A new United Nations report says African countries must diversify exports if they are to survive economic shocks.
A report by the United Nations Conference on Trade and Development, UNCTAD, calls on African countries to broaden their exports beyond commodities if they are to escape poverty.
UNCTAD’s economic development in Africa report for 2022 says that global crises, including the COVID-19 pandemic and Ukraine war threaten African countries’ economies. It says millions of Africans already struggle to make a living in the middle of a rapidly rising food and energy crisis.
U.N. economists say Africa will not get out of its poverty trap if the continent remains dependent on exports of primary products, mainly in the agricultural, mining, and extractive industries. They note commodities still account for more than 60% of total merchandise exports in 45 of Africa’s 54 countries.
UNCTAD Secretary-General Rebeca Grynspan says 1 out of 2 Africans, more than 600 million people, are severely vulnerable to food, energy, and finance shocks. She says Africa must diversify its economy to become more resilient.
“The report makes clear the great potential for African countries to transform their economies through services, supporting the continent’s long-standing economic diversification goals, boosting productivity and development,” Grynspan said.
UNCTAD says knowledge-intensive services, such as information and communication technology, or ICT, and financial services, could be a game-changer for Africa. However, they note the sector currently accounts for only 20% of the continent’s services exports.
Grynspan says traditional services, such as travel and transport, dominate, accounting for about two-thirds of the total services trade.
“The analysis we are sharing today provides convincing evidence that high-value services, especially high-intensity ones in ICT and finance, are often the missing links that explain why diversification has not been achieved in the continent,” Grynspan said.
Grynspan says economic diversification should be a priority in Africa. She says it is the only path to sustainable growth and to high-quality jobs for young people.
The UNCTAD report calls on African countries to implement policies to better link trade in high-value services with other sectors, especially manufacturing. It also calls for removal of protectionist measures that limit the development of high value-added services trade.