Africa relies heavily on commodities, with 83% of its economies dependent on them. This creates a cycle of boom and bust, largely influenced by global commodity prices. For instance, from 2001 to 2014, Chad experienced impressive GDP growth averaging 9% during periods of high commodity prices. However, after 2015, Chad and many other African nations saw a reversal in fortunes, with GDP contraction and rising poverty levels, highlighting their vulnerability to external shocks.
At the African Centre for Economic Transformation Summit on Economic Transformation, Dr. Kouassi Yeboua, a senior researcher at the African Futures Innovation Programme, emphasized the need for diversification away from traditional agriculture to more resilient sectors. He pointed out that the shift has made several economies less diversified and more susceptible to external disruptions.
Professor Nicola Viegi, head of the Department of Economics at the University of Pretoria, proposed a reorientation of how African nations utilize their commodity resources. Instead of financing current consumption, these resources should be leveraged to boost investment capacity in economies for long-term sustainable growth. “Imagine utilizing proceeds from resource sales to build infrastructure rather than accumulating debt. This would reshape our economic landscape drastically,” Viegi suggested.
The discussion pointed to a broader trend where Africa is seen more as an object in the global economic order rather than as a subject. This perception is changing slowly as the continent becomes more aligned with global economic shifts, particularly the push towards energy transition which increases the demand for African resources. However, Yeboua pointed out that despite this potential, African nations remain minor players in the global value chains of their own minerals and resources.
Africa’s over-dependence on the East, particularly as a manufacturing hub, was criticized for contributing to reduced economic diversification. This relationship, while beneficial in some respects, has tethered African economies to the fortunes of their Eastern partners, potentially stifling local industrial growth.
Yeboua emphasized that transformation is more than just economic growth; it’s about changing lives through fundamental shifts in the economic structures of nations. This involves investing in human capital and infrastructure to create linkages across the continent, which in turn would foster sustainable development by utilizing revenues from natural resources effectively.
For instance, Norway’s model of using oil revenues to fund long-term investments was highlighted as a benchmark. This approach contrasts sharply with the short-term export-focused strategies that have dominated African resource management, which have often led to the ‘resource curse’ phenomenon, particularly evident in places like the Democratic Republic of Congo.
The discussion also explored the need for African nations to pivot from exporting raw materials to processing them into semi-finished or finished products. This strategy is essential for building strong manufacturing sectors within the continent and reducing dependency on imports for finished goods.
The African Union has been urged to advocate for member countries to shift towards exporting at least semi-processed materials. This would not only add value locally but also attract investments into the continent’s manufacturing sectors. “We need to attract investors not just to extract and export but to transform these resources here,” Yeboua advised.
Moreover, the summit addressed the challenges posed by inadequate infrastructure and high unemployment, which hinder economic integration and agricultural productivity. Effective solutions include developing regional value chains and enhancing grid integration to improve investment attractiveness.
Countries like Zimbabwe are already moving in this direction, with Chinese companies setting up factories to produce lithium, marking a shift towards more value-added industrial activities on the continent.
Professor Viegi also brought examples of African nations like Morocco and Tunisia, which have successfully integrated into European manufacturing and tourism value chains. He suggested that South Africa could similarly position itself as a hub for innovation and enterprise by leveraging its academic institutions and infrastructural capabilities to attract and develop talent across the continent.
The transformation of Africa’s economies requires a holistic approach encompassing economic diversification, capital formation, and social inclusion. By rethinking resource management and fostering a conducive environment for investment and development, Africa can overcome its historical challenges and steer towards a more prosperous and resilient future.
Source: Mining Weekly
