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Africa’s C — Costs

What role do high prices play in Africa’s economy?

February 16, 2005

What role do high prices play in Africa's economy?

Imported petroleum products also are more costly in Africa. One of the main reasons for this is the small size of most African economies. Serving such small national markets entails high costs.

In addition, small market size also encourages monopolies — which, in turn, tend to raise prices. Furthermore, transport costs within Africa are also very high. In part, this is due to the weak transportation infrastructure on the continent, which makes transporting goods more costly.

Another African reality is that the people who tend to be among the poorer parts of the population live far from the main ports. And yet, by economic logic, they end up paying the highest prices.

These fundamental cost disadvantages are not easy to overcome. They mean that many African countries are handicapped at the very start of the development race.