Agenda 2063 (IV): A Commodities Strategy

Last week I was in Sao Paulo with a group of IESE’s Global Executive MBA program participants. The module focused on Doing Business in Latin America. Three of the local speakers showed the same series of The Economist’s front pages! The series went from “Brazil takes off” (2009) to “The betrayal of Brazil” (2016).

Local processing of raw materials will keep value added local

This reminded me of a similar series on Africa: from “The hopeless continent” (2000) to “Africa rising” (2011) – a perspective that now is questioned. The fact is despite the continent’s recent strong economic growth, Africa is still commodity dependent. A commodities strategy is needed for Africa to really rise.

This is one of the flagship projects of the African Union’s Agenda 2063.The United Nation’s Economic Commission for Africa released recently its Economic Report for Africa 2016. The report highlights the still heavy reliance on the production and export of raw commodities. While many countries are making an effort to diversify their economies, the fact is that the share of manufacturing has remained stagnant at 11 % of the continent’s GDP over the last decade.

The good news is that Africa is resource-rich. What’s needed is that the value added by processing and marketing these resources is kept locally.

That’s the aim of an Africa’s commodity strategy:

“Enabling African countries add value, extract higher rents from their commodities, integrate into the Global Value chains, and promote vertical and horizontal diversification anchored in value addition and local content development”

In other words, Africa’s commodity strategy should be closely linked to its industrialization strategy. While the continent lags behind the rest of the world, there’s a positive side to this situation: Africa has the possibility to leapfrog to a greener industrial era. Doing so takes not only investments but also – and most important – the will of both policy makers and business leaders.

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