Adding Value to Africa: The need to shift from raw material exports
Windhoek – Africa is well endowed with natural resources, but for the continent to benefit from its natural wealth, it needs to broaden its economic base and not remain heavily dependent on the export of raw materials, Namibian Trade and Industry Minister, Calle Schlettwein, has said.
Conventional thinking has long held that the continent’s over-dependence on commodity and raw material exports for processing elsewhere could harm or restrict economic growth in Africa.
During the 9th Conference of African Union Ministers of Trade in the Ethiopian capital, Addis Ababa, on December 4, Schlettwein reiterated calls for African countries to diversify their economies, and avoid negative effects associated with raw materials trade such as, low demand, falling prices and stunted economic growth and industrialisation prospects.
“Africa is a continent on the rise, with some of the fastest growing economies,” Schlettwein told the two-day gathering that discussed trade issues that are important for the continent’s socio-economic development.
“The question that we have to answer is how do we make the most of this growth potential? Should we continue to be a continent that perpetuates trade in raw commodities? The answer is no, we need to move from this trend to production of value added and finished goods for trade among ourselves and globally,” said the minister.
He added that: “If we want to trade gainfully and optimally we need to move away from trade in raw materials and move up the value chains and trade in finished goods among ourselves and with the rest of the world.
“Industrialisation and the need to build our productive capacities must form an important pillar in our agenda for economic integration.
“All of us across the continent have agriculture and food production as our main production sectors and we trade in commodities; therefore we need to diversify our industrial base.”
He urged his colleagues to ensure that economic gains are translated into wealth creation “in our countries to address unemployment, improve education and skills as well as health situations. We need to find a formula that will improve and optimise our economic gain share that we get out of free trade arrangements and global trade”.
He added that, “When we negotiate through the multilateral system we must be very clear of what we want, we must put our terms on the table and stick to them and we should be stern in defending our positions”.
The trade ministers’ meeting was preceded by a meeting of experts at the AU headquarters in Addis Ababa, who discussed the implications of mega regional trade agreements and current investment trends in the context of Africa’s commitment to forge economic integration. The meeting also considered issues of concern to Africa, including those related to the World Trade Organisation (WTO), the Economic Partnership Agreement and the renewal of the African Growth Opportunity Act (AGOA).
The deliberations were crucial, as the launch of the Continental Free Trade Area (CFTA) negotiations begin in 2015.
In this regard, the Namibian trade and industry minister said, “When we negotiate through the multilateral system we must be very clear of what we want, we must put our terms on the table and stick to them and we should be stern in defending our positions”.
He said: “We no longer have the policy space that developed nations had to become developed.
“We need policy space to get the best deal from global trade liberalisation, and to look at other ways on how to develop our countries while we also take advantage of opportunities and gains from free trade. How we treat our traditional knowledge, intellectual property and innovation is crucial for development of new commodities and services we want to trade in.”
Another important question that African need to ask themselves, according to Schlettwein, is how strong their voice is, at multilateral bodies and platforms such as the World Bank, International Monetary Fund (IMF), Unite Nations, and WTO.
“We need to make Africa’s voice loud and heard by others. Part of our discussions and demands must be the reform of these organisations. Africa’s ability to influence global rule-making must be strong.
“Through the negotiation of the Bali Agreement, we have made the WTO relevant again. Our hope is that through a multilateral trading system, we ensure that fair trade and rules for fair trade are entered into and are followed.
“We cannot dance to rules that we have not been able to make input to, as this will put us at a disadvantage and we will not be able to optimise the gains from free trade,” he said.