Insights and analysis
Teaching an old dog new tricks
On diversifying Africa’s economies
Africa Rising was the meme that rallied around spectacular economic performance by African countries up till the commodities boom went bust driving the pace of the collective sub-Saharan Africa economy down to a 20-year low. Now, the common theme across nations that are highly dependent on their extractive industries, especially crude oil exporters, is economic diversification.
Nigeria for instance was caught flat footed when the bottom fell on oil prices. The country is now in recession. A rebound in the oil price courtesy of an agreement by OPEC to cut production is seen to have provided some reprieve, at least in the short run (it is unclear if the cuts will be very effective due to production by non-OPEC states). The country’s president says he’s keen on diversifying the economy. Agriculture is considered a key pillar in this effort, and even industries that collapsed ages ago may receive some attention.
The same story echoes over in Algeria where Oil and gas exports generate 94% of the country’s total export earnings. But much as there is talk of diversification and developing the private sector, the move has seen lackluster support and the state is banking on increasing Liquified Natural Gas exports to Europe as a way out. That said, some steps such as reviewing investment laws have been taken.
On the other hand are countries that are relatively diversified, mostly those that are not dependent on extractives such as East Africa’s economies. But even these seem to be hopeful that pumping oil or discovering oil deposits will provide the silver bullet.
Could it be that breaking the commodity-dependency habit is more like teaching an old dog new tricks?
