Africa: Geography and Growth

Paul Collier

Revised, August 2006

Centre for the Study of African Economies,

Department of Economies,
Oxford University
1. Introduction

Currently, many African economies are growing more rapidly than for three decades.
This is partly the result of high prices for commodity exports but also reflects deeper
changes. The last time Africa enjoyed a commodity boom was in the mid-1970s: it was
followed by a decade of unparalleled economic disaster. It is vital that Africa’s current
opportunities for growth are not dissipated in the same way. On average over the period
1960-2000 Africa’s population-weighted per capita annual growth of GDP was a mere
0.1%. In effect it stagnated while other regions experienced accelerating growth. Indeed,
between 1980 and 2000 the annual rate of divergence was an astounding 5%. To
understand both why this happened and whether it is likely to recur a geographic
perspective is essential. Africa’s geography has shaped its economic opportunities. Africa
is distinctive both in its physical geography and its human geography. In Section 2 I
consider the implications of Africa’s distinctive physical geography. It accounts for some
of Africa’s slow growth and suggests how strategies will need to differ radically among
Africa’s countries. In Section 3 I turn to its distinctive human geography and the political
problems that this has created. To a considerable extent these problems have recently
been surmounted: Africa’s human geography may explain delayed take-off rather than
predict persistent stagnation. Finally, in Section 4 I consider two interactions between
physical geography and human geography that generate intractable problems that are
likely to require international assistance.1

2. Africa’s distinctive physical geography

The aspect of Africa’s physical geography that has recently received most emphasis is its
climate and disease vectors. I will emphasize two other features that I suspect may be
more important for economic performance. Both of these features divide rather than unify
Africa: it is an enormous region and cannot sensibly be analyzed as a single entity.
Because Africa is land-abundant yet low-income, natural resource endowments loom
much larger in its fortunes that for any other region except the Middle East. However,
they are unevenly distributed. Considerable parts of Africa are abundant in natural
resources, but other parts are resource-scarce. The other feature of physical geography
follows from the fact that Africa is enormous and divided into many countries. As a
result, many of its countries are landlocked.

Potentially, these two distinctions create four possible categories: resource-rich

landlocked; resource-rich coastal; resource-scarce landlocked; and resource-scarce
coastal.2 However, the resource-rich coastal countries and the resource-rich landlocked
countries can be re-aggregated into a single group. If the resources are sufficiently
valuable, being landlocked is not a significant disadvantage to their extraction, and
conversely, the coastal countries are generally not in a position to take advantage of non-
resource exports because of the effects of Dutch disease on their export competitiveness.
Empirically, even at a global level, there is no significant difference between the growth
performance of resource-rich countries whether they are landlocked or coastal.

1
For a fuller presentation of the arguments and their implications see Collier (2007)
2
This discussion is based on Collier and O’Connell, (forthcoming).
By contrast, the remaining three categories have had sharply divergent growth
performances globally, and this has been mirrored in Africa. The best-performing
category globally has been the coastal resource-scarce countries of which there are many
Asian examples. The worst-performing category globally has been the landlocked
resource-scarce countries. In between, the resource-rich countries have on average grown
moderately but with massive differences both between countries and time periods.
Whereas Africa broadly follows this global pattern, one respect in which it is sharply
distinctive is in the distribution of its population as between the three categories. In the
developing world other than Africa some 88% of the population lives in the coastal
resource-scarce countries, around 11% in the resource-rich countries, and a mere 1% in
the landlocked resource-scarce countries. In Africa the population is approximately
evenly spread between the three groups. Thus, the African population is heavily skewed
towards the globally slow-growing category of landlocked resource-scarce, and away
from the globally fast-growing category of coastal resource-scarce. This unfortunate
distribution accounts for around one percentage point of growth: that is, if African
countries grew at the mean of their group, the different distribution would leave the
region with substantially slower growth than other regions.

The growth strategies for these three categories of country differ markedly. I take them in
turn giving illustrative examples.

Landlocked and resource-scarce

The most striking difference between Africa and other developing regions is in the
proportion of the population in landlocked, resource-scarce countries. Put another way,
outside Africa areas with these poor endowments seldom became independent countries:
rather they became the hinterlands of countries that are overall more fortunately
endowed. With hindsight, the creation of so many such countries in Africa may have
been a mistake, but it is now difficult to change. Indeed, recent political secessions are
adding to the number of such countries. The secession of Eritrea turned Ethiopia into a
landlocked, resource-scarce country and if Southern Sudan secedes it might join this
category.

Globally, there are some obvious examples of success such as Switzerland and Austria.
However, these countries have benefited enormously from their neighbourhood. In effect,
being landlocked has not cut them off from international markets but rather placed them
at the heart of a regional market. More generally, historically the most promising strategy
for such countries has been to orient their economies towards trade with their more
fortunately endowed neighbours. This shows up in the growth spillovers. Globally, on
average if neighbours grow at an additional one percentage point, that raises the growth
of the country itself by 0.4 percent. Outside Africa the landlocked resource-scarce
economies on average gain larger spillovers, at 0.7%. Thus, they are consciously
orienting their economies towards making the most of these growth spillovers. In Africa,
the growth spillover for the landlocked resource-scarce economies is a mere 0.2%. In
other words, they are not orienting their economies towards their neighbours. To date this
has not really mattered. As I will discuss below, for various reasons the more fortunately
endowed countries of Africa have not made the most of their opportunities and so have
largely failed to grow. Hence, there was very little growth to spill over.

This suggests that the critical path for the landlocked resource-scarce countries to succeed
is first that their more fortunate neighbours need to harness their opportunities, and then
that the sub-regional economies need to become radically more integrated. The
integration agenda is partly a matter of practical trade policy such as the removal of road
blocks and harassment by customs officials. It is also a matter of infrastructure: roads
need to be built and above all maintained.

It is just possible that developments such as e-trade and air-freight that do not
disadvantage landlocked countries might offer a new route to global integration. Clearly,
the landlocked countries should push these opportunities to the hilt. Being landlocked is
not a choice, but being airlocked is largely a matter of airline regulation and competition
policy. The policies that produced high-cost monopolies such as Air Afrique were
evidently mistaken. Similarly, the twin pillars of e-trade are international telecoms and
higher education. Policies that raise the cost of international telecoms, or make access
unreliable, and the neglect of tertiary education are thus costly for landlocked resource-
scarce Africa.

Although these countries are the core of Africa’s poverty problem I am going to focus on
the other two opportunity categories. It is the failure of the African countries in these
categories to harness their opportunities that has been decisive.

Resource-rich

First, consider the resource-rich countries. These are increasingly important in Africa,
partly as a result of higher commodity prices and partly as a result of resource
discoveries. Such economies will inevitably have large public sectors. The resource rents
must be taxed in order for them to accrue to the nation, and the revenues from these taxes
will then be spent by the government.

Effective public spending requires accountable government. It might be hoped that this
would be promoted by democracy. Unfortunately, the statistical evidence suggests that
globally resource rents make democracy function radically less well on the criterion of
economic growth.3 In the absence of natural resource rents democracies tend to grow
significantly faster than autocracies, whereas with large resource rents autocracies
outperform democracies. Evidently, democracy is corrupted by resource rents. The
explanation is that because resource rents substitute for taxation they gradually
undermine checks and balances. In turn, this enables politicians to divert public revenues
from the provision of public services to the finance of private patronage: votes are bought
instead of won. A mature democracy has two distinct aspects, electoral competition,
which constrains how power is achieved, and checks and balances, which constrain how
power is used. Uniquely in the resource-rich societies checks and balances are
3
The following discussion is based on Collier and Hoeffler, (2005).
significantly beneficial for growth, whereas the remaining aspects of democracy are
detrimental. Thus, those resource-rich countries that are democratic need a rather
distinctive type of democracy. They need strong checks and balances rather than fierce
electoral competition. Africa indeed has such a country, namely Botswana. With due
respect to the government of Botswana, it has not faced severe electoral competition:
despite continuous democracy since independence it has never actually lost power. It
does, however, have strong checks and balances, notably rules for public spending. All
public spending projects have had to pass a dual hurdle of honesty and efficiency.
Honesty has been maintained by rules of competitive tendering. Efficiency has been
maintained by careful technical scrutiny of the rate of return on each proposed project,
with the political support to block all projects that failed to meet a critical minimum
return. Unfortunately, Botswana is exceptional. Other resource-rich African countries are
now democratic, but they are ‘instant democracies’. As demonstrated by Afghanistan and
Iraq, it is possible to establish electoral competition in virtually any conditions, but it is
far harder to establish effective checks and balances because nobody has the incentive to
enforce them. Nigeria under President Shagari displayed the classic patronage politics of
resource rents in the context of intense electoral competition without effective checks and
balances. The regime of President Shagari, though democratic, wasted the previous
Nigerian oil bonanza.

I have emphasized the importance of effective public spending. Usually, most emphasis
is put on the savings decision. The central bank indeed has a critical role in smoothing
fluctuations in revenue to avoid peaks in expenditure. However, it is important to make a
sharp distinction between arrangements for medium-term revenue smoothing and ‘future
generations’ funds. The latter are, I think, completely inappropriate for Africa in two
respects. First, in low-income countries there is a need to build up domestic capital: these
countries are not capital-rich like Norway, and so there is a reasonable presumption that
if spending can be managed well productive absorption can be quite high. Secondly,
Africa does not have the long stability of political institutions necessary to make the
credible commitments involved in future generation funds. The most likely scenario for
such a fund is that it is a transfer from a prudent minister of finance to an imprudent
minister a few years later. Hence, the centrepiece of policy towards resource wealth is not
the savings decision but the spending decision. Africa’s one remarkable success in
managing resource wealth, Botswana, indeed focused on the rules for spending rather
than rules for saving. Because Botswana is a landlocked desert it was not possible to
spend all the revenues productively and so, under the spending rules, the balance was
saved abroad. The savings decision was a by-product of the application of effective
spending processes.

In extreme cases such as Botswana the revenues are so large that they should indeed not
all be spent by the government even allowing for smoothing. However, rather than the
government undertake custodial savings it may be better to redistribute some revenue
directly to citizens. This is evidently the situation in a tiny country such as Sao Tome,
Principe, but it is also going to be true of Angola which will have per capita resource
revenues far higher than non-resource per capita income. The most credible mechanism
by which low-income countries can redistribute income directly to households is through
the schooling system: children could receive bursaries as is already done through the
Progresa system in Mexico. Studies have shown this to be highly effective both in
increasing school attendance and in directly reducing poverty.

Resource-scarce and coastal

I now turn to the resource-scarce coastal economies. These are the category that globally
has had the fastest growth, but also the category in which African performance has been
least encouraging relative to the global norm. The only African country to succeed in this
category has been Mauritius which followed the Asian pattern in transforming itself
through exports of manufactures from an impoverished sugar economy into an upper-
middle income country and by far Africa’s richest economy.

Prior to 1980 manufacturing and services were concentrated in the OECD economies,
locked in partly by trade restrictions but mainly by the agglomeration economies the
analysis of which has been pioneered by Antony Venables. Around 1980 a combination
of trade liberalization and the widening gap in labour costs began to make it profitable for
industry to relocate to low-income countries. As Venables has shown, this process is
explosive: as firms relocate agglomeration economies build up in the new location and
make it progressively more competitive. The chosen locations were in Asia not in Africa.
The factors that determined this choice need only have been temporary and need not have
been massive. However, once Asia got ahead of Africa the forces of agglomeration made
it progressively harder for Africa to break in. Currently, Africa has no significant
advantage over Asia in terms of labour costs while having large disadvantages in terms of
agglomeration economies.

3. Human geography

Now consider the other important distinctive aspect of Africa’s geography: human
geography, both political and social. Africa’s political geography is unmistakably
striking: it is divided into far more countries that other regions which are more populous,
so that the average population of its countries is radically smaller. But Africa’s social
geography is also unmistakable: despite the division into tiny countries the typical
country is ethnically far more diverse than countries in other regions. Hence, small
population and ethnic diversity are the two distinctive socio-political features of African
geography. Each of these creates problems.

Globally, being small is no impediment to being rich: Luxembourg is as rich as the USA.
But in the context of development being small poses substantial problems. After
independence Africa, like other developing regions, plunged into a range of bad
economic policies and governance. The process of achieving a sustained and decisive
turnaround from such configurations is difficult: despite being economically
dysfunctional they were politically rather stable. The first problem of being small is that
statistically, having a small population makes it less likely that change will be achieved.4
Probably this is because the process of formulating a critique of past failure and
4
The following discussion is based on Chauvet and Collier, (2006).
implementing a strategy for change is helped by scale. For example, scale enables a
society to have a specialist financial press which can conduct economic discussion. Thus,
China and India were able to diagnose failure and implement change, whereas a tiny
society such as the Central African Republic has an acute dearth of resident skills. Thus,
Africa’s political geography has made economic reform more difficult and helps to
account for the greater persistence of poor policies in Africa than in other regions.
Fortunately, in the past decade many African societies have succeeded in designing and
implementing a measure of economic reform, helped by substantial international
technical assistance. Improved macroeconomic indicators are the clearest evidence of this
process. Hence, to an extent, the greater difficulty of reform in small countries may
account for why Africa persisted with poor policies for longer than other regions rather
than be a prognosis for the future. It may take longer to learn from failure if the society is
small, but learning nevertheless happens.

Not only are the ladders of economic development more difficult to mount if population
is small, but the snakes of economic collapse are more prominent.5 The major risk of
development in reverse comes from civil war: the typical civil war costs around four
times annual GDP. The risk that a region will experience civil war increases considerably
the more countries into which it is divided. This is primarily because the provision of
security is subject to strong scale economies: the typical African nation is simply too
small for its government to provide effective internal security. This is a major reason why
Africa has a much higher incidence of civil war than South Asia. Further, the costs of
civil war are not confined to the country at war. More than half the costs typically accrue
to neighbours. An analogy is to imagine a city in which each street was autonomous and
so could not afford an adequate fire service. Not only would there be a lot of fires, but
when one house caught fire a whole district might burn. This suggests that international
actors are needed to enhance African security. Belatedly, the international community has
responded to this need and the results have been very hopeful. External participation in
negotiations has helped achieve settlement in southern Sudan. UN peacekeeping has
stabilized the DRC. British military intervention established peace in Sierra Leone. The
intensified scrutiny of diamond transactions in the build-up to the Kimberley Process
starved UNITA into defeat bringing peace to Angola.

The other socio-political aspect of African geography is the high ethnic diversity of the
typical country: considerably greater than any other region. Ethnic diversity is not a
decisive impediment to development, but it does require distinctive political architecture.
Democracy is evidently not always necessary for growth: China shows that amazing
success is possible without it. However, statistically, democracy is important for growth
if the society is ethnically diverse.6 China can grow under autocracy because it is
ethnically unified, but in Africa autocracy has proved disastrous. The explanation is that
in an ethnically diverse society an autocracy usually rests on the military power of a
single ethnic group. The more diverse is the society the smaller is likely to be the share of
the population constituted by the ethnic group in power. A minority in power has an

5
The following discussion is based on Collier and Hoeffler, (2004), Collier, Hoeffler and Rohner, (2006)
and Collier, Hoeffler and Soderbom, (2006).
6
The following discussion is based on Collier (2001) and Alesina and La Ferrara (2005).
incentive to redistribute to itself at the expense of the public good of national economic
growth. Ethnically diverse democracies may be messy, but they do force the coalition in
power to be large and increase the attraction of broad-based growth relative to
redistribution. Hence, Africa needs democracy more than other developing regions.

A second aspect of ethnic diversity is that it makes collective action for public service
provision more difficult in the society. Inter-group trust is normally limited. A corollary
is that the boundaries between public and private provision should be drawn more in
favour of private provision in societies that are more diverse. This is, indeed, often the
case. Thus, the USA, being a diverse society, has a smaller public sector than France, a
more unified society. Another corollary is that public spending may be more effective if
it is decentralized: at the local level Africa is much less ethnically diverse than at the
national level.

4. Physical and human geography interacted: Africa’s dilemma

Finally, I bring together physical geography with human geography. The interaction of
the two creates two acutely difficult problems for African economic development.

Resource-rich and ethnically diverse societies

Africa’s big economic opportunity is its natural resource rents. Not only does a
disproportionate share of Africa’s population live in resource-rich countries, but for the
foreseeable future commodity prices are going to be high and discoveries will be skewed
towards the region. As set out in Section 2, large resource rents imply a large state and
hence the central importance of effective public spending, but also make democracy
radically less effective in the growth process. Sadly, it seems that the typical resource-
rich country might grow faster under autocracy. However, as set out in Section 2,
Africa’s high ethnic diversity makes autocracy radically damaging. Africa’s resource-rich
countries do not have the option of growth through autocracy. Further, ethnic diversity
weakens the ability of the society to hold public services accountable. However,
resource-rich Africa does not have the option of a small public sector: resource rents
inevitably accrue to the government and will largely be spent by it.

So what sort of political system would best serve a resource-rich and ethnically diverse
country such as is commonly found in Africa? Autocracy is unredeemably dysfunctional
in the context of ethnic diversity, but democracy is not unredeemably dysfunctional in the
context of resource rents. The form of polity that appears to be best suited to ethnically
diverse societies with resource rents is a democracy with unusually strong checks and
balances and decentralized public spending. How the government can use power needs to
be heavily constrained, rather than simply how it attains power. Botswana demonstrates
both that this combination is possible in Africa and that it is massively effective in
delivering development in resource-rich societies. For many years Botswana was the
fastest growing economy in the world. Yet currently Botswana is exceptional. Most
resource-rich states have unusually weak checks and balances, not unusually strong ones.
The key challenge currently facing Africa’s resource-rich societies is to build such
polities. Heroically, during his second term President Obasanjo has attempted precisely
this: a system with strong checks and balances and decentralized public spending. It is
too early to judge how successful he has been, but it is precisely the right political design
for resource-rich Africa.

Independent central banks are themselves one of the critical checks and balances that a
resource-rich society needs. However, the key role of central banks in resource-rich
Africa is currently to advance this agenda by informing the society. In the absence of a
financial press central banks are the main independent institution of professional
economic authority within the society able to command public attention. Central banks
cannot afford to retreat into technocratic isolation. Electorates must be educated so that
the mistakes of Africa’s past are not to be repeated during the present natural resource
boom.

International actors also have a role to play in supporting the struggle to build effective
checks and balances. To date the clearest example of such assistance is the Extractive
Industries Transparency Initiative (EITI), launched by the British government in 2002
and promptly adopted by the Nigerian reform team that entered government in 2003.
While the EITI demonstrates how useful international ‘templates’ can be in the
management of resource rents, in its present form it covers only a small part of the vital
issues. The time is ripe for an expanded and fully internationalized EITI2. Another area
for potential international action that is particularly pertinent for central banks is the
reporting and repatriation of corruptly acquired natural resource revenues. The clearest
example of the inadequacies of present practice was the extreme difficulty faced by the
Nigerian government in repatriating oil revenues embezzled by former President Abacha
in Swiss banks. The efforts that the international banks have made to curtail finance for
terrorism need to be applied to the problem of embezzlement.

Resource-scarce societies with small, diverse populations

Finally, I turn to a second problem generated by the interaction of physical geography

and human geography: coastal resource-scarce Africa has missed the globalization boat.

What were the critical factors that decided firms against an African location in the 1980s?
Proximately, the factors differed among countries. In Francophone Africa the growing
overvaluation of the CFA franc effectively excluded the sub-region from exporting. For
example, an incipient garment export sector in Cote d’Ivoire was wiped out. Lusophone
Africa was beset by civil war. South Africa was in the late stages of the apartheid regime.
Among the other coastal resource-scarce countries, Ghana, Tanzania and Madagascar
were in crises as a result of experiments with socialism, and Kenya was beset by the
ethnic politics of redistribution. Mauritius was the only country not precluded from
manufactured exports by such misfortunes. However, as discussed above, Africa was
prone to these disparate syndromes due to the problems generated by its distinctive
human geography. Its societies were too small and diverse to provide the public goods of
security and good economic policy. I noted that Africa has substantially succeeded in
surmounting these problems: its human geography inflicted prolonged but not permanent
disadvantages. Indeed, all of the specific misfortunes that impeded coastal Africa from
entering global markets are now over. The CFA Franc was sharply devalued, Lusophone
Africa is now at peace, South Africa had a successful regime change, socialist policies
were abandoned, and the Kenyan regime of ethnic patronage was finally defeated in
elections. Yet Africa has still not decisively broken into global markets. This is in part
just a matter of time: statistically, the longer a coastal African country has been free of
any of these policy syndromes the higher are its non-traditional exports as a share of
GDP. However, the most probable explanation for the slow pace of export penetration is
that Africa missed the boat. The policy mistakes happened to occur at precisely the
critical time when Africa could otherwise have broken in on level terms with Asia. Now,
Asia has huge agglomeration advantages and so freedom from the policy syndromes is
not enough. When will Africa be able to repeat Asia’s success? I fear that the logic of the
new economic geography is that Africa will have to wait until the wage gap between
Africa and Asia is approximately as wide as that between the OECD and Asia at the time
when Asia broke into OECD markets. If this is approximately right then Africa will have
to wait for several decades.

I think that international action is needed to bring the boat back sooner.7 The difficulties
of the Doha Round are, in fact, an opportunity to pump-prime African export
diversification. What Africa needs is temporary protection from Asia in OECD markets.
While this might sound radical, in fact Africa already has such protection. It was critical
to the success of Mauritius which benefited from the Multi-Fibre Agreement. Currently,
the USA gives Africa such preferences through the Africa Growth and Opportunity Act
(AGOA) and the EU through Everything but Arms (EBA). Indeed, a variant of this
special protection was part of the failed Hong Kong offer for LDCs. The principle of
protection has thus already been conceded. However, as with all trade policy the devil is
in the detail. All these schemes fail because, for different reasons, the details of the
schemes limit their effectiveness. The most successful of the three is AGOA. A recent
study shows that it has increased Africa’s apparel exports by 50%. The weakness of
AGOA is partly that it only applies to the US market, but mainly that its time horizon is
too short: a mere three years. Evidently, this is insufficient for investment. For example,
apparel firms in Madagascar are profitable but dare not risk expansion. EBA has had no
discernable effect on African exports. Its rules of origin are far more restrictive than those
of AGOA and it applies only to the LDCs, which are precisely the countries least in a
position to diversify their exports. The countries most likely to break into new exports are
not Somalia or Liberia, but Ghana, Senegal and Kenya, all of which are excluded. EBA
as presently designed is thus a sorry instance of gesture politics. EBA’s good features are
its much longer time frame, and its coverage of the EU market which is probably the
critical market for Africa. The Hong Kong offer had a number of weaknesses. However,
its key strength was that it applied across the OECD. What is needed is to combine the
best features from each of these schemes: an Integrated Approach to African
Opportunities (IAAO). It would seek to generalize the demonstrated effects of AGOA to
other OECD markets. An IAAO would have the generous rules of origin and country
coverage of AGOA, but the time frame of EBA, and the market coverage of the Hong
Kong offer. Such an initiative in global trade policy would complement and encourage
7
The following discussion is based on Collier, (2006).
reform agendas within Africa and would stand a good chance of creating some African
export transformations analogous to Asian experience. Such success would transform
how the region perceives itself and how it is perceived.

5. Conclusion

Africa currently faces its best opportunity for growth since the commodity boom of the
mid-1970s. In the intervening period African economic performance has been far worse
than that of any other region. The explanation for this is not that African economic
behaviour is fundamentally different from elsewhere, but rather that African geographic
endowments are distinctive. Considerable attention has been given to the climatic aspects
of African geography and the consequent hazards for health. While not wishing to
question this analysis I think that the emphasis upon health has underplayed other
features of African geography that may be both more important and more amenable to
policy.

Both Africa’s physical geography and its human geography are distinctive. In respect of
physical geography Africa is not only distinctive but its countries are differentiated. The
greater share of Africa’s population in landlocked resource-scarce countries as opposed
to coastal resource-scarce countries alone accounts for one percentage point off Africa’s
regional growth rate compared to other regions. Further, because opportunities differ
across the region strategies need to be differentiated. This applies both to what African
governments should see as critical priorities and to what external actors can do to assist:
pan-African strategies will fail. In respect of human geography Africa is distinctive but
not so differentiated. Almost all African countries have small populations and yet are
ethnically diverse. A corollary of small countries is that Africa has found both policy
reform and the maintenance of internal security more difficult than other regions.
Fortunately, Africa has made progress on both of these problems: hopefully, the small-
country problem merely helps to account for Africa’s troubled recent past, not its future.
A corollary of ethnic diversity is that democracy is more important for economic
performance than other regions, and that the domain of the public sector should probably
be kept small and decentralized. Again, these may be problems of the past. The region
has substantially democratized over the past decade, and also reduced the size of the state
and decentralized spending.

Hence, recent developments are hopeful: in some respects Africa’s distinctive geography
may be more important in explaining its past that in predicting its future. However, the
interactions of physical and human geography have created two intractable and important
problems that have yet to be addressed and which probably need international action.

One is how to manage resource rents in the context of ethnic diversity. The most
appropriate polity is a design that such countries tend not to have: strong checks and
balances on how governments can use power and decentralized public spending. This is a
political challenge for the resource-rich African societies and one in which African
central banks can play a prominent role. The international community can also do much
to assist African societies to build the necessary checks and balances by setting out
templates such as the Extractive Industries Transparency Initiative and by reform of
banking secrecy to make the embezzlement of resource rents more difficult.
The other is how to compete with Asia despite having let Asia get decisively ahead. It
seems likely that international action will be needed to give coastal resource-scarce
Africa a second chance by temporarily levelling the playing field through preferential
market access that offsets Asian economies of agglomeration.

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