Capital Flows to Africa: An Analysis of the Structure of Official and Private Capital Flows
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Although globalization was built on increased world trade, the movement of capital has
accelerated faster in the past two decades. It is this free flow of capital that is offering
African countries renewed hope of tapping global markets for the much needed resources
to aid their economic growth while becoming fully integrated into the global economy.
While past studies tackling external resource flows to Africa have focused on either
official or private capital flows, this paper analyses both types of capital flows with the
intention of providing a clearer picture on composition and magnitude of external
resources to Africa. Three types of capital flows – Official Development Assistance
(ODA), Foreign Direct Investment (FDI) and Workers Remittances – emerge as key to
tackling Africa’s development problems. Together, these flows account for the bulk of
resources to Africa. In addition, they have built-in advantages for economic development
hence are more suited to addressing Africa’s growth challenges. To this end, African
countries must enact policies that directly relate to aiding effectiveness of these flows.