African foreign trade

 African Foreign Trade: Key Features: The very low level of exports and declining share in world trade in the post-war years is an indication of the marginality of Sub-Saharan Africa (SSA) in the global economy. The value of total merchandise exports from SSA was $125 billion in South Korea and $73 billion in Malaysia in 1995.

In 1950, Africa had 5.3 per cent share in global exports. Its share fell to average 4.3 per cent in 1960s and 1970s. It rose marginally to 4.6 per cent in 1980, but fell again to 3.2 per cent in 1985; 2.3 per cent in 1990 and dived to 1.6 per cent in 1995. SSA’s share in world exports also fall sharply reaching 1.1 per cent in 1996 from 3.5 per cent in 1950 and an average of 2.5 per cent in the 1960s and 1970s.

In import also, the continent had a dismal picture. In 1950, Africa’s share in world import was 5.7 per cent. It dropped to average 4 per cent in 1960s and 1970s. It recorded continuous decline and touched 2.5 per cent in 1980s and slightly less than 2 per cent in the first half of 1990s.  SSA’s share in import was 3.1 per cent in 1950 and averaged about 2.5 per cent until 1980 and dropped to average 1 per cent until 1990s. Besides the staggering fall in share of world trade in the 1980s and 1990s, Africa’s terms of trade also worsened during the period.

The terms of trade of S$A non-oil countries declined by over one-third between 1977 and 1993 relative to a decline of 20 per cent for other non-oil developing countries. By 1993, the SSA required to raise the volume of their exports by over 50 per cent above their 1977 level to be able to import the same volume of goods. In some cases, for example, terms of trade deteriorated 50 per cent or even more than 50 per cent.

For example in 1996, Uganda (36), Ghana (42), Nigeria, Ethiopia and Madgascar (54, 56, 51 respectively) were some of the worst fall in terms trade. African exports mainly comprise primary commodities. The share in exports is miniscule for some of the dynamic primary commodities – semi-processed or so. Manufactured goods had a very small share in Africa’s total exports. In SSA’s two-third countries, manufactured goods accounted for only 15 per cent of the total exports. 

The share of individual country in total exports varies significantly. For instance, in 1990 in such exports share of Mauritius was 70 per cent, South Africa and Zimbabwe accounted for 30 per cent and Senegal and Sierra Leone had 20 per cent. Traditionally African countries had been trading mostly with Western Europe. Two-third of their exports and imports are with this region only. Intra-Africa trade is miniscule. In recent years, it was not more than 10 per cent of their total trade.

There are many factors responsible for Africa’s low share in world trade. Some of them are:

(i) Africa’s share in global output is small

(ii) Growth rate in traded goods resulting in fall in the share of exports in GDP during 1980s and 1990s.

(iii) Poor infrastructure in African countries

(iv) Unfavourable climate condition and inappropriate economic policies.

(v) Misalignment of exchange rates, high transport cost, natural calamities, price instability and low price and income elasticities of these exports in major export markets of Western Europe are some factors.

African countries thus continued to get affected by import compression. Dependence on imported capital and intermediate goods and low productivity and output growth also affects exports adversely in Africa. As per the data, Africa’s manufacturing share in its GDP is low even by the standards of their developing region. In 1995, it was only 11.5 per cent in Africa, compared with 21 per cent for Latin America and 24 per cent for South and East Asia.

Besides, among of all the developing countries, Africa’s share in Manufacturing Value Added (MVA) was only 5.5 per cent in 1996, a fall from the low level of 6.9 per cent in the mid-1980s.  Between 1980 and 1990, MVA increased only slightly in the continent.

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