Resource prices source of adversities and opportunities for Africa
Dr Axel Schimmelpfennig, Dr Martyn Davies and Keith Scott provide insights on the global economy and its impact on Africa.
BACKS TO THE WALL Many African countries’ development prospects are inversely proportional to their natural resource endowment
The significant and potentially persistent decline in oil and other commodity prices, as well as slower-than-projected growth in the eurozone, China, Japan and Russia, has substantially altered the economic prospects for most African countries, according to the International Monetary Fund’s (IMF’s) recently released regional and world economic outlook update.
Addressing research and investment advisory firm Frontier Advisory’s 2015 Africa Outlook conference, held in Johannesburg last month, IMF South Africa senior resident representative Dr Axel Schimmelpfennig noted that exports accounted for about 27% of sub-Saharan Africa countries’ gross domestic product (GDP).
He highlighted that this was seven percentage points more than what it was for the region in the 1990s, or a one-third increase in export volumes.
Most of the increased trade involved new trading partners such as China and India.
“However, the exports were fairly concentrated in raw materials and commodities.”
Schimmelpfennig pointed out that, for Gabon and Angola, oil exports accounted for about 50% of their respective countries’ GDP, while it accounted for about 80% of Equatorial Guinea’s GDP.
Frontier Advisory CEO Dr Martyn Davies added that many African countries’ development prospects were inversely proportional to their natural resource endowment.
“The so-called resource curse is an endemic challenge across Africa,” he lamented.
Davies said it was likely that this year would be a catalyst for change in terms of African coun- tries actively seeking to diversify away from purely resource extraction to manufacturing and service-based economies.
“At policy level, for Africa to mimic Asia’s developmental trajectory, sub-Saharan Africa States will need to forge proactive, business-friendly growth models, rather than aid-supported, reactive and commodity-price-driven ones that result in nothing more than dependence,” he emphasised.
Meanwhile, local mining consultancy The MSA Group MD Keith Scott stated at the conference that bulk commodity prices had bottomed out, but that it would take at least two to three years before they would start to rise again.
“The mining sector is a cyclical sector and it takes many years for projects to be developed. Therefore, it is important that mining companies have a long-term vision to ensure that they invest in and develop projects now, so as not to miss out on the next [commodity price] upswing in years to come,” he concluded.
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