Economic Development Obstacles in Africa and the Middle East. Reasons for the Slow Development of Entrepreneurship


Essay, 2020

6 Pages


Excerpt

Index

Introduction

Inadequate Education System

Division and War

Heavy Admistrative Procedures

Difficult Access and High Lending Interest Rate

Low Income or poverty in the regions

High corruption in the regions

References

Introduction

This essay analyses what may be the reasons why Africa and the Middle East have seemingly lagged behind other world regions in terms of economic development. It explains why entrepreneurship has been slow to develop in the region, and gives suggestions for how it may be developed more assertively. The problems that may constitutes the reasons of lagging behind other may be the following: inadequate education system, division and war, heavy admistrative procedures, difficult access and high lending interest rate, low income or poverty in the regions reducing demand in goods and services, high corruption in the regions, colonialism consequences, low salaries and wages for states employees, insufficient savings for workers to begin new business.

Inadequate Education System

Education in Africa is a heritage of colonial system which did not intent to develop entrepreneurship in colonized countries. Courses are dominated by modules that are not related to entrepreneurship, but full of content foreign literature like French, English, history, etc. Courses offered by universities are disconnected to labor market needs and new technologies. Courses are fuller of theory without practical knowledge. Professional courses are limited, and graduated are full of theorical knowledge.

Albert et al. (2010) said 1980s experienced stagnation and decrease due to a drastic fall in education financing further to the balance of payment and budget deficits, and the ensuing structural adjustment programmes. He added that African education sector continues to face serious challenges of low and inequitable access to education, irrelevant curriculum and poor learning outcomes, inadequate political commitment and financing, weak education system capacity, and weak link with the world of work. BBy the time I’m writing this essay, some African countries are in civil war like Central African Republic, Somalia, Sudan, etc. Some other countries security is not fully guaranteed like in Burundi, Congo Democratic Republic, South Africa, etc. Situation in Syria is catastrophic now.

Division and War

African countries are not united. Some of them have much diversity in culture, religion, ethnics, etc. In the place of using the diversity in generating new ideas, creativity and innovation, the diversity is the basis of war in African countries. No entrepreneur can engage seriously in war country. Molem (2007) indicated Cameroon had linguistic and cultural diversity with more than 289 ethnic groups, and a colonial legacy of French and English cultures and languages, plus remnants of a German sub-stratum.

Heavy Admistrative Procedures

The Report of the World Bank (2019 indicated that Sub-Sahara Africa was still underperform regarding obtaining electricity (146), commerce across borders (140) and procedure of registering property (129). It can take more than 200 hours in Côte d'Ivoire and Cameroon to fulfill with export border procedures for maritime transport, compared with 13 hours in OECD high-income economies. Additionally, ports are the least efficient of any region in Sub-Saharan African.

Difficult Access and High Lending Interest Rate

In Africa and the Middle East, it is difficult to get financing. Not getting financing reduces the entrepreneurs and entrepreneur activities. To grow, a company needs financial resource to make investment in productive equipment. Sometimes, one must use financial institutions credit. However, the cost of financing is too high in the regions. The bank lending rate was 0.05 % in Denmark in August 2020, 0.86 % in France in July 2020, 1.57 % in Belgium while it was 20.04 % in Zimbabwe in June 2020, 19.5% in Angola in May 2020, 13.62% in Tanzania, 11.95 % in Kenya in May 2020, according to Trading economics (2020). It is clear in Africa bank lending rate is too high compared to developed countries.

Low Income or poverty in the regions

The poverty in most countries of Africa and the Middle East reduces the poor of purchase. It becomes difficult to initiate new product or service where populations are not able to buy the product. Aftermath, entrepreneurs are profit driven. They must be sure that their ideas or product generates enough profit or income. Entering in business is a difficult decision. Nevertheless, a person decides to do so if he/she finds that profit will be high compared to the work salary he/she will get. The low income reduces the capacity of making saving for beginning business in the future.

High corruption in the regions

Corruption is destroying economic, social, and political development in African countries. It constitutes the main obstacle to economic development, good government and basic liberties (Transparency International, 2019). A country with corruption cannot attract entrepreneur. Jiaqi , Mingzhi and Jon (2018) concluded that high levels of corruption affect negatively entrepreneurship. Corruption increases costs for entrepreneur and discourage entrepreneurial activities.

In addition to the mentioned problems, the analyzed regions are having high rate of unemployment, high exchange rate, difficult to have foreign currency, inflation, etc. In some countries, the economy is dominated by a minority made by people near ruling party. All those reduce economic development in the region, and entrepreneurial activities.

Modernization of the education, reinforcement of peace and security in the region, reducing unnecessary procedures, reducing interest rate, reducing poverty, eradicating corruption in the regions, increasing salaries and wages, may contribute, reducing inflation, making available foreign currencies, can contribute positively in promoting entrepreneurship and economic growth in the region. Without promoting entrepreneurship, those countries will lag in the road of development. Many studies have proven the positive linkage between entrepreneurship and economic development.

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Excerpt out of 6 pages

Details

Title
Economic Development Obstacles in Africa and the Middle East. Reasons for the Slow Development of Entrepreneurship
Author
Year
2020
Pages
6
Catalog Number
V956949
ISBN (eBook)
9783346304575
Language
English
Tags
Africa, Midddle, East, Development, Obstacles
Quote paper
Antoine Niyungeko (Author), 2020, Economic Development Obstacles in Africa and the Middle East. Reasons for the Slow Development of Entrepreneurship, Munich, GRIN Verlag, https://www.grin.com/document/956949

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