Sunday, July 4, 2010

South-South trade good for Africa; More trading in manufactured goods needed

A new UNCTAD report (Economic Development in Africa Report 2010) backs South-South trade, especially between Africa and other fast growing developing countries, namely China, India and Brazil. For Africa to grow and integrate more with the growing economies, it has to export manufactured goods. Traditionally, it has been exporting low-valued agricultural products and raw materials.

The study warns that so far, trade and investment flows with the South are reinforcing a longstanding trend in which African countries export farm produce, minerals, ores, and crude oil, and import manufactured goods. This situation should be reversed while the South-South trend is still in its early stages. A repeat of the traditional pattern will not help African countries to reduce their traditional dependence on exports of commodities and low-value-added goods.

The scale of African and non-African developing countries trade:

  • Africa’s total merchandise trade with non-African developing countries increased from US$ 34 billion in 1995 to $97 billion in 2004 and then jumped to $283 billion in 2008.
  • While Africa´s total merchandise trade with China increased from $25 billion in 2004 to $93 billion in 2008, Africa´s total merchandise trade with India increased over the same period from $9 billion to $31 billion, and its trade with Brazil increased from $8 billion to $23 billion.
  • The number of "greenfield" foreign direct investment (FDI) projects by investors from non-African developing countries climbed from 52 in 2004 to 184 in 2008. (A "greenfield" investment is an investment in a manufacturing, office, or other physical company-related venture where no previous facilities exist.)
  • It is estimated that official aid to the region from developing countries was US$ 2.8 billion in 2006. And it has risen substantially since, as China, which is estimated to contribute over 83% of that aid, committed to double its assistance to Africa by 2009.
  • Available evidence suggests that Chinese infrastructure finance commitments in sub-Saharan Africa soared from $470 million in 2001 to $4.5 billion in 2007. An estimated 54% of China’s support to Africa over the period 2002-2007 went to infrastructure and public works.
Share of Africa’s total trade accounted for by selected partners, 1980-2008