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4.1 Case studies on export diversification for selected African countries: Economic Report on Africa 2007

Written by: United Nations Economic Commission for Africa

Article Overview: So far, diversification trends in relation to African economies indicate that different countries have achieved varying results. The overall conclusion is that, in general, African economies have failed to make gains beyond their initial positions in the early 1980s. It has also been pointed out that they reacted defensively to the crises that beset them in the 1980s. Their macroeconomic stabilization policies did not create an environment conducive for dynamic response, as a good number of countries in Asia and Latin America were able to do. Their defensive response as seen in the oil factor, perpetuated the status quo and worsened it in some instances. Earlier gains in such countries as Gabon, Nigeria and Sudan were eroded.

4.1 Case studies on export diversification for selected African countries: Economic Report on Africa 2007

So far, diversification trends in relation to African economies indicate that different
countries have achieved varying results. The overall conclusion is that, in general,
African economies have failed to make gains beyond their initial positions in the
early 1980s. It has also been pointed out that they reacted defensively to the crises
that beset them in the 1980s. Their macroeconomic stabilization policies did not
create an environment conducive for dynamic response, as a good number of countries
in Asia and Latin America were able to do. Their defensive response as seen in
the oil factor, perpetuated the status quo and worsened it in some instances. Earlier
gains in such countries as Gabon, Nigeria and Sudan were eroded.

In this sub-section, selected results on the different outcomes of various national
economic diversification efforts are discussed. The evidence on how some of the
countries have responded is based on the cumulative export experience function.
The cumulative export experiences of the top ten commodities are employed to
make the point that export diversification in Africa has been varied. Most countries
have not managed to break out of their traditional exports to more dynamic nontraditional
sectors with higher export-earning potential.

The interpretation of the cumulative export experience function is as follows. For two
different industries whose cumulative export experience functions are plotted together,
the industry whose exports were concentrated earlier would have its functions further
to the left. The sectors whose export experiences functions were concentrated earlier
are the ones normally referred to as traditional. Those sectors whose export experience
function is concentrated later in a given sample period are often referred to as
non-traditional industries. Increasing numbers of industries that are concentrated in
later years are indicative of a national efforts to break away from over-reliance on more
traditional exports. The more the number of sectors with cumulative export experience
functions shifted to the right, the more the indication of some dynamism in new
export developments.

Case 1 - Mauritius
Figure 4.5 presents the cumulative export experience of Mauritius, one of the more
diversified African economies. In the Mauritius case, the more traditional sectors are
sugar and honey, knitted outer garments; and watches and clocks, with the larger
part of the export development occurring early in the 22-year period under consideration. On the other hand, Mauritius has managed to develop non-traditional
export sectors. These include fish, woven cotton fabrics, knitted undergarments,
and non-knitted women’s outerwear. These are sectors whose export experience have
been developed in more recent years. That the last three of the export categories
named above are related to the textiles and apparel sector could also be an indication
of some vertical diversification.

Case 2 – Kenya
The Kenyan experience does not differ much from the experience of Mauritius (figure
4.6). However, the range of experiences in the different sectors are more pronounced.
Kenya is also one of the more diversified economies (box 4.2). However, it is evident
that the top ten commodities have not broken into the range of manufactured products
where there is generally evidence of more dynamism. The most traditional sector is coffee.
Iron and steel are also showing strong indications of becoming more traditional exports.
As for the non-traditional industries, Kenya has managed to attain strong real growth in recent years in export of vegetables in particular. Very interestingly, exports of petroleum
products indicate that this industry is also becoming more traditional in nature.

Case 3 – Tunisia
The Tunisian diversification experience indicates significant horizontal diversification
in exports (see figure 4.7). Tunisia’s top ten products include garments such
as knitted non-elastic outer garments, non-knitted men and women’s outerwear,
and knitted under garments. The others include switchgear and electricity distributing
equipment. These products indicate greater export experience in recent years
and are the emerging or newer products in the export mix. On the other hand,
manufactured fertilizers and inorganic chemical elements, oxides and others have
not registered any significant structural changes for 24 years. It is noteworthy that
crude petroleum, which is a traditional product, has witnessed a decline in its share
of exports from 50 per cent at the beginning of the period to about 7 per cent of
total exports in 2002.

Case 4 - Nigeria
The Nigerian experience described in figure 4.8 provides a distinct feature associated
with the oil factor. Nigeria’s top export products include seed for other fixed oils,
leather, cocoa, shellfish fresh and frozen, natural rubber and gums, petroleum products
refined and special transactions. These traditional export products decreased
their share in the country’s total exports around the mid-1980s, as crude petroleum
became the dominant export product from Nigeria. Since 1987, the share of crude
petroleum export has risen to almost 95 per cent of total exports, maintained this
level and then again increased to over 99 per cent in 2000. Other products such as
ships and boats, and polymerization products do not have a steady direction. They
were not among the traditional exports but there are periods when their exports were
very high. Finally, in the late 1990s, these two products were actually dominated by
exports of crude petroleum.

Related Articles
  4.0 Diversification trends in Africa: Economic Report on Africa 2007
  4.3 Conclusion: Economic Report on Africa 2007
  4.4 References: Economic Report on Africa 2007
  5.3 Conclusion: Economic Report on Africa 2007
  6.4 Industrialization policies key to deepened diversification: Economic Report on Africa 2007

Article Tags: 1980s, african economies, commodities, countries in asia, crises, defensive response, diversification efforts, dynamic response, economic diversification, export diversification, export experience, initial positions, latin america, macroeconomic stabilization, national efforts, number of countries, number of countries in asia, sectors, stabilization policies, traditional exports



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