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.”