A new report by the United Nations Conference on Trade and Development (UNCTAD) has revealed that 89% (42) of countries in sub-Saharan Africa depend on commodities. According to the report ‘State of Commodity Dependence Report 2019‘, 60% of the exports of about 9 out of 10 sub-Saharan African countries is made up of commodities.
“Given that commodity dependence often negatively impacts a country’s economic development, it is important and urgent to reduce it to make faster progress towards meeting the sustainable development goals,” said UNCTAD Secretary-General Mukhisa Kituyi.
Clearly, Africa is the hardest hit region. This is followed by the Middle East and North Africa, where 65% of countries depend on commodities. The dependence on commodity put economies in Africa on a vulnerable path. The changing prices of these commodities affect sustained growth and development.
UNCTAD’s report has come at such an opportune time for Africa, in particular. Several African countries are pushing for economic diversification. The good news is that some countries have recorded gains. Energy or mineral-export-dependent countries like Rwanda and Cameroon managed to expand their agricultural exports. But more countries have to follow suit.
One single biggest issue with Africa’s dependence on commodities is value addition. Countries are not just susceptible to commodity price volatility. But most of these commodities are exported in raw state. With this, most countries lose out on their commodities. Whether cocoa, cotton, coffee, bauxite, gold or iron ore, countries have to derive the optimum value. This can only happen when commodity-rich countries add value to these resources.
African countries must move beyond simply extracting and exporting raw commodities. This doesn’t just happen. The continent needs to build institutions and structures that support value chain development. This is how to transform using commodities.