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Harnessing productive sectors’ through value chains to enhance intra-African trade and regional integration
Integrating Africa is the AfDB Group’s blog on regional integration in Africa. It chronicles the issues arising from African countries’ efforts as they work to pool resources and integrate their economies for the development of their regional and individual economies. Read More
As African resource-rich countries battle with the macroeconomic impact of the dip in global commodity prices, many look back at the 2004-2013 upswing in the commodity cycle and consider whether African countries, and their citizens, made the best out of them. Asymmetric information between governments and private investors, as well as weaknesses in designing fiscal frameworks are among the reasons why the benefits of extraction might have fallen short of expectations. How can African governments equip themselves to reap a larger slice of rewards when commodity prices start climbing again?
The discovery and exploitation of oil, gas and mining usually brings in its wake high expectations of employment opportunities for countries where the resource extraction is taking place. However, there is often a mismatch between these expectations and the actual jobs that the oil, gas and mining sectors can offer. In practice, oil and gas, and to a lesser extent, mining projects in Africa often do not generate much employment locally. This is partly as a result of the capital intensive nature of extractives and, especially oil and gas projects.
Illicit financial flows – flows of financial resources leaving a jurisdiction through illegal or illicit means – are the largest drain on developing countries’ ability to finance the Sustainable Development Goals agenda. Africa is particularly affected: the African Development Bank estimated that the continent lost over a trillion dollars since the 1980s, making it a net creditor to the world.
Industrialisation is back. After decades when policy efforts were mostly focused on macroeconomic stability and opening up markets, the success of industrial policies in emerging Asian markets highlighted the importance of a concerted effort for Africa to climb up the global value chains and diversify away from reliance on raw commodities. The Africa Union’s Agenda 2063 puts value addition and industrialisation at the centre of its vision for a prosperous continent, setting a target for Africa to generate 10% of global manufacturing by 2050.
Throughout the price boom of the 2000s, extractive resources (mining, oil and gas) were seen as assets that African Governments needed to leverage more effectively for development outcomes. This view has persisted even through the current price slump that began in 2011.
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