCS [Centre for Chinese Studies] (2006) 'China’s Interest and Activity in Africa’s Construction
and Infrastructure Sectors'(A research undertaking evaluating China’s involvement in
Africa’s construction and infrastructure sector prepared for DFID China, Stellenbosch
University.
Chen, Wenjie and David Dollar, and Heiwai Tang (2015), ‘Why is China investing in Africa? Evidence
from the firm level’ (Unprocessed, John Hopkins University and IMF)
Chunha, Andre, M. Lelis, J. Bichara and M. de Lima (2012) ' Brail in Face of the Chinese Rise: the
Risks of Regressive Specialization' Brazilian Journal of Strategy and International Relations,
1(2):129-168.
Coleman, J.R. and M.E., Thigpen (1993), Should Sub-Saharan Africa Expand Cotton Exports,
Working Paper Series 1139, World Bank.
Collier, P. (1991) ‘Africa’s External Economic Relations: 1960-90’, African Affairs, 90: 339-356.
Collier, P. and A. Hoeffler(2002) ‘Greed and Grievance in Civil War’, Center for the Study of
African Economies WPS/2002-01.
Collier, P. and S. O’Connell (2008) ‘Opportunities and Choices’ in Benno Ndulu, S. OConnell, R.
Bates, P. Collier, and C. Soludo (2008). The Political Economy of Economic Growth in Africa:
1960-2000. Cambridge: Cambridge University Press.
Collier, P. and W. Gunning (1999) ‘Explaining African Economic Performance’, Journal of
Economic Literature, 37 (1): 64-111.
Collier, P., and B. Goderis. 2012. “Commodity Prices and Growth: An Empirical Investigation”
European Economic Review 56 (2012) 1241–1260.
Collier, P, Anke Hoeffler and Catherine Pattillo (1999) ‘Flight Capital as a Portfolio Choice’, Policy
Research Working Paper Series No. WPS2066, Washington: World Bank.
Corden, Max (1984) ‘Booming Sector and Dutch Disease Economics: Survey and Consolidation’,
Oxford Economic Papers, 36: 359-80.
Cramer, C. (2006) Civil War is not a Stupid Thing: Accounting for Violence in Developing
Countries. London.
Cuddington, John (1992) ‘Long-run trends in 26 primary commodity prices: A disaggregated
look at the Prebisch-Singer hypothesis’, Journal of Development Economics, 39(2): 207-227.
Cuddington, John and Carlos Urzua (1989) ‘Trends and Cycles in the Net Barter Terms of
Trade: A New Approach’, Economic Journal, 99 (396): 426-442.
Custers, Raf and Ken Matthysen (2009) Africa's Natural Resources in a Global Context. Antwerp:
IPIS.
Deaton, A. (1999) ‘Commodity Prices and Growth in Africa," Journal of Economic Perspectives,
13(3), 23-40.
Deaton, A. and G. Laroque (1992). ‘On the Behaviour of Commodity Prices,’ Review of
Economic Studies, 59(1), pp 1-23.
Deaton, A. and R. Miller (1996). ‘International Commodity Prices, Macroeconomic Performance
and Politics in Sub-Saharan Africa,’ Journal of African Economies, 5(3), pp. 99-191.
Dehn, Jan (2001) The effects on growth of commodity price uncertainty and shocks.
Washington, DC: World Bank (World Bank Policy Research Working Paper 2455).
Dickson, K.B. (1977) ‘Trade Patterns in Ghana at the Beginning of the Eighteenth Century’, in Z.A.
Koncazcki and J.M. Knoxzacki. An Economic History of Tropical Africa: Vol. I, The Pre-Colonial
Period. London: Frank Cass.
Dollar, David (1992) ‘Outward-Oriented Developing Economies Really Do Grow More Rapidly:
Evidence from 95 LDCs, 1976-85’, Economic Development and Cultural Change, 523-544.

68
Dutt, A. (1992), ‘The Origin of Uneven Development: The Indian Subcontinent’, American
Economic Review, 82(2):146-150.
ECA, Economic Commission for Africa (2005). Economic Report on Africa 2005: Meeting the
Challenge of Unemployment and Poverty in Africa, Addis Ababa: Economic Commission for
Africa.
ECA, Economic Commission For Africa, (1989a) African Alternative Framework to Structural
Adjustment Programs for Socio-Economic Recovery and Transformation (AAF-SAP). Addis
Ababa: ECA.
ECA, Economic Commission for Africa, (1989b). Statistics and Policies: ECA Preliminary
Observation on the World Bank Report: Africa’s Adjustment and Growth in the 1980s. Addis
Ababa: ECA.
Edinger, H. and C. Pistorius, (2011) 'Aspects of Chinese investment in the African resources
sector' The Journal of The Southern African Institute of Mining and Metallurgy, 111 (July): 501-
510.
Edwards, Sebastian (1998) ‘Openness, Productivity and Growth: What Do We Really Know?’,
Economic Journal, 108 (March): 383-398.
Elbadawi, I. and Sambains, N. (2000) ‘Why are there so many civil wars in Africa?
Understanding and Preventing Violent Conflict’ Journal of African Economies 9(3): 244-
269.
Elbadawi, I.A (1992.), ‘Have World Bank-supported adjustment programs improved economic
performance in sub-Saharan Africa?’ Working Paper WPS 1001. Washington, D.C.: The
World Bank.
Elbadawi, I.A., D.Ghura and G.Uwujaren (1992) ‘World Bank Adjustment Lending and
Economic Performance in Sub-Saharan Africa in the 1980s: A Comparison with other
Low-Income Countries’, Policy Research Working Papers, WPS 1000. Washington D.C.: The
World Bank.
Elbadawi, Ibrahim A., Benno J. Ndulu and Njuguna Ndung’u (1999), ‘Debt overhang and
economic growth in sub-Saharan Africa’, In Zubair Iqbal and Ravi Kanbur (eds), External
finance for low-income countries, Washington DC: IMF.
Esfahani, H. S., K. Mohaddes, and M. H. Pesaran (2009). Oil Exports and the Iranian Economy.
Cambridge Working Papers in Economics 0944.
Fantu Cheru (1992) ‘Structural Adjustment, Primary Resource Trade and Sustainable
Development in Sub-Saharan Africa’ World Development, 20 (4) :497-512.
Fieldhouse, D.K. (1986). Black Africa 1945-1980: Economic Decolonization and Arrested Development.
London: Allen and Unwin.
Finger, K. M. (2007), “Evolving Wave of Competition in the International Market: Challenges
for Africa Through the Rise of China and India”, mimeo, AERC, Nairobi.
Fitch Ratings (2011) cited in Bloomberg at Dec. 28, 2011 at www.Bloomberg.net
FitzGerald, E.V.K. 2003. Global markets and the developing economy, International Finance and
Development Series, Palgrave, Macmillan.
Fosu, Augstin (1991) ‘Capital Instability and Economic Growth in Sub-Saharan Africa’, Journal of
Development Studies, 28 (1): 74-85.
Fosu, Augstin. 2000. The International Dimension of African Economic Growth (Unprocessed,
African Economic Research Consortium, AERC, Nairobi).
Fosu, Augustin (2008) ‘Anti-growth syndromes in Africa: A Synthesis of Case Studies’ in Benno
Ndulu, S. OConnell, R. Bates, P. Collier, and C. Soludo (2008). The Political Economy of
Economic Growth in Africa: 1960-2000. Cambridge: Cambridge University Press.

69
Fosu, Augustin (2011), ‘Growth, Inequality and Poverty Reduction in Developing Countries’,
CSAE Working Paper WPS/2011-07, CSA, University of Oxford, UK.
Fosu, Augustin (2013), ‘Terms of Trade and Growth of Resource Economies: A Tale of Two
Countries’, CSAE Working Papers, No 2011-09, CSAE, University of Oxford.
Fosu, Augustin (2015) ‘Growth and Poverty Reduction in Africa: The Context and Evidence’
(Background Study for African Development Bank Report 2015 on Growth-Poverty
Nexus, ISSER, University of Ghana).
Fosu, Augustin K. and Stephen A. O’Connell (2006), “Explaining African Economic Growth:
The Role of Anti-growth Syndromes,” in Francois Bourguignon and Boris Pleskovic,
eds., Annual World Bank Conference on Development Economics
Frankel, Jeffery and David Romer (1999) ‘Does Trade Cause Growth’, American Economic Review,
89 (3): 379-399.
Frankema, Ewout Jeffrey Williamson, and Pieter Woltjer (2015. ‘An Economic Rationale for the
African Scramble: The Commercial Transition and the Commodity Price Boom of 1845-
1885’, NBER Working Paper No. 21213, May 2015
Frey, Burno (1984). International Political Economy. Cambridge: Basil Blackwell.
Galil, Eisa Abdalla Abdel (1994). Towards an Understanding of Sudan’s Balance of Payments
Difficulties (Unpublished MA Thesis). The Hague: Institute of Social Studies.
Gary, Ian and Terry Lynn Karl(2003). “Bottom of the Barrel: Africa’s Oil Boom and the Poor.”
Catholic Relief Services.
Gebre-Hiwot Baykedagne (1917). Mengestena Yehizb Astedader (in Amharic). The English
translation in Tenker Bonger (1995). The State and Economy in Early 20th Century Ethiopia:
Prefiguring Political Economy. London: Karank House.
Gebru Mersha (1995). State Farms in State-Centered Accumulation Strategies in Socialist Africa: The
Rationale and Critique (Ph.D. Dissertation, Institution of Social Studies, The Hague, The
Netherlands)
Ghura, Dhaneshwar (1995) ‘Macro Policies, External Forces, and Economic Growth in Sub-
Saharan Africa’, Economic Development and Cultural Change, 43 (4): 759-777.
Gilbert, C.L. and P., Varangis (2003), Globalization and International Commodity Trade with Specific
Reference to the West African Coca Producers, Paper Prepared for the International Seminar
on International Trade (ISIT), Stockholm, 24-25,
Goldin, I., O. Knudsen and D.V. Mensbrugghe (1993), ‘Tropical Product Exporters’, Chapter 6,
in Trade Liberalization: Global Economic Implications, OECD and the World Bank, Paris.
Grier, Kevin B and G. Tullock (1989) ‘An Empirical Analysis of Cross-National Economic
Growth: 1951-80, Journal of Monetary Economics, 24: 259-276.
Griffin, Keith (1970) ‘Foreign Capital, Domestic Savings and Economic Development’, Bulletin of
the Oxford University Institute of Economics and Statistics 32: 99-112
Griffin, Keith and J. Enos (1970), ‘Foreign Assistance, Objectives and Consequences’, Economic
Development and Cultural Change, 18 (3): 313-337.
Grilli, E.R. and M.C., Yang (1988), ‘Primary Commodity Prices, Manufactured Goods Prices,
and the Terms of Trade of Developing Countries: What the Long Run Shows’, The World
Bank Economic Review, 2(1), 1-47.
Gylfason (2000) - Natural Resources, Education, and Economic Development for the 15th
Annual Congress of the European Economic Association
Gylfason, Thorvaldur, T.T. Herbertsson, and Gylfi Zoega, Gylfi (1999), ‘A mixed blessing:
natural resources and economic growth’, Macroeconomic Dynamics, 3(2): 204–225.

70
Haggard, Stephan (1990). Pathways from the Periphery: The Politics of Growth in the Newly
Industrialized Countries. Ithaca: Cornell University Press.
Heinrich, Andreas (2011) ' challenges of A Resource Boom: Review of the Literature'
Forschugsstelle Oseuropa, University of Bremen, Germany at http://www.
forschugsstelle.uni-bremen.de.
Helleiner, G. K (1993) ‘From Adjustment to Development in Sub-Saharan Africa: Consensus and
Continuing Conflict’ in G.A. Cornia and G.K. Helleiner (eds). From Adjustment to
Development in Africa: Conflict, Controversy, Convergence, Consensus? New York: St.
Martin’s Press.
Heller, P.S. (1975) ‘A Model of Public Fiscal Behaviour in Developing Countries: Aid, investment and
Taxation’', The American Economic Review, 65 (3): 429-445.
Hopkins, A.G. (1973). An Economic History of West Africa. London: Longman.
Humphreys, Macartan and Martin E. Sandbu (2007), The Political Economy of Natural Resource
Funds, in “Escaping the Resource Curse” Macartan Humphreys, Jeffrey D. Sachs ,and Joseph
E. Stieglitz edition , Columbia University Press, New York.
Hyden, Goran (1983). No Shortcuts to Progress: African Development Management in Perspective.
London: Heinemann.
IAGS [Institute for the Analysis of Global Security] (2006). China's Oil Rush in Africa IAGS
WWW.IAGS.ORG .
IMF (2012), Regional Economic Outlook: Sub-Saharan Africa Sustaining Growth amid Global
Uncertainty, Washington, D.C.
IMF 2010. World Economic Outlook, Update, January, Washington, D.C. at www.imf.org
IMF(2008), Sub-Saharan Africa Sustaining the Expansion. World Economic and Financial
Surveys, Washington, DC.
Ismail, K. 2010. “The Structural Manifestation of the ‘Dutch Disease’: The Case of Oil Exporting
Countries.” Working Paper 10/103. International Monetary Fund, Washington, DC.
Jamshidi, Ahmad (1989) ‘Evaluating Global Macroeconomic Models: A Case Study of
MULTIMOD’, World Bank Policy, Planning and Research Working Paper Series WPS 298,
Washington D.C: The World Bank.
Jerven, Morent (2015). Africa: Why Economists Get it Wrong. London: Zed Books.
Johnson, H. G. (1958: 1953), International Trade and Economic Growth, London : George Allen and
Unwin.
Jones, Basil (2013) ‘Fragile States: Taking Part in Africa’s Inclusive Growth Take-off’ AfDB
African Economic Brief, Vol 4, Issue 4, 2013.
JRank (2015) “Africa Minerals And Resources -Reserves, Deposits, World,”
at http://science.jrank.org/pages/115/Africa-Minerals-resources.htm (accessed, July 30,
2015).
Kaldor, Nicholas (1976) ‘Inflation and Recession in the World Economy’, Economic Journal, 86
(344): 703-714.
Kaplinsky, R., and Morris, M., (2006), “Dangling by a thread: how sharp are the Chinese
scissors?” , A Report for DFID, Institute of Development Studies, University of Sussex
Kaplinsky, R., and Morris, M., (2008), Do the Asian Drivers Undermine Export-oriented
Industrialization in SSA?, World Development 36, 2:254-273
Kaplinsky, R., McCormick, D. and M. Morris (2006) The Impact of China on Sub Saharan Africa,
Institute of Development Studies, University of Sussex
Kaplinsky, Raphael and Mike Morris (2009) 'Chinese FDI in Sub Saharan Africa: Engaging With
Large Dragons' European Journal of Development Research Special Issue, 24( 1):

71
Kaplinsky, Raphael, Dorothy McCormick and Mike Morris. 2006. "The impact of China on sub-
Saharan Africa", DfID China Office, DfID, UK.
Karl, Terry Lynn (1997) The paradox of plenty: oil booms and petro-states. Berkeley, CA:
University of California Press.
Kay, C. 1989. Latin American theories of development and underdevelopment. London: Rutledge
Kay, Geoffrey (1975). Development and Underdevelopment: A Marxist Analysis. London: The
Macmillan Press Ltd.
Kellard, Neil and Mark Wohar (2006), ‘On the prevalence of trends in primary commodity
prices’, Journal of Development Economics, 79(1): 146–167.
Khan, Mohsin S. And M.Knight (1983) ‘Sources of Payment Problems in LDCs’, Finance and
Development, 20(4): 2-5.
Khan, S. A. and F. M. Baye (2008), “China-Africa Economic Relations: The Case of Cameroon”,
mimeo AERC, Nairobi.
Kitano, Naohiro and Yukinori Harada (2014) ‘Estimating China’s Foreign Aid 2001-2013, JICA
RI Working Paper 78 , JICA Research Institute
Klick, Tony (1998) ‘Adjustment, income distribution and poverty in Africa: A research guide’
(AERC Collaborative Research Project - Poverty, Income Distribution and Labour Market
Issues in Sub-Saharan Africa, AERC, Nairobi)
Koncazcki, Z.A (1977) ‘Portugal's Economic Policy in Africa’, in Z.A. Koncazcki and J.M. Knoxzacki. An
Economic History of Tropical Africa: Vol. II The Colonial Period. London: Frank Cass.
Konczacki, Zbigniew (1990), 'Socio-Economic Formations of the Southern African Iron Age: An
Overview', in Z.A. Koncazcki, J.L. Parpart and T.M. Shaw (eds.). Studies in the Economic
History of Southern Africa Vol. 1, The front-line States. London: Frank Cass LTD.
Lall, Sanjaya (1995) ‘Structural Adjustment and African Industry’, World Development, 23 (12) :
2019-2031.
Lawrence, Peter (1986) ‘Introduction: Word recession and the food crisis in Africa' in Peter
Lawrence (ed.). World Recession and the Food Crisis in Africa. London: James Curry.
Leys, Colin (1996). The Rise and Fall of Development Theory. London: James Currey.
Lin, Yifu Justin (2011) ‘ New Structural Economics: A Framework for Rethinking Development’,
The World Bank Research Observer, 26(2):193-221.
Longmire, Philip (1990) ‘Land and Labour in the Namibian Economy’', in Z.A. Koncazcki, J.L.
Parpart and T.M. Shaw (eds). Studies in the Economic History of Southern Africa, Vol. 1, The
Front-line States. London: Frank Cass LTD.
MacBean, A.I. 1966. Export instability and economic development. Cambridge, Mass.:
Harvard University Press.
Mack, Andrew (1974) ‘Theories of Imperialism: The European Perspective’, The Journal of
Conflict Resolution, 18 (3):514-535.
Maizels, A. (2000), ‘The Manufactures Terms of Trade of Developing Countries with the United
States, 1981–97’, Working Paper 36, Oxford: Finance and Trade Policy Centre, Queen
Elizabeth House.
Maizels, A. (2003), The Manufactures terms of Trade of developing and developed countries
with Japan, 1981-2000, mimeo, Oxford: Queen Elizabeth House
Maizels, A., K.Berge, T. Crowe and T. Palaskas (1998), ‘Exports in their export-led growth’,
World Development, 28 (1): 57—77.
Mamdani, Mohammed (1994) ‘A Critical Analysis of the IMF Program in Uganda’ in Ulf
Himmelstrand, Kabiru Kinyanjui and Edward Mburugu (eds). African Perspective on
Development. London: James Currey Ltd.

72
McKay, Andy (2004), ‘Economic Growth for Poverty Reduction in Africa: Recent History and
Current Issues’, ( University of Bath, UK, Background Paper prepared specifically for
the IV Mediterranean Seminar on International Development, “Africa’s Tragedy”,
Universitat de les Illes Balears, Palma de Mallorca September 2004)
McKay, Andy (2013) ‘Growth and Poverty Reduction in Africa in the Last Two Decades:
Evidence from an AERC Growth-Poverty Project and Beyond," Journal of African
Economies, 22 (suppl 1): i49-i76.
Mehrara, Mohsen and Kamran Niki, Oskoui (2007), The sources of macroeconomic fluctuations in oil
exporting countries: A comparative study. Journal of Economic Modelling.Volume,24.Issue
3 (May) ,Pages: 365-379.
Mehrara, Mohsen and Kamran Niki, Oskoui (2007), The sources of macroeconomic fluctuations in oil
exporting countries: A comparative study. Journal of Economic Modelling.Volume,24.Issue 3
(May) ,Pages: 365-379
Mistry, Percy S. (1988). African Debt: The Case for Relief for Sub-Saharan Africa. Oxford University,
Queen Elizabeth House: Oxford International Associates.
Mistry, Percy S. (1991). African Debt Revisited: Procrastination or Progress? The Hague: FONDAD.
Mistry, Percy S. (1994). Multilateral Debt: An Emerging Crisis. The Hague: FONDAD
Mistry, Percy S. (1996). Resolving Africa’s Multilateral Debt Problem: A Response to the IMF and The
World Bank. The Hague: FOUNDED.
Mkandawire, T. (2001), ‘Thinking about Developmental State in Africa, Cambridge Journal of
Economics, 25:289-313.
Mlachila, Montfort and Misa Takebe (2011) ' FDI from BRICs to LICs: Emerging Growth
Driver?' IMF Working Paper WP/11/178.
Mohammed, Baba G. (1989). Oil boom and Structure of Nigerian Economy 1970-87 (Unpublished
MA thesis). The Hague: Institute of Social Studies.
Mohan, Giles, Ed Brown, Bob Milward and A.B. Zack-Williams (2000). Structural Adjustment:
Theory, Practice and Impact. London: Rutledge.
Morazan, Pedor, Irene Konke, Doris Knoblauch and T. Schafer (2012) ' The Role of BRICS in the
Developing World' EU Parliament, Director General for External Policies, Policy Department at
http://www.eurpar.eurpoa.eu/activities/comittees
Moyo, Nelson P. And N. Amin (1992) ‘The Development Experience of Post-Colonial Sub-Saharan Africa’
in Willem L.M. Adriaansen and J.G. Waardenburg (eds). A Dual World Economy: Forty Years of
Development Experience. Bombay: Oxford University Press.
Mukherjee, Chandan and Marc Wuyts. 1991. ‘Data analysis in development research: An
argument’, ISS Working Paper No. 103, The Hague: Institute of Social Studies.
Mulalu, Sally Linda (1987). The Role of Foreign Finance in Alleviating Zambia’s Balance of Payment
problem (Unpublished MA thesis, The Hague: Institute of Social Studies).
Mundell, Robert. 1968. International economics, New York: Macmillan.
Munro, J.Forbes (1976). Africa and the International Economy 1800-1960. London: J.M. Dent & Sons Ltd.
Mwale, Charles (1983). Domestic Adjustment to External Shocks of the 1970s: The Case of Zambia
(Unpublished MA thesis, The Hague: Institute of Social Studies).
Ndikumana, L., Boyce, J. K. and Ndiaye, A. S. (2015). Capital flight from Africa: Measurement
and drivers. In S. I. Ajayi and L. Ndikumana (Eds.), Capital Flight from Africa: Causes,
Effects and Policy Issues (pp. 15-54). Oxford: Oxford University Press.
Ndulu, Benno J. 1986. "Investment, output growth and capacity utilization in an African
economy: The case of manufacturing sector in Tanzania", Eastern Africa Economic Review, 2
(1): 14-31.

73
Ndulu, Benno J. 1991. ‘Growth and adjustment in sub-Saharan Africa’, in Ajay Chhibber and
Stanley Fischer (eds) Economic reform in sub-Saharan Africa, Washington DC: World Bank.
Neary, J.P. and S. Van Wijnbergen (1986), Natural resources and the macro economy. Centre for
Economic Policy Research/ Blackwell, Oxford, UK, 1986, pp 352
Neumark, Daniel S. (1977) ‘Trans-Sahara Trade in the Middle Ages’, in Z.A. Koncazcki and
J.M.Knoxzacki (eds). An Economic History of Tropical Africa: Vol. I, The Pre-Colonial Period.
London: Frank Cass.
Ngwenya, A.R. and P.K.Bugembe (1987) ‘The origins and Causes of the African Social and
Economic Crisis’, in International Conference on Africa: the Challenge of Economic Recovery
and Accelerated Development (Abuja, Nigeria 15-19 June).
Nzula, A.T. I.I. Potekhin and A.Z.Zusmaovich (1979). Forced Labour in Colonial Africa. London:
Zed Press.
OAU, Organization of African Unity (1981). Lagos Plan of Action for the Economic Development of
Africa: 1980-2000. Addis Ababa: OAU.
Obinyeluaku, Moses and Nicola Viegi (2009).How does fiscal policy affect monetary policy in the
Southern African Community (SADC)?, MPRA Paper 15372, University Library of Munich,
Germany.
Ocampo, Jose Antonio (1986) ‘New Development in Trade Theory and LDCs’, Journal of
Development Economics, 22:
Ocran, Matthew Kofi & Nicholas Biekpe (2008). Ghana, Journal, Emerald Group Publishing, vol.
35(3), pages 224-235, July.
OECD, AfDB, UNECA, UNDP (2011). African Economic Outlook 2011: Africa and its Emerging
Partners, OECD Publishing, Paris.http://dx.doi.org/10.1787/aeo-2011-e
Ofuatey-Kodjoe (1991) ‘African International Political Economy: An Assessment of the Current
Literature’ in Craig
Onimode, Bade (1988). A Political Economy of the African Crisis. London: Zed Books Ltd.
Onjala, J. (2008), “A Scoping Study on China-Africa Economic Relations: The Case of Kenya”,
mimeo, AERC, Nairobi.
Osei-Hwedie, Bertha Z (2012) The Dynamics Of China-Africa Cooperation'' Afro Asian Journal
of Social Sciences 3(3): 2229 - 5313)
Palma, Gabriel, A Formal Theory of Underdevelopment or a Methodology for the Analysis of.
Concrete Situations of Underdevelopment? World Development, vol. 6, nos. 7/8 (July/
Aug. 1978), pp. 881-924 .
Panagariya, A. and M., Schieff (1990), Commodity Exports and Real Income in Africa, Working
Paper Series 537, World Bank.
Pfaffenzeller, Stephan, Paul Newbold, and Anthony Rayne (2007) A Short Note on Updating the
Grilli and Yang Commodity Price Index”, The World Bank Economic Review, 21(1):151–
163
Pigato, Miria and Wenxia Tang (2015) ‘China and Africa: Expanding Economic Ties in an
Evolving Global Context’, Investing in Africa Forum, Addis Ababa (Unprocessed)
Pigato, Miria, and Jullien Gourdon (2014), ‘The Impact of Rising Chinese Trade and
Development Assistance in West Africa’, Africa Trade Practice Working Paper Series
Number 4, World Bank, Washington, DC.
Pim, Alan (1977) ‘Capital Investment in Sub-Saharan Africa’', in Z.A. Koncazcki and J.M.Knoxzacki (eds).
An Economic History of Tropical Africa: Vol. II, The Colonial Period. London: Frank Cass.
Prebisch, Raul (1962, earlier 1950) ‘The Economic Development of Latin America and Its
Principal Problems’, Economic Bulletin for Latin America, 7 ( 1): 1-22.

74
Rattso, Jorn. 1994. "Medium-run adjustment under import compression: Macroeconomic analysis
relevant for sub-Saharan Africa", Journal of Development Economics, 45: 35-54.
Renard, Mary-Francoise (2011) ' China's Trade and FDI in Africa' ADB Working Paper, No 126
(May), African Development Bank, Tunis.
Rodney, Walter (1972). How Europe Underdeveloped Africa. London: Bogle L'Ouveture Publishing.
Rodriguez, F. and Dani Rodrik (2000) ‘Trade Policy and Economic Growth: A Skeptic’s Guide to
The Cross-National Evidence’, Department of Economics, University of Maryland and
J.F. Kennedy School of Government, Harvard University.
Rodrik, Dani (1992) ‘The Rush to Free Trade in the Developing World: Why So Late? Why
Now? Will IT Last?’, NBER Working Paper NO 3947, NBER, Cambridge, MA.
Rodrik, Dani (1999) ‘How Far Will International Economic Integration Go?’J.F. Kennedy School
of Government, Harvard University (mimeo).
Rodrik, Dani (2001) ‘The Developing Countries ‘ Hazardous Obsession with Global
Integration”, J.F. Kennedy School of Government, Harvard University (mimeo).
Routley, Lura (2012), ‘Developmental Sates: A Review of the Literature’, ESID Working Paper,
No. 3, ESID, University of Manchester.
Sachs, J. D., and A. M. Warner. 2001. “The Curse of Natural Resources.” European Economic
Review 45 (4–6): 827–38.
Sachs, Jeffery and Andrew Warner (1995) ‘Economic Reform and the Process of Global
Integration’, Brookings Papers on Economic Activity, 1995 (1): 1-118.
Sahn, David, Paul Dorosh, S.D. Younger (1997). Structural Adjustment Reconsidered: Economic
Policy and Poverty in Africa. Cambridge: Cambridge University Press.
Sarkar, Prabirjit (1986) ‘The Singer-Prebisch Hypothesis: A Statistical Evaluation’, Cambridge
Journal of Economics, 10 (4): 355-371.
Sarkar, Prabirjit and H.W. Singer (1991), ‘Manufacture Exports of Developing Countries and
Their Terms of Trade since 1965’, World Development, 19(4): 333-340.
Sau, R (1978). Unequal Exchange, Imperialism and Underdevelopment: An Essay on the Political
Economy of World Capitalism. Calcutta: Oxford University Press.
Schief, M. (1994), Commodity Exports and the Adding-up Problem in Developing Countries Trade
Investment, and Lending Policy, Policy Research Working Paper 1338, World Bank.
Seleti, Yonah N. (1990) ‘The Development of Dependent Capitalism in Portuguese Africa’, in
Z.A. Koncazcki, J.L. Parpart and T.M. Shaw (eds). Studies in the Economic History of
Southern Africa Vol. 1, The Front-line States. London: Frank Cass Ltd.
Sender, John and S. Smith (1986). The Development of Capitalism in Africa. London: Methuen.
Shaikh, Anwar (1984) ‘The Laws of International Exchange’ in E.J. Nell. Growth, Profits and
Prosperity. Cambridge: Cambridge University press.
Shaikh, Anwar (2016). Capitalism: Competition, Conflict, Crisis. Oxford: Oxford University Press.
Singer, H.W. 1950. “The distribution of gains between investing and borrowing countries.”
American Economic Review 40, pp. 473 485.
Singer, H.W. (1950) ‘US Foreign Investment in Underdeveloped Areas: The Distribution of
Gains between Investing and Borrowing Countries', The American Economic Review:
Papers and Proceedings, 40 (2): 473-485.
Spraos, J. (1980), ‘The Statistical Debate on the Terms of Trade between Primary Products and
Manufactures’, Economic Journal, 90(357), 107-128.
Stafanski, Bogdan (1990) ‘An Alternative Development Strategy for Africa’ African Bulletin No.
36. Warsaw: University of Warsaw, Institute of Developing Countries.
Stein, Leslie (1977) ‘Export Trends in East Africa’, Development and Change, 8 (1): 103-116.

75
Stewart, F (1984) ‘Recent Theories of International Trade: Some Implication for the South’, in
Henry Kierzkowski (ed.). Monopolistic Competition and International Trade. Oxford:
Clarendon Press.
Stewart, Frances (1993) ‘Are Short-term Policies Consistent with Long-term Development Needs
in Africa’ in G.A. Cornia and G.K. Helleiner (1993). From Adjustment to Development in
Africa: Conflict, Controversy, Convergence, Consensus? New York: St. Martin’s Press.
Stijns, Jean-Philippe C. (2005), ‘Natural resource abundance and economic growth revisited’,
Resource Policy, 30(2): 107–130.
Strange, Austin, Bradley Parks, Michael J. Tierney, Andreas Fuchs, Axel Dreher, and Vijaya
Ramachandra (2013), ‘China’s Development Finance to Africa: A Media-Based Approach
to Data Collection’, Working Paper 323, Center for Global Development, at
www.cgdev.org
Sutcliffe, Bob (1986) ‘Africa and the World Economic Crisis', in Peter Lawrence (ed.). World
Recession and the Food Crisis in Africa. London: James Curry.
Swan, T.W. (1960) ‘Economic Control in a Dependent Economy’, The Economic Record, (March):
51-66.
Taiwo, I.O. (1991) ‘Commodity Prices and Debt Crisis in Sub-Saharan Africa’, Eastern Africa
Economic Review, 7 (2): 39-50.
Taylor, Lance. 1983. Structuralist macroeconomics: Applicable models for the Third World. New York:
Basic Books.
Tegegne Gebre-Egziabher (2006) “The Developmental Impact of China and India on Ethiopia
with Emphasis on Small Scale Footwear Producers” , Paper presented at Accelerated
and Shared Growth in South Africa: Determinants, Constraints and Opportunities
Conference, 18 - 20 October 2006, Johannesburg, South Africa.
Tsikata, D., A. M. Fenny and E. Aryeetey (2008) “China-Africa Relations: A Case Study of
Ghana”, mimeo, AERC, Nairobi.
UN (1949). International Capital Movements During the Inter-War Period. New York: United
Nations, Department of Economic Affairs.
UN (1954). The International Flow of Private Capital 1946-1952. New York: United Nations,
UNCTAD (1999). Foreign direct investment in Africa: Performance and potential, Geneva: UNCTAD.
UNCTAD (2006). Investment brief (at www.unctad.org, accessed on 20 October, 2006).
UNCTAD (2011), Unraveling the underlying causes of price volatility in world coffee and cocoa
commodity markets, Discussion paper 1
UNCTAD (2016, 2014), World Investment Report. Geneva: UNCTAD
UN-OSAA (2013) ' The Role of Emerging Economies in Africa's Infrastructure Development' a
draft report presented at the export group meeting of UN, Office of Special Advisor on
Africa, Addis Ababa, January, 15, 2013.
van Arkadie, Brain (1986) ‘Some Realities of Adjustment: An Introduction’, Development and
Change, 17 (3) : 371-86.
van Wijnbergen, Sweder (1984), ‘The ‘Dutch Disease’: A Disease After All?’, The Economic
Journal, March: 41-55.
van Wijnbergen, Sweder (1986a), ‘Aid, Export Promotion and the Real Exchange Rate: An
African Dilemma’, Macroeconomics Division Development Research Department, The World
Bank.
Vansina, J. (1977) ‘Long-distance Trade-routes in Central Africa’, in Z.A. Koncazcki and J.MKnoxzacki
(eds). An Economic History of Tropical Africa: Volume I: The Pre-Colonial Period. London: Frank
Cass.

76
Wallerstein, Immanuel (1976) ‘The Three Stages of African Involvement in The World
Economy’, in Wallerstein, Immanuel and C.W. Gutkind (eds). The Political Economy of
Contemporary Africa. London: Sage Publication.
Weisskopf, Thomas E. (1972) ‘The impact of Foreign Capital Inflow on Domestic Savings in
Underdeveloped Countries’, Journal of International Economics, 2:25-38.
Westerhoff, Frank (2004). Market depth and price dynamics: A note, Quantitative Finance
Papers, cond-mat/0403723, arXiv.org
Wheeler, David (1984) ‘Sources of Stagnation in Sub-Saharan Africa’, World Development, 12 (1):
1-23.
White, Howard (1992) ‘The Macroeconomics Impact of Development Aid: A Critical survey’,
Journal of Development Studies, 28 (2): 163-240.
White, Howard (1996a) ‘Adjustment in Africa: A Review Article’ Development and Change, 27 (4):
786-815.
White, Howard (1996b) ‘Zambia in 1990s as the Case of Adjustment in Africa’ Economic Research
Seminar, The Hague: Institute of Social Studies.
Word Bank (1994). Adjustment in Africa: Reforms, Results, and the Road Ahead. Washington D.C:
The World Bank.
World Bank (1981). Accelerated Development in Sub-Saharan Africa: An Agenda for Action.
Washington D.C: The World Bank.
World Bank (1989). Sub-Saharan Africa: From Crisis to Sustainable Growth- A Long-term Perspective
Study. Washington D.C: The World Bank.
World Economic Forum (2006) at www.weforum.org/summitreport/africa2006.
Younger, S.D. (1992) ‘Aid and the Dutch Disease: Macroeconomic Management When
Everybody Loves You’, World Development, 20 (11): 1787-1759.

77
 LIST OF Department of Economics Working Papers
1. AAU-Econ WP No 1: Wassie Berhanu: The Informal Cross-border Livestock Trade
Restrictions in Eastern Africa: Is there a case for free flows in Ethio-Kenyan
Borderlands?. May , 2015
2. AAU-Econ WP No 2. Alemayehu Geda and Edris Hussein: The Potential for Intra-
African Trade and Regional Integration in Africa, May (2015).
3. AAU Econ WP No. 3 Marsha Negussie: Putting the Solow Growth Model to the Test:
The Case of Sub-Saharan Africa Countries, June 2016.
4. AAU Econ WP No 4 Alemayehu Geda and Addis Yimer: Determinants of Foreign Direct
Investment Inflows to Africa: A Panel Co-integration Evidence Using New Analytical
Country Classification. June 2016
5. AAU Econ WP No 5 Kokeb G. Giorgis: The Impact of International Remittances on
Expenditure Patter of Households in Ethiopia. June 2016
6. AAU Econ WP No 6. Alemayehu Geda : The Historical Origin of African Economic Crisis and
its Legacy: African International Trade and Finance -from Colonialism to China, February
2017

78

View publication stats