Economics in Africa

Standard/Elements SS7E1 The students will analyze different economic systems. 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. Explain how most countries have a mixed economy located on a continuum between pure and market and pure command. Compare and contrast the economic systems in South Africa and Nigeria.

Essential Question What are the similarities and differences of the economic systems in South Africa and Nigeria?

Countries Today Most countries in the world today have a __________economy. (You know this because you have studied it before. ) Do you remember the three different economies you have studied?

All economic systems answer three basic questions: Complete the chart below : Economy What is produced How goods are produced How products are distributed to others Traditional Make their own products Command Market Supply and Demand

Answers: Economy What is produced How goods are produced How products are distributed to others Traditional What people need to survive Farming Hunting Gathering Make their own products Command Whatever the government decides However the government decides Class reward system Waiting in line Market What people want to buy and sell Supply and Demand Determined by how much someone will pay for the good

South Africa's Economy South Africa has a mixed economy. It is the most successful economy in sub- Saharan Africa after recovering from apartheid. It has been making the transition from a command economy to a mixed economy The government controls some areas like telecommunications and the postal service.

Healthcare is both private and public. What does that mean to you? The economy has gone from primarily mining, fishing, and agriculture to include manufacturing and service industries.

Nigeria's Economy Nigeria’s economy is very different from South Africa. It is a mixed economy. During the 1970s Nigeria was very wealthy from the oil industry. When the oil prices fell in the late 1970s the Nigerian economy collapsed.

From Rich to Poor! By the time the year 2000 arrived Nigeria was one of the poorest nations in the world. Agriculture was neglected during the oil days. Almost half of Nigerians are farmers. Nigeria has gone from exporting food (making money from food) to importing food (spending money for food). Most Nigerians live on less than a dollar a day.

What does the government control? Oil companies are controlled by private businesses. The government controls two of the three television stations. The government controls the postal service and public schools. The public schools are in poor shape and if parents can afford it, their children attend private schools. Nigeria is planning for national healthcare, but it is so poorly run that most healthcare is run by individuals.

Complete the chart Country Type of Economy Growing or Struggling What the Government controls South Africa Nigeria

Answers: Country Type of Economy Growing or Struggling What the Government controls South Africa Mixed (transitioning from command to market) growing Oil, gas, postal services, and some telecommunications Nigeria Mixed (moving to a market economy) struggling Postal, schools, 2 of 3 TV stations

Talk it over with a neighbor. A Question for You What conclusions can you make about the condition of the economies in Nigeria and South Africa and whether the economy is weak or strong? Talk it over with a neighbor.

Standard/Elements SS7E2 The student will give examples of how voluntary trade benefits buyers and sellers in Africa. Explain how specialization encourages trade between nations. Compare and contrast different types of trade barriers, such as tariffs, quotas, and embargos. Explain why international trade requires a system for exchanging currencies between nations.

Essential Questions How does specialization encourage trade between countries? How do tariffs, quotas, and embargos serve as barriers to trade? Why does international trade require a system for exchanging currencies between nations?

Trade is Essential to Africa Why do you think trade is essential to Africa’s future? Discuss as a class. Currently, it is not easy for African countries to trade with each other. Why do you think this is true?

Trade in Africa Most African countries trade with countries outside of the African continent because: The roads usually lead to a port rather than another city. Why do you think roads would be built that way in Africa? (Hint: think back)

That’s right- The colonial powers needed to ship raw materials back to Europe not to other parts of Africa so they built roads to ports!

Other reasons: Terrible roads, roadblocks, border patrol searches, and civil wars, and high tariffs prevent trading between African countries.

So who are Africa's trading partners? Many people around the world value African art and textiles, so African sellers benefit from their unique products. The United States has lifted tariffs from South African diamonds and gold also benefiting sellers in Africa. Money earned from exports allows Africans to import what their countries need.

Trade Barriers Tariffs, quotas, and embargoes restrict trade in some African countries. Do you remember how these trade barriers restrict trade?

Tariffs are taxes placed on imported goods. Quotas are restrictions on the amount of a good that can be imported. Embargoes forbid trade with other countries.

How do these trade barriers affect trade Africa? High tariffs prevent African countries from trading with each other. Some African countries charge their African trading partners tariffs as high as 17% on imports from the country. They set up high tariffs to prevent competition in their countries for products they also produce. Example: If Nigeria wants to sell rugs to Ghana, Ghana will charge the people in Ghana the cost of the rug plus a tariff of 17%. The people will not buy the item because they can buy a cheaper locally made rug.

In 2007 South Africa, placed a quota on the amount of Chinese textiles (fabrics, rugs) that could be imported. Many South Africans had lost their jobs in the textile business because the people in the country were buying cheaper foreign textiles so the government halted the import of the Chinese exports by imposing a quota.

In May of 2007, a six-year UN embargo was lifted from Liberia. Liberia could not export any diamonds because the money made from the selling of diamonds was used to fund civil wars across the continent. Now, since the embargo is lifted, Liberia can sell its diamonds.

True or False The UN has forbidden arm (weapons) to be imported into Africa. This is a quota. To give its farmers an advantage, Nigeria has placed a high tax on imported rice. This is a tariff. The EU voted to only allow limited amount of cocoa from Africa to be imported to EU member countries. This is an embargo.

Specialization Countries trade goods because no country has everything they need (scarcity). Every country has different capital, human, and natural resources. We are a global economy today because countries trade to buy and sell what they need.

Specilaization Countries give up something when they specialize in the production of a good. This is called opportunity cost. For example: Ghana makes beautiful textiles and produces chocolate . Switzerland produces chocolate. Ghana decides to make only cloth because it is more profitable. Ghana now has to buy chocolate from Switzerland. Ghana’s opportunity cost is the money that Ghana is giving up to specialize in the manufacturing of cloth.

Specialization Specialization helps make businesses more profitable and improves the standard of living in countries. Why? Write your answer in your notebook or on another sheet of paper. Share out.

Answer People make more money if their businesses are successful which they will be if the business specializes and becomes very skilled at what they produce. The business raises their own standard of living and that will increase the country’s GDP and strengthen the country’s economy.

Discuss What are some businesses in our community that specialize in goods or services? Would they be as successful if they tried to make many items instead of specializing in one type of item or service?

Standard/Elements SS7E3 The student will describe the factors that cause economic growth and examine their presence or absence in Nigeria and South Africa. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP). Explain the relationship between investment in capital goods (factories, machinery, and technology) and gross domestic product (GDP). Explain how the distribution of diamonds, gold, uranium, and oil affects the development of Africa. Describe the role of entrepreneurship.  

Essential Questions What is the relationship between investment in capital (factories, machinery, and technology) and gross domestic product? What is the relationship between investment in human capital (education and training) and gross domestic product (GDP)? How does the distribution of diamonds, gold, uranium, and oil shape the economies of Africa? What is the role of entrepreneurship in Africa?  

Question What are the four factors which influence economic growth? You have studied this in other units.

South Africa Gets Smart! How a country manages these factors determines how strong their economy is or could possibly become. An investment in human capital delivers more and longer lasting rewards for a country’s economy. South Africa is strongly committed to education- preparing a future workforce which will increase the country’s GDP.

South Africa’s GDP has been growing at a rate of 5% per year. How does this rising GDP affect the economy?

What about Nigeria? In Nigeria, the government does not budget for education. How do you think this will affect the future GDP of Nigeria? While Nigeria has a healthy GDP from selling its oil, 70% of Nigerians leave in poverty. Only a group of wealthy people benefit from the sale of Nigeria’s oil.

Why has this happened in Nigeria? The government has spent money excessively and not managed its money well. Therefore, it has little money to invest in capital resources like factories and technology. What will happen to Nigeria’s economy if the government does not change its ways?

Unequal Distribution of Resources In Africa, there is an unequal distribution of resources. What does that mean?

Even countries that have many natural resources may not have a strong economy. Why? If the country has an unstable or corrupt government, the country’s people may not benefit form their country’s riches.

Diamonds ½ of the world’s diamonds are found in Africa. Can you name any countries in Africa which mine diamonds? Some countries use the money from selling diamonds to build schools and roads. Others like the Democratic Republic of Congo use the money to fund wars against their own people.

Gold South Africa has nearly ½ of the world’s gold. Gold is the basis of South Africa’s strong economy. Other countries like Ghana, Mali, and Senegal may mine gold, but their economies are not strong and people are poor. Why do you think this is so?

Oil Nigeria is the sixth largest oil producer in the world. (think: OPEC) However, most of the population is very poor living on a dollar a day. Nigeria takes in 2.2 million dollars a day from selling its oil. What do you think happens to this money?

Uranium Uranium is a radioactive element that occurs in rocks, soil, and both surface and ground water. It is used to produce fuel for nuclear power plants and to make nuclear weapons. Africa produces 20% of the world’s uranium. Uranium can be found in Namibia, South Africa, and Gabon.

Uranium sales had dropped, but are now increasing due to the need for alternative fuel sources. The countries who export uranium are hoping for an increase in exports to raise their GDP.

Time to Write! What conclusions can you make about natural resources, Africa, governments, and the economies of countries that have gold, diamonds, uranium, and oil? Write your conclusions in a paragraph. Write for 10 minutes and discuss with the class.