Addis Ababa/New York, 25April 2013 (ECA) - African countries have an opportunity to transform their economies through a commodity-based industrialization strategy that leverages on the continent’s abundant resources, current high commodity prices and changing organization of global production process, according to a newly published economic report.
“Effective industrial policies and planning are essential if the continent is to unleash its potential to promote sustainable growth and economic transformation and address the challenges of youth unemployment, inequality, poverty and gender disparities,” emphasized senior UN officials this week in Addis Ababa and the UN Headquarters in New York. The 2013 edition of the Economic Report on Africa (ERA 2013), co-authored by the United Nations Economic Commission for Africa (ECA) and the African Union Commission is being launched in multiple cities at events aimed at eliciting debates and action around commodity-based industrialization as one way for the many commodity-rich African countries to achieve economic transformation.
The Report, whose theme is “Making the Most of Africa’s Commodities: Industrializing for Growth, Jobs, and Economic Transformation,” says that making the most of Africa’s commodities for industrialization involves adding value to soft and hard commodities and developing forward and backward linkages to the commodity sector. The arguments in this year’s edition have been warmly welcomed by experts, who insist on the need to shift from calling for diversification away from commodities.
“We argue that apart from providing employment, income, price and non-price benefits and other dynamic benefits, African countries, can add value to their raw materials locally, and bring about diversification of technological capabilities, an expanded skills base, and deepening of individual countries’ industrial structures,” said Mr. Carlos Lopes, Executive Secretary of the ECA.
Although Africa 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% of arable land and vast timber resources, value addition is still limited, culminating in the paltry receipts for the export of its primary commodities.
A case in point is the coffee industry where up to 90 per cent of total income from Africa's coffee, calculated as the average retail price of a pound of roasted and ground coffee, in the global value chain goes to consuming countries outside the continent. African producers like Ethiopia too can benefit more from this, it says.
While some African countries have made modest progress in forward and backward linkages to their commodity sectors, others still have some ground to cover, according to the report. It also notes that appropriate long-sighted industrial and local content policies and continental initiatives could help improve the situation. To further boost current levels of linkages, the report calls for urgent moves to reduce the infrastructural and human capital constraints and bottlenecks on the continent.
According to Ethiopian government officials attending the launch in Addis Ababa, the country’s policy interventions have seen impressive growth in leather exports and a dramatic reduction in export of hides, thus providing opportunities for improvements in manufacturing. UNIDO’s representative to Ethiopia, Jean Bakole underscored his organization’s support to countries with their local capacity development needs. UNIDO, said Mr. Bakole, plays a role in related capacity-building efforts in the leather industry in Ethiopia.
The Report also recommends improved policy implementation through coordination among relevant ministries in order to reduce incidents of coordination failure that have for long plagued the continent.