Economic problems in Africa seem to defy most solutions that have been proffered by experts, and this may not be unconnected with the multidimensional nature of these problems. The hydra-headed nature of the problems will make them very difficult for an approach to solving them. This has prompted the adoption of a composite approach comprising many dimensions in solving some of the economic problems. In Nigeria and some other African countries, debts are increasing daily as many of them have resorted to deficit budgeting. It is extremely difficult or impossible to have a balanced budget in a situation of decreasing revenue, except the government has decided to do less for the people.
Informal sector versus formal sector
In most developing economies, the informal sector has been providing a channel for absorbing a large number of unemployed individuals; this is why poverty is the order of the day here. This sector is so large that the formal counterpart is almost rendered useless. Therefore, no matter the tax reforms; if they do not capture very well the informal sector; revenue will still be very low. This problem of the gap provided by the informal sector is compounded in Africa because women are dominant there. So we have a majority of the people not contributing anything to the GDP. More so, the small-scale businesses are also many within the informal sector. There is no doubting the fact most economies thrive on the development of small and medium scale businesses. Governments will have to develop robust incentives that will serve as drivers for the people within this sector to embrace formalization; thus contributing directly to the growth of the economy.
Ensuring full employment
Keynes talked about full employment as a result of aggregate demand. Unemployment has a way of breeding poverty. Thus, one can conclude that poverty and unemployment are like other sides of the same coin. So, employment can help fight poverty. This can also cause economic growth if many individuals within the country are gainfully employed. We have just discussed the predominance of the informal sector, which means that majority of the people are barred from entering the formal sector because they lack the prerequisite qualifications. Organizations can help in bringing people into the mainstream through on-the-job training.
Foreign direct investment can be beneficial for countries especially in the developing countries of Africa. When foreign countries establish businesses in other countries, they bring in funds in form of foreign exchange, and at the time technological and infrastructural developments are also enhanced. FDIs help in projecting globalization around the world. The local market has a way of creating a competitive advantage; this assertion is advanced by Porter. Thus, the local market with proper innovation can create a competitive advantage in the global economy. This is contrary to the traditional idea of competitive advantage.
If we want to attract foreign direct investment, then we need to first all work on our infrastructural decay and deficit. Power is key for businesses to grow and survive so we to ensure its constant supply. More so, the development of road networks and the transport sector is key in attracting investment. Foreigners are always looking out for anything that could enhance their businesses. Labor cost is a major cost of production; so most businesses will always tend towards cheap labor.
Defense and security of lives and property are crucial for the investors to come in. There cannot be development without peace. Governments across Africa have to fight and nip in the bud the activities of terrorists and bandits. This is important as foreign investors will not want to put themselves in a very volatile economy.
The diaspora community can work on getting their associates to come and invest in Nigeria and Africa in general.
More investment in technology
This is very necessary as technology can help in propelling innovative developments and also preventing some of the social vices. For example, it will make the war on corruption to be preventive rather than reactive. It will help in controlling armed robbery and other vices as stated earlier. In the area of revenue generation, it will help in preventing tax avoidance and or evasion. MDAs will be able to rake in their incomes directly into the coffers of the government.
Agricultural and manufacturing sectors
Nigeria's government has tried to invest in the agricultural sector. This is also evident in Ghana and some other African countries. This is a good development in ensuring food security. Despite this, we still need to do more for the farmers.
The manufacturing industry is not very developed in Africa. This notwithstanding, some African countries have invested a lot in developing this sector. In Nigeria for example, we have invested little in the manufacturing sector. Iron ore and other solid minerals have not got the required attention from the federal government. This could have served as an avenue for the government to generate funds to augment the budget deficit. The government has to work on this.
There is no doubting the fact that if we have more exports than imports; and more foreign direct investments more revenue will be generated by the government and these will put the African economies in good stead.
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