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4.2 Diversification regimes in Africa: Economic Report on Africa 2007

Guest post by: United Nations Economic Commission for Africa

Article Overview: Analysing the various diversification indices and the structure of the top ten export commodities for selected countries over the last two decades and a half provides some useful insights which can be used to define diversification regimes that characterize Africa. Five diversification regimes can be identified from Africa’s experience (see Ben Hammouda et al. 2006b). These regimes should not be viewed as steps or as a continuum that a country must follow as it moves from a concentrated to a diversified economy. Rather, the regimes are a result of the policy actions that a country has set in place over a given period of time. The particular regime that a country falls into is likely to be the result of a mix among the various diversification determinants.

4.2 Diversification regimes in Africa: Economic Report on Africa 2007

Analysing the various diversification indices and the structure of the top ten export
commodities for selected countries over the last two decades and a half provides
some useful insights which can be used to define diversification regimes that characterize
Africa. Five diversification regimes can be identified from Africa’s experience
(see Ben Hammouda et al. 2006b). These regimes should not be viewed as steps
or as a continuum that a country must follow as it moves from a concentrated to
a diversified economy. Rather, the regimes are a result of the policy actions that a
country has set in place over a given period of time. The particular regime that a
country falls into is likely to be the result of a mix among the various diversification
determinants. The five regimes that can be identified in Africa’s diversification efforts
are summarized below:

• Little economic diversification: The countries exhibiting this regime
are those that have not achieved much in terms of diversification. These
are countries which, without experiencing any conflict, have been unable
to achieve any significant diversification gains. Bénin, Burkina Faso, and
Malawi exemplify countries that exhibit this regime.

• Countries that started the process but have not made any significant
breakthrough: The second regime that is evident in the African experience
characterizes those countries that have not made major breakthroughs in
their diversification efforts over the last 20 years. Even though such countries
are among the more diversified on the continent, they have not managed
to achieve deep horizontal diversification that encompasses high-value
export commodities. Vertical diversification might have occurred leading to
new agriculture related exports as is the case in Kenya. However, the vertical
diversification is still not based on the higher-valued exports that have
been characteristic of the Asian NIEs and Latin American countries.

• Deepened diversification process: A strengthened diversification regime
is one that has the potential to be sustainable. This is a regime that is characterized
by both horizontal and vertical diversification. Examples include
Mauritius and Tunisia. Tunisia has managed to achieve horizontal diversification
into higher-value exports (box 4.3). Mauritius, on the other hand,
has achieved deep vertical diversification, which has led to more textilesrelated
exports.

• Backsliders in the diversification process: The fourth regime characterizes
those countries that started well and were registering positive diversification
gains but later fell back. It covers countries that, after the economic crises
of the early 1980s, concentrated on an internal focus. The Dutch Disease
effects might have played a major part in putting the countries under this regime. In the majority of the cases, export booms based on a single commodity
played a part in the diversion of factors of production away from
other tradables, especially the exportables. Gabon and Nigeria were unable
to follow the strategy that Tunisia adopted, whereby the traditionality of
petroleum-related exports continued but new sectors were able to emerge
and thrive.

• Conflict and post-conflict countries: The fifth regime in this characterization
of African economies includes conflict and post-conflict countries. The
Democratic Republic of Congo, Liberia and countries in similar conditions
exhibit diversification efforts but conflict has undermined these efforts.

Related Articles
  4.0 Diversification trends in Africa: Economic Report on Africa 2007
  4.4 References: Economic Report on Africa 2007
  5.0 Diversification and Growth: Economic Report on Africa 2007
  4.3 Conclusion: Economic Report on Africa 2007
  5.4 References: Economic Report on Africa 2007

Article Tags: african experience, breakthrough, burkina faso, case in kenya, continent, continuum, determinants, diversification efforts, diversified economy, economic diversification, export commodities, horizontal diversification, latin american countries, malawi, nies, nin, period of time, policy actions, regime, regimes



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