News — Black Export

The underdevelopment of Africa has largely been attributed to the horrific slave trade, unfair trade practices, and lack of value addition of its raw materials.

The continent is well endowed with resources such as gold, cocoa, coffee, diamond, bauxite, among others. However, in monetary value, the continent does not make more compared to the countries that purchase these resources and add value to them.

For centuries, Africa’s economy has remained export-driven, and resources exported out of the continent are mostly in their raw state. This means that the continent loses millions of dollars in the value chain.

According to a former South African Minister of Trade and Industry, Rob Davies, Africa in 2014 exported coffee valued at $6 billion but after the coffee was roasted, blended, packaged, and branded, the final products sold abroad yielded $100 billion.

“In other words, 94% of the value chain of a primary product produced on this continent was captured abroad,” Davis said, citing a 2014 study by KPMG. The former minister was delivering the 2021 Adebayo Adedeji Memorial Lectures.

He said the figures are even starker in the case of highly knowledge-intensive products. “Take the case of the iPhone 6, that retails for $649 in the US. The cost of the mineral products used in its manufacture totals a mere $1,03 (0,16%),” he said.

Citing Adedeji’s seminal work, African Alternative Framework to Structural Adjustment Programmes for socio-economic recovery and transformation (AAF SAP), Davis said the AAF SAP has become a major beacon looked to by many then doubting that externally-imposed Structural Adjustment Programmes were the best, or only, way forward.

According to Davis, AAF SAP identified what it saw as the structural weaknesses in most African economies, including a “weak productive base characterized by low productivity and productive activities dominated by either subsistence or export-orientated primary product production.”

From this, AAF SAP identified the central task as the structural transformation of African economies, he said, adding that Africa has to “break the apron strings of structural and relational dependence on producing a limited number of cheap primary commodities for export.”

Davies noted that poor countries that have transitioned to become industrialized nations followed the path of earlier industrializers.

“Whether they were the East Asian Newly Industrialising Economies in the 1960s and 1970s (South Korea, Taiwan, Malaysia) or, more recently, China, their governments pursued active industrial policies that promoted, nurtured and protected nascent industries,” he said.

According to him, the industrialization they experienced resulted in greater output and higher incomes for those involved in manufacturing and a host of related service activities that created higher quality, better remunerated, and higher quality jobs than those that existed before.

He, therefore, urged African economies to break the dependency ties with industrialized nations and begin to add value to their resources through industrializing their economies.

Touching on the Continental Free Trade Agreement (AfCFTA) which combines the economies of Africa into a single market of 1.2 billion people, Davies said AfCFTA’s real prize would be if it supported the emergence of regional value chains involved in the production of higher value-added goods and services.

“Such an outcome could expect to see components and other intermediate inputs being produced in a number of countries before being assembled into “products of Africa” consumed by the citizens of the continent and also exported,” he said.

“Under such a scenario we could expect to see not just a quantitative increase in intra-regional trade but a qualitative change in its character. This would involve a greater absolute and relative intra-trade in components and intermediate products – which is in fact the largest and fastest-growing part of global trade in goods.”

A year ago, Ghana’s President Nana Akufo-Addo became the first African leader to be invited in about 60 years on a state visit to Switzerland. But his visit may not have gone as his host would wish as he announced that his country will soon end the process of selling raw materials to trade partners for onward value addition.

Although Akufo-Addo’s visit was about 12 months ago, the details of his announcement have been rekindled by conversations sparked by recent impediments placed by rich countries on a World Trade Organization (WTO) proposal. The proposal would have seen coronavirus vaccines produced in large quantities widely in other countries if pharmaceutical corporations can waive off intellectual property claims.

Richer nations like those in the European Union as well as the United States have blocked this proposal although, in terms of global numbers, they are in the minority. Akufo-Addo’s statement to the Federal Council of Switzerland is seen by many pro-African interest observers as well as Pan-Africanists as a possible route through which Africa can win on trade on the global scene.

Ghana’s quest to hold back on exporting raw materials is an agenda independent of what is happening with the WTO’s proposal on COVID-19 vaccines. The agenda was even stated before the pandemic thus, it requires us to understand it within the context of Ghana’s developmental ambitions.

One of the raw materials that Ghana is not looking to export any much longer includes cocoa beans, a commodity for which Ghana happens to be the second-largest producer in the world after neighbors the Ivory Coast. Switzerland, a great manufacturer of chocolates, buys its cocoa from the two West African neighbors although Ghana is Switzerland’s biggest trading partner in sub-Saharan Africa.

President Akufo-Addo told the Federal Council of Switzerland, then headed by President Simmoneta Sommaruga:

“Ghana is currently Switzerland’s largest trading partner in sub-Saharan Africa, largely from the export of gold and cocoa to Switzerland and the import of chemical and pharmaceutical products…However, as I have stated on many occasions, Ghana no longer wants to be dependent on the production and export of raw materials, including cocoa beans. We intend to process more and more of our cocoa in our country with the aim of producing more chocolate ourselves”

Akufo-Addo tied in the movement towards value addition to Ghana’s national pride as well as poverty alleviation. Even though it can be read as an approach antithetical to what free-marketeers like Switzerland have advocated over the last few decades, protecting Ghana’s interest in short ot long term would be difficult to argue against.

Last year, both Ghana and Ivory Coast halted the sale of cocoa to United States manufacturers accusing the U.S. confectionary giants Hershey’s and Mars of avoiding paying a bonus that will help improve the economic fortunes of poor farmers.

The Coffee Cocoa Council (CCC) and the Ghana Cocoa Board (Cocobod) in a statement said the two of the world’s top chocolate sellers were not paying the living income differential (LID).

The LID gives cocoa farmers a bonus of $400 per tonne in addition to the market price and envisioned to cushion many farmers who live in poverty. The $400 a tonne LID on cocoa sales for the 2020/2021 season was introduced by the West African nations last year.

That trade war did not last long as Ghana and the Ivory Coast won their way. It was the second time in two years that the two countries had manufacturers to concede on deals. With Ghana’s move towards processing its own cocoa, the world, and not just Switzerland, will experience a massive shortage since Ghana is responsible for about 45% of the world’s cocoa.

With this, it is understandable how Akufo-Addo’s promise to the Swiss people, who are one of the world’s largest producers of chocolate, falls within the trajectory of hopes of those who wish Africa well.