Wednesday, November 5, 2008

Capacity constraints hinder Africa's export performance

This is according to the Economic Development in Africa report for 2008 which was released Monday night at the United Nations Conference on Trade and Development (UNCTAD) meeting in Geneva.

According to the report, weak supply capacity is the reason Africa has lost market share from 6% of world exports in 1980 to about 3% in 2007.

The report subtitled "Export Performance following Trade Liberalisation: Some Patterns and Policy Perspectives” highlighted that two decades of trade liberalisation has successfully removed many of the barriers that used to limit trade.

“But the progress has been less than expected and is far below the increases achieved by other developing regions.

“Gaining greater access to world markets opens up vast opportunities, but many African countries do not yet have sufficient ingredients in place to take advantage,” the report noted.

Stable foundation needed

Africa needs the appropriate building blocks such as well-trained workforces, reliable electricity supply, research and development skills, flexible investment and banking services, and efficient transportation to supply at competitive prices.

The report also indicated that African governments need to take effective steps to reverse several concerning trends. These include decades of relative neglect of agriculture that have hindered African countries at a time of climbing commodity prices.

“In addition, diversification of their economies - long recommended as a way of ensuring more robust and stable growth - has not occurred; and the manufacturing sector, where potentially higher profits and higher living standards can be realised, has been stagnating.

“Trade liberalisation in Africa was expected to result in increased production in the tradable sector, which should have increased export volumes and diversified the array of exported products.

“As of the second half of the 1990s, most countries in the region were liberalised,” the report said.

Export to GDP ratio

Africa's average export ratio to Gross Domestic Product (GDP) growth grew by 11% in comparison to the 50% increase recorded in non-African developing countries following trade liberalisation.

There is a large disparity between Africa's oil-exporting countries and non-oil exporting countries with Africa's oil exporters achieving 46% higher exports than their non-oil exporting counterparts.

“Africa has also lost world market share in agriculture with exports decreasing from 5.4% in 1985 to 3.2% in 2006.

“Globally, Africa has also lost market share in manufacturing decreasing from 6% in 1980 to 3% in 2006. Africa's export structure has not changed with concentration on primary products,” Senior Economic Affairs officer for a special unit on commodities at UNCTAD, Dr Sam Gayi, told media recently.

Change in destinations

Africa has also changed its export destinations with a reduction in exports to Europe from 60 - 40% between 1960 and 2006.

Exports to North Africa have increased from 9 to 24%, while exports to Asia have increased from 6 to 16%.

“The report noted that intra-Africa trade remains weak at only 10%, far lower than other regions. For example, 67% of European Union trade is internal ... and 46% of Asian trade in internal,” said Dr Gayi.

No increase in agricultural output

He highlighted that Africa's agricultural yield since the 1960's has not changed while other regions have increased to keep up with demand.

Inefficient rural and urban production markets, low levels of investment in research, as well as a lack of access to credit has resulted in agricultural production in Africa remaining stagnant, he said.

The report noted that developed countries have an important role to play in helping African countries to improve their export performance, notably through their aid-for-trade initiatives, the report said.

To help overcome the problems linked with the small size of African national markets, regional economic cooperation needs to be encouraged.

Article published courtesy of BuaNews [16 Sep 2008]