Friday, May 6, 2011

Africa not changing harmful trade

May 5 2011 - Sapa

Africa has little room to change the one-dimensional nature of its trade ties and use its new-found growth to create jobs and alleviate poverty, according to the 2011 Africa Progress Report released on Thursday.

The emergence of non-European trade partners, notably China, has not changed the fact that the continent mainly exports raw materials and imports manufactured goods, it states.

“Africa's current economic growth is not all positive. It is generally not accompanied by much-needed structural transformation and diversification,” reads the report released at the World Economic Forum (WEF) meeting in Cape Town.

“The problem is caused, driven and compounded by the poor quality of Africa's economic relationships, with both Africa and other countries.

“Despite the increasing prominence of non-European partners, and China in particular, the disadvantageous pattern of Africa exporting unprocessed commodities and importing manufactured goods persists.

“In fact it is becoming ever more entrenched as the resource thirst of emerging partners continues to grow.”

According to the report the channelling of foreign direct investment mainly to mining, the Doha Development Round unresolved and protectionist measures unbroken, Africa “has little opportunity to resolve this pattern and drive much-needed economic transformation through trade diversification”.

Moreover, intra-African trade continues to account for only 10 percent of exports on the continent and is too weak to be an incentive for changing trade patterns.

The lack of diversification in products and partners made African trade volatile and explained why the continent's GDP growth did not translate into tangible improvement in people's lives.

“Driven by capital-intensive extractive sectors, the current type of economic growth has little positive impact on employment and income levels and virtually no effect on employment intensive sectors such as agriculture.”

The authors concluded that to develop the continent's potential and counter forecast risks ranging from climate change to debt defaults in developed nations, African leaders must speed up economic diversification.

They say most African nations would gain strongly by targeting the informal sector, easing labour rigidities, improving infrastructure and promoting regional integration.

The nature of Africa's trade partnerships has come under the spotlight at the three-day WEF, with President Jacob Zuma telling delegates on Wednesday that Africa must try to build a relationship with China that benefits the continent.