Transcript Africa Economic Understandings Powerpoint

Africa
Economic Understandings
SS7E1 The student will analyze
different economic systems.
• a. Compare how traditional, command, and
market economies answer the economic
questions of (1) what to produce, (2) how to
produce, and (3) for whom to produce.
• b. Explain how most countries have a mixed
economy located on a continuum between
pure market and pure command.
• c. Compare and contrast the economic
systems in South Africa and Nigeria.
What is a traditional economy?
• An underdeveloped economy in which
communities use primitive tools and
methods to harvest and hunt for food,
often resulting in little economic growth.
Traditional economies are often found in
rural regions with high levels of
subsistence farming (growing only
enough food for your family and to sell at
the local market).
In a traditional economy…
• 1. How would you determine what to
produce?
• 2. How would you produce it?
• 3. For whom would you produce it?
What is a command economy?
• An economy where supply and price
are regulated by the government
rather than market forces.
Government planners decide which
goods and services are produced and
how they are distributed.
In a command economy…
• 1. How would you determine what to
produce?
• 2. How would you produce it?
• 3. For whom would you produce it?
What is a market economy?
• an economy in which prices and
wages are determined mainly by
supply and demand, rather than
being regulated by a government
• Cash crops are often produced in
Market economies for export to
Europe, not necessarily for other
African countries (ECOWAS –Economic
Communities of West African States)
In a market economy…
• 1. How would you determine what to
produce?
• 2. How would you produce it?
• 3. For whom would you produce it?
What about mixed economies?
• What does mixed economy mean?
– an economy in which some industries and
businesses are government-owned and some are
privately owned
On a scale like the one below, where would you say
most countries would be placed?
Pure Command
Mixed
Pure Market
Most countries have a mixed economy
located on a continuum between pure
market and pure command.
Pure Command
Mixed
Pure Market
In other words, most countries have privately
owned businesses and government-run
businesses. How is the U.S. an example of a
mixed economy?
South Africa
• South Africa has a mixed economy with a
high rate of poverty and low GDP per
capita.
• The economy of South Africa is the
largest in Africa. It accounts for 24% of
Africa’s Gross Domestic Product (PPP).
South Africa
• The country’s economy is reasonably
diversified with key economic sectors
including mining, agriculture and fishery,
vehicle manufacturing and assembly, foodprocessing, clothing and textiles,
telecommunication, energy, financial and
business services, real estate, tourism,
transportation, and wholesale and retail trade.
South Africa
• South Africa is the world's largest diamond, gold,
platinum, manganese, chromium, vanadium,
alumino-sillicates and titanium producer.
• South Africa is the largest steel producer in Africa.
• Other than Swaziland, South Africa is the only African
state to produce pulp and paper.
• There are four oil refineries in South Africa, with a
total production capacity in 2002 of 469,000 barrels
per day.
South Africa
• According to official estimates, a quarter of
the population is unemployed, however
unofficial estimates put the real
unemployment rate as high as 40%.
• A quarter of South Africans live on less than
US $1.25 a day. Why do you think that is if
they have Africa’s largest economy? Where is
all of the wealth?
Resources in Southern Africa
Nigeria
• Nigeria is a middle income, mixed economy
and emerging market, with expanding
financial, service, communications, and
entertainment sectors.
• It is ranked 30th in the world in terms of GDP
(PPP) as of 2011.
• About 57% of the population lives on less than
US$1 per day.
Nigeria
• In 2005 the GDP was composed of the
following sectors: agriculture, 26.8%; industry,
48.8%; and services, 24.4%.
• Previously hindered by years of
mismanagement, economic reforms of the
past decade have put Nigeria back on track
towards achieving its full economic potential.
Nigeria
• Although much has been made of its status as
a major exporter of oil, Nigeria produces only
about 2.7% of the world's supply.
• Nigeria's economy is struggling to leverage the
country's vast wealth in fossil fuels in order to
displace the crushing poverty that affects
about 57% of its population.
• The largely subsistence agricultural sector has
not kept up with rapid population growth, and
Nigeria, once a large net exporter of food,
now imports a large quantity of its food
products.
West
African Oil
Coast
There is an increasing Chinese presence in
Africa as China searches for oil, minerals,
and food for its markets.
Chinese Influence in Africa
Trade rose from about $10b in 2000 (China’s leader,
Deng Xiaoping) to $100b+ in 2010
-Oil (Angola, Sudan, Nigeria)
-Copper (Zambia)
-Agricultural land (Zimbabwe, Nigeria, etc.)
• Problems:
– Hostility by African workers due to China’s appalling
anti-labor practices, low wages, and disregard for the
environment. *They also bring their own Chinese
workers with them. Why is this a problem?
– Cultural clashes
Brazil – Africa relations
• Brazil is also becoming a greater influence in
Africa’s markets
(Both Brazil and Africa have cultural & historical ties
to the trans-Atlantic slave trade.)
– Trade
– Investment
– Alliances
Nigeria
• Reportedly, 80% of Nigeria's energy revenues
flow to the government, 16% cover
operational costs, and the remaining 4% go to
investors. However, the World Bank has
estimated that as a result of corruption 80% of
energy revenues benefit only 1% of the
population.
• Government focus is on the oil industry rather
than food. Oil spills have contaminated land
and people are moving into the rain forest
which is causing deforestation issues.
Nigeria
• Corruption has been a huge issue:
– In September 2005, Nigeria, with the assistance of
the World Bank, began to recover US$458 million
of illicit funds that had been deposited in Swiss
banks by the late military dictator Sani Abacha,
who ruled Nigeria from 1993 to 1998.
Nigeria
• A longer-term economic development
program is the United Nations (UN)-sponsored
National Millennium Goals for Nigeria. Under
the program, which covers the years from
2000 to 2015, Nigeria is committed to achieve
a wide range of ambitious objectives involving
poverty reduction, education, gender equality,
health, the environment, and international
development cooperation.
Sudan & South Sudan
• July 9, 2011 – South Sudan gained
independence & became recognized as the
Republic of South Sudan. It was voted on by
the people, and it passed with 98.83% of the
vote! (Who are the ethnic groups living in Sudan & South Sudan?)
– South Sudan has very little resources except oil
(80% of oil is now found in South Sudan)
– It is a land-locked country
– Recently, they have created a relationship with
China concerning oil
SS7E2 The student will explain how
voluntary trade benefits buyers and
sellers in Africa.
• a. Explain how specialization encourages trade
between countries. Compare and contrast
different types of trade barriers, such as
tariffs, quotas, and embargos.
• b. Explain why international trade requires a
system for exchanging currencies between
nations.
Specialization
• Not every country can produce all the goods
and services it needs
– Because of this, countries specialize in producing
those goods and services that they CAN provide
most efficiently.
– They then look for others who may need those
goods and services so they can sell their products
to those who need them.
*People producing cash crops have become efficient
and successful with those crops, and they produce
a higher quality product!
Specialization
• So What Does That Mean?
– Countries trade with one another to get
everything they need for their country. In order to
do that, each country
produces what they can
make the best. Then they
trade with one another.
Specialization
• In international trade, no country can be completely
self-sufficient.
– Which means….no country can produce all the
goods and services it needs
• Specialization: the products a country makes
best and that are in demand on the world
market
– This is a way to build a profitable economy and to
earn money to buy items that cannot be made
locally
The problem with specialization is that a country’s
economy is wiped out with one crop failure; the
demand and price lowers on the world market.
Trade Barriers
Let’s Review The Three Types of Trade Barriers!!
1. Tariff
2. Quota
3. Embargo
All three of these are considered to be trade
barriers. They slow down or prevent one
country from exchanging goods with another.
Trade Barriers
• Why have trade barriers?
– To protect local industries from lower priced
goods made in other countries
– Political problems between countries (trade would
be stopped until the political issues are settled)
Tariff
• Tariff: a tax placed on goods when they are
brought (imported) into one country from
another country.
– Purpose: Make the imported good more
expensive than a similar item made locally.
• Called a “protective tariff” because it PROTECTS local
manufacturers from competition coming from cheaper
goods made in other countries
Quota
• Quota: sets a specific amount or number of a
particular product that can be imported or acquired
in a given period
– Purpose: a different way of limiting the amount of foreign
goods that can come in to a country.
– EX: South Africa could decide that only 1500 cars could be
brought into the country from Japan in a given year. That
would make it more likely that people buying cars would
have to buy South African made cars, if Japanese cars were
not available.
Embargo
• Embargo: when one country announces that it will
no longer trade with another country in order to
isolate a country and cause problems with that
country’s economy.
– Purpose: to punish OR persuade a country
– Example: Member countries of OPEC (including Nigeria in
1971) decided to stop all sales of oil (petroleum) and gas to
the countries supporting Israel in the 1973 Arab-Israeli war.
Exchanging Currency
• Most countries in Africa have their own type of
currency.
– In order to pay for goods as they trade with each other,
they had to establish a system of changing one type of
currency to another.
• Exchange Rate
– In order for them to trade with each other, they have to be able to
figure out what goods cost in each currency.
• To sum it all up…This makes it possible to buy and
sell goods between nations with different types of
money.
Currencies
Nigerian currency - Naira
South African currency - Rand
Let’s try some currency conversions!
• http://www.xe.com/ucc/
SS7E3 The student will describe factors that influence
economic growth and examine their presence or
absence in Nigeria and South Africa
• a. Explain the relationship between investment in
human capital (education and training) and gross
domestic product (GDP).
• b. Explain the relationship between investment in
capital (factories, machinery, and technology) and
gross domestic product GDP).
• c. Explain how the distribution of diamonds, gold,
uranium, and oil affects the economic
development of Africa.
• d. Describe the role of entrepreneurship.
Human Capital
• It is called human capital because people cannot
be separated from their knowledge, skills, health,
or values in the way they can be separated from
their financial and physical assets.
Research shows that investment in human capital
(education & training) increases a nation’s GDP.
Why?
Investment in Capital
• Why invest in capital (factories, machinery, and
technology)?
1. It contributes to current demand of capital goods
2 . It enlarges the production base thus increasing
production capacity
3. It modernizes production processes, improving cost
effectiveness
4. It reduces the labor needs per unit of output, thus
potentially producing higher productivity and lower
employment
5. It allows for the production of new and improved
products, increasing value added in production
6. It incorporates international world-class innovations
and quality standards, allowing trade with more
advanced countries
How does the distribution of natural
resources affect economic
development in Africa?
• Natural resources can be extracted and
exported to bring in revenue.
• Diamonds, uranium, and oil are all natural
resources that countries in Africa export for
financial gain.
Africa’s Natural Resources
Entrepreneurship
• Indeed the issue of entrepreneurship in Africa
is a problem we must address at the core. As
an African proverb says, "The construction of a
house, always start with the foundation"; thus
develop entrepreneurship at its core and base
concepts.
*Why is entrepreneurship so important to
countries in Africa?
Entrepreneurship
• There is no doubt that the creation of
small businesses would allow economic
recovery of certain villages and cities.
• It would also offer youngsters the
opportunity to work in their own villages
and towns and stop the exodus in search
of an imaginary paradise.
• People could work for the development of
the African continent.
• Micro-lending (loaning small amounts of
money) has helped people with the capital they
need to start businesses.