The pattern of exporting raw materials and importing finished goods is a common economic challenge faced by many countries in Africa. This phenomenon is often referred to as the “resource curse” or the “raw material trap.” Many African countries are rich in natural resources such as oil, minerals, and agricultural products. However, the export of these raw materials often leads to a heavy dependence on them as the main source of revenue, which can have negative effects on the overall economy.
One of the main issues is that exporting raw materials does not promote industrialization or value-added production within the country. The raw materials are often sent to developed countries where they are processed, manufactured, and transformed into finished goods. These finished goods are then imported back into the African countries at a higher price, resulting in a trade imbalance and a lack of diversification in the economy.
To address this challenge, many African countries are striving to promote value addition and local manufacturing industries. This involves investing in infrastructure, improving access to finance, incentivizing local production, and creating policies that support industrial development. By reducing reliance on raw material exports and promoting domestic production, countries can diversify their economies and build resilience against external shocks.
However, at the Trade and Investment Conference that held recently in Cairo, Egypt, Deputy Chairperson, African Continental Free Trade Area (AfCFTA) Jean-Louis Ekra, said (AFCFTA) can break Africa’s colonial legacy of exporting raw materials and importing finished goods. He said that Africa’s dependence on these resources made the continent vulnerable to adverse trade shocks, liquidity constraints and macroeconomic management challenges.
Ekra said that the situation needed to be addressed urgently, especially as it had worsened the effects of the COVID-19 pandemic, geopolitical tensions and climate change. “AfCFTA cannot fail, especially given that intra-African trade is estimated at 16 per cent, which is a level of trade that compares unfavourably with other regions. ” He said that the low level of intra-African trade was explained by constraints such as limited trade and infrastructure, including payments and settlement systems
“Other constraints are lack of access to relevant market information, limited business knowledge, sustained investment opportunities and limited platforms to connect buyers and sellers.” Ekra urged African countries to recognise that the AfCFTA was the missing link the continent needed and that it presented many trade and investment opportunities in manufacturing, export development, SME promotion and trade in services.