Rethinking the Foundations of Export Diversification in Africa

Soaring food and energy prices are hitting African countries especially hard as they struggle with the impact of the COVID-19 pandemic, climate change and the war in Ukraine.

To cope with current crises and insulate itself against future shocks, Africa must diversify its economies. The continent of 1.4 billion people is among the least diversified regions in the world with regard to exports.

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Commodities account for more than 60% of total merchandise exports in 45 of the 54 countries in Africa, leaving them highly vulnerable to global commodity price shocks and undermining the continent’s inclusive growth and development prospects.

UNCTAD’s Economic Development in Africa Report 2022 shows that neglecting the potentially transformative role of high knowledge-intensive services, such as information and communications technology, business services and digital financial services, is among the key reasons why export diversification remains a challenge in Africa.

High knowledge-intensive services can foster diversification

The report shows that effectively addressing barriers to services trade under the African Continental Free Trade Area will be key to unleashing the transformative role of services in enhancing the diversity and complexity of African economies.

UNCTAD recommends that for export diversification strategies to be impactful in Africa, policies need to be in place that enhance inclusive access to innovative financing technologies, including for small and medium-sized enterprises.

Leveraging high knowledge-intensive services to increase productivity and improve competitiveness in the private sector will be key to achieving higher value-added diversification and growth on the continent.

83% of African countries are highly dependent on commodities

UNCTAD considers a country to be dependent on commodities when these products make up more than 60% of its total merchandise exports. Based on this definition, 83% of African countries are commodity dependent, accounting for 45% of the commodity-dependent countries worldwide.

UNCTAD also photo

Graphic: Most African countries are highly dependent on commodities