There is a real opportunity for African countries to create jobs and promote economic transformation through a commodity-based industrialisation and value addition process that involves soft and hard commodities, according to the 2013 Economic Report on Africa (ERA) published here Thursday.
“African countries have an opportunity to transform their economies through a commodity-based industrialisation strategy that leverages on the continent’s abundant resources, current high commodity prices and changing organisation of global production process,” said the report, co-authored by the Economic Commission for Africa (ECA) and the African Union Commission (AUC),
Such a policy is necessary if the continent is to become a global economic power that can address the challenges of youth unemployment, poverty and gender disparities, said the report, which has the theme: ‘Making the Most of Africa’s Commodities: Industrialising for Growth, Jobs and Economic Transformation.’
The report points out that African countries could also bring about diversification of technological capabilities, an expanded skills base, and deepening of industrial structures by adding value to their raw materials locally.
Value addition is still limited in Africa, although the continent boasts about 12 percent of the world’s oil reserves, 40 percent of its gold, 80 to 90 percent of chromium and platinum group metals, 60 percent of arable land and vast timber resources.
The report cited the coffee industry as a case in point, noting that up to 90 percent of Africa’s total income from the commodity, calculated at the average retail price of a pound of roasted and ground coffee, went to consuming countries in Europe, North America and Asia.
While some African countries have made modest progress in forward and backward linkages to their commodity sectors, the report revealed that others still have some ground to cover.
The report called for urgent moves to reduce the infrastructural constraints and bottlenecks on the continent.
Of the nine country case studies on which its findings were based, the report said efforts to improve linkage between Nigeria’s dominant oil and gas industry and other sectors of the economy have only achieved modest success owing to the limited capacity in the state-owned oil company to perform its production and monitoring functions.
Oil and gas play a major role in the Nigerian economy, contributing an average of 76 percent of the federal government’s revenue between 1980 and 2000.
The sector also accounted for an average of 97 percent of exports over the same period, but the business was dominated by foreign multinationals among which Shell is the biggest operator, accounting for about 43 percent of the country’s crude oil.
“The government’s efforts to increase local content has been mixed,” said the report. “Minimal success in meeting targets is attributed to the absence of legislation, weak monitoring and supervision capacity by the Nigerian National Petroleum Corporation (NNPC), low capacity of NNPC to carry out independent exploration and production activities, and dissatisfaction in the Niger Delta region.”
On South Africa, another case study, the report suggested that as the hub of mining equipment industry on the continent, South Africa needs to urgently establish a challenge fund to enable it serve other sectors of the economy while maintaining a competitive edge in the industry.
According to the report, the fund would signal the government’s resolve to help the sector retain its global relevance through creation of new products and by lateral expansion into new territories.
“South Africa is a net exporter of mining equipment, with particularly strong interest coming from Latin America. The industry is growing at an annual 20 percent and has a global competitive advantage in four areas – mine safety, ventilation, shaft sinking, and tracked mining,” said the report. “Mine safety is a particularly strong and fast-growing area.”
The report, however, warned that South Africa’s competitive edge is waning.
“Skills are in short supply, standards are perceived to be on the decline, publicly-funded research is shrinking, and the capacity for scientific and technological research is diminishing,” the report said, calling for urgent steps to reverse the trend.