The general picture of the continental performance that was shown in figure 4.1 masks the gains and losses made at the subregional and country levels. Figure 4.3 gives the situation at the subregional level and it compares five subregions defined around some of the RECs. In 1980, the most diversified subregions were COMESA and ECOWAS. The least diversified was CEMAC with SADC and North Africa in between. By 2002, the diversification gains at the subregional level had changed, with the most significant gains made by SADC, which is now the most diversified subregion on the continent. It is followed by COMESA and North Africa. CEMAC has remained the least diversified subregion.
The improvements in SADC’s index of diversification, especially in recent years, are attributed more to South Africa’s heavily diversified economy. The diversification results in other SADC countries appear to be easily masked by the dominant nature of the South African economy. Case in point is the Angolan economy which is becoming increasingly concentrated owing to its reliance on oil. However, this concentration is hidden in the overall SADC results due to South Africa’s dominance.
In the case of North Africa, there is a clear trend towards diversification. This could be attributed to the efforts of Egypt, Morocco and Tunisia to diversify, given their proximity to the large and lucrative European market (box 4.1). Country-level analyses of the North African experience show that the subregion’s diversification results are close to the overall African results (Ben Hammouda et al. 2006a). It is noteworthy that although diversification of North African economies was weaker in 1980, the gap between these economies and that of the whole of Africa has been significantly diminished. The Tunisian experience with economic diversification has played a big role in achieving the subregional outcome given the static performance of economies such as Algeria’s, after making considerable progress until 1985 or so.
Unlike the experience in North Africa, COMESA lost some of the diversification edge it had at the beginning of the 1980s. Yet, COMESA had a great incentive to diversify. Unlike other subregions such as West, Central and North Africa, the East African subregion has not been favoured with discoveries of new export commodities such as oil. It failed to pursue policies that could have led to a more dynamic response to the challenges that it faced after the main economic crises. While COMESA is one of the most diversified subregions in Africa and even more diversified than Africa on average, performance is driven by only a few economies.
Kenya and Mauritius have had significant diversification and as such they have outweighed the influence of other economies such as Burundi’s, that has had a tendency to become more concentrated. It is important to note that Sudan, which is one of the largest economies in COMESA, had managed to maintain a stable path of diversification until the structural changes following the discovery of oil. For the least diversified, CEMAC, the oil factor dominance through Chad, Republic of Congo, Equatorial Guinea and Gabon is a major determinant of the diversification experience. Notably, the Cameroon economy rates as more diversified than the subregional average.
The magnitude of the oil factor in African economies is most pronounced in ECOWAS where the dominance of the Nigerian economy has led to low export diversification in the overall subregional performance. From the late 1970s to the early 1980s, the diversification index for ECOWAS was higher than the aggregate African index.
ECOWAS, at the beginning of the period, was one of the most diversified subregions.
However, beginning from 1986 onwards, the economies of the subregion started to become more concentrated, and within 25 years, the diversification gains that had already been made were eroded. In 1986, a clear structural shift occurred in Nigeria that was related to the oil effect and this shift was strong. It is not possible to discount the political factors associated with the conflicts and instabilities that played a part in erosion of the diversification gains. This is particularly the case with the recent history of Côte d’Ivoire, which at one point was a leading economy in the subregion. Political instability undermines diversification and it can be envisaged that instability affects some activities more (or differently) than others. For the period 1991 to 1998, other economies in the subregion such as Côte d’Ivoire were making substantial progress on diversification. Senegal also managed to safeguard the diversification gains it had achieved. Conflicts and political instability had a negative effect on efforts in other countries to counteract the Nigerian oil effect.
It is apparent that the continental gains are attributed to just a few African countries, whose experience could be replicated elsewhere if the gains had resulted in better economic and social performance. This indicates that country-level performance is important to understanding what is happening at the continental level (figure 4.4).
At the start of the period, Africa as a whole was more diversified than both Mauritius and Tunisia.
For the period 1982 to 1991, Africa’s diversification gains were being reversed while countries such as Mauritius and Tunisia were becoming more diversified economies.
What did Mauritius and Tunisia do to make their economies overcome the constraints posed by the economic crises that so negatively affected the continent as a whole? Both countries had a stable and sustained economic policy aimed at very specific outcomes, in this case, increased diversification. For the most part, subregional analysis of the diversification trends paints a picture of volatility at the country level.
To learn more about this author, visit United Nations Economic Commission for Africa's Website.
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