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Commodity exports expose Africa to external shocks: Dr Nzenza

By on May 1, 2022 0

The Chronicle

Mashudu Netsianda, Senior Business Reporter
Overreliance on commodity exports makes Africa vulnerable to external shocks and the solution lies in transforming the continent from a commodity exporter to a producer of market-competitive value-added goods, a said the Minister of Industry and Trade, Dr. Sekai Nzenza.

By producing market-competitive value-added goods, African value chains would therefore be linked to global chains.

The minister said this at the inaugural Connect Africa Symposium held alongside the just-concluded 62nd edition of the Zimbabwe International Trade Fair (ZITF) in Bulawayo on Thursday.

Dr. Nzenza, who underscored the need for a holistic overhaul, called for a new approach to enable Africa to reap optimal economic benefits from its abundant resource endowment.

“Most African countries are still highly dependent on the production and export of commodities with minimal value addition and even less forward and backward linkages with other sectors of the economy,” he said. she declared.

“Overreliance on commodity exports makes Africa vulnerable to external shocks.”
Dr. Nzenza said the development of integrated and complementary African value chains is most ideal.

“This calls for policies that will enable African countries to add value and extract higher rents from their natural resource endowments and commodities,” she said.

“The solution lies in transforming Africa from a commodity exporter to a producer of market-competitive value-added goods, in which continental value chains are linked to global chains.

“It also lies in the promotion of horizontal and vertical diversification anchored on innovative value-added approaches and the development of local content.”

Studies indicate that Africa is home to around 12% of the world’s oil resources, 42% of the gold, 80-90% of the chromium and platinum group metals and 60% of the arable land, most of which is still virgin.

In addition, the continent has vast timber resources and accounts for 16% of the world’s population.

“Despite all this, Africa only accounts for around 2-3% of world trade.

Mineral fuels and other raw materials account for 59% of Africa’s exports,” said Dr Nzenza.

“What is even more worrying is that only 10-12% of African countries trade with each other.

“That compares to around 40% for North America and over 60% for Western Europe.

The Regional Economic Communities (RECs) of our continent are more connected to other third-party RECs outside the continent, in which African countries source goods, mainly manufactured goods, and services that are produced by sister African countries on the same continent.

The situation is compounded by the fact that most African countries are still highly dependent on the production and export of commodities with minimal added value and even less on backward and forward linkages with other sectors of the economy. economy, said the minister.

She said the establishment of the African Continental Free Trade Area (AfCFTA), which came into effect in January last year, is expected to boost pan-African trade.

There is therefore a need to put in place an appropriate policy framework and trade facilitation measures, as the AfCFTA presents an invaluable opportunity to accelerate pan-African trade through policy innovations and natural resource value chains.

“Realizing its full potential will very much depend on putting in place significant policy reforms and initiatives, as well as trade facilitation measures that will unlock value for African economies,” Dr Nzenza said.

The AfCFTA, said to be the world’s largest free trade zone, with a market of 1.3 billion people, seeks to reduce trade tariffs between member states.

Besides reducing trade tariffs, the AfCFTA will also cover policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards, as well as technical barriers to trade.

It also regularizes policy areas such as investment and the protection of intellectual property rights, which have not been covered by most sub-regional agreements.