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1. Trade Integration Over the Past 20 Years

Author(s):
Céline Allard, Jorge Canales Kriljenko, Jesus Gonzalez-Garcia, Emmanouil Kitsios, Juan Trevino, and Wenjie Chen
Published Date:
March 2016
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Sub-Saharan Africa’s trade experienced a rapid expansion over the past 20 years. While cumulative nominal GDP growth for the region over 1995–2013 amounted to a substantial 350 percent (in U.S. dollars), the equivalent increase for goods exports was even larger, at 500 percent—over the same period, global trade expanded by 260 percent. The region’s export-to-GDP ratio2 rose from 20½ percent in 1995 to 27½ percent in 2013, with the import-to-GDP ratio also increasing, from 19 percent to 23 percent.

In the process, the destination of sub-Saharan Africa’s exports changed substantially: trade flows with advanced economies, which represented close to 90 percent of exports in 1995, slumped in the wake of the global crisis. Meanwhile, new trade partnerships were forged with emerging markets such as Brazil, China, and India. China is now the single most important trading partner of sub-Saharan Africa (IMF 2012, 2014c). Moreover, the share of intraregional trade almost doubled, although from a very low base, to reach 3½ percent of the region’s GDP.

Trade patterns, however, are extremely heterogeneous across the region. In fact, while the export-to-GDP ratio has more than doubled for resource-rich non-oil exporters over 1995–2013—with South Africa accounting for about two-thirds of that increase—it has stagnated for non-commodity exporters as a group, and even dropped for oil exporters (Figure 1).

Figure 1.Exports of Goods Shares by Partner, 1995–2013

Source: IMF, Direction of Trade Statistics..

Note: Excludes South Sudan due to data availability. Oil-rich sub-Saharan Africa includes: Angola, Cameroon, Chad, Republic of Congo, Equatorial Guniea, Gabon, and Nigeria. Resource-intensive sub-Saharan Africa inlcudes Botswana, Burkina Faso, Central African Republic, Democratic Republic of Congo, Ghana, Guinea, Liberia, Mali, Namibia, Niger, Sierra Leone, South Africa, Tanzania, Zambia, and Zimbabwe. Non-resource-intensive coastal sub-Saharan Africa includes Benin, Cabo Verde, Comoros, Côte d'Ivoire, Eritrea, The Gambia, Guinea-Bissau, Kenya, Liberia, Madagascar, Mauritius, Mozambique, São Tomé and Príncipe, Senegal, Seychelles, and Togo. Non-resource rich landlocked sub-Saharan Africa includes Burundi, Ethiopia, Lesotho, Malawi, Rwanda, Swaziland, and Uganda.

1 Resource-intensive countries are defined as those for which nonrenewable resource exports are 25 percent or more of goods exports on average over 2009–2012.

We conduct a more country-specific analysis that corroborates these findings. We define resource-intensive exporters as those for which nonrenewable resources represent 25 percent or more of goods exports over 2009-12. By dividing SSA countries into groups of oil exporters versus resource-intensive non-oil exporters, and coastal non-resource-intensive exporters versus landlocked non-resource-intensive exporters, Figure 2 depicts the changes in export shares between 1995 and 2013. New natural resource exporters over the period, such as Chad and Sierra Leone, have seen their export share increase substantially, driven by growing emerging markets’ interest for commodities. Conversely, export shares in most longtime commodity exporters, such as Angola, Equatorial Guinea, or Zambia, have declined over time—underscoring the difficulty to broaden the export base in countries with a longtime role of commodities. Moreover, in many countries, rapid GDP growth has been accompanied by the development of buoyant nontradables sectors, leading not only to a welcome diversification of growth sources but also to a somewhat lower trade share, with Nigeria standing out in that respect. As for regional trade, countries such as Côte d’Ivoire, Senegal, and Togo, in the West African Economic Monetary Union (WAEMU) stand out for increased regional trade integration, as do Botswana, Lesotho, Namibia, and Swaziland in the SACU. On the other hand, landlocked countries with no natural resources remain more closed economies—with exports at only about 10 percent of GDP—and still struggle to increase trade integration, handicapped by poor transportation infrastructure and limited interest from emerging markets.

Figure 2.Change in Export Shares, 1995–2013

Sources: IMF, Direction of Trade Statistics; and World Economic Outlook database.

Note: Excludes South Sudan due to data availability.

The strong increase in the region’s exports has reflected favorable price developments. That is, not only have export volumes increased, but the relative prices at which sub-Saharan African countries sold these exports have surged substantially. More precisely, the fivefold increase in the real value of sub-Saharan Africa’s exports over 1995–2013 (deflated by the U.S. GDP deflator) is explained by both a 2.5-fold increase in volumes and a twofold increase in the relative price at which those exports were sold, a trend in sharp contrast with the experience observed prior to 1995 (Figure 3). This led to a welcome increase in purchasing power for the region and helped finance a much-needed increase in infrastructure investments (IMF 2014b). However, the improved terms of trade did not reflect stronger pricing power or better quality of exported goods, but rather a decade-long increase in commodity prices fed by tight supply conditions and strong demand from emerging markets. Unfortunately, this leaves the region’s commodity exporters particularly exposed to a reversal in prices, as it is currently experiencing.

Figure 3.Real Export Value Decomposition, 1981–20131

Sources: IMF, World Economic Outlook database; and IMF staff calculations.

1 The export value corresponds to the U.S. dollar value of exports deflated by the U.S. GDP deflator. The volume refers to real exports from the national accounts for each of the sub-Saharan Afircan countries weighted according to the regions 2006 export structure. The relative export price is the ratio of the real export value by the export volume.

Once again, this overall picture masks substantial heterogeneity in the structure of exports across the region. While commodities represent about half of all goods and services exports for sub-Saharan Africa as a whole, this ratio climbs to 80 percent for the eight oil exporters but conversely drops to about 35 percent for other countries, including those that export commodities other than oil—a share that is quite similar to that in emerging and low-income countries elsewhere in the world (Figure 4).

Figure 4.Goods and Services Export Compositions, Average 2008–12

Sources: Eora database; and IMF staff estimates.

Note: Emerging Markets and Developing Countries(EMD) and Low-income and Developing Countries (LIDC) are WEO aggregations. Sub-Saharan Africa (SSA) oil exporters include Angola, Cameroon, Chad, Republic of Congo, Equatorial Guinea, Gabon, Nigeria, and South Sudan.

Indeed, while the decline or stagnation in export ratios in many oil-exporting countries over 1995–2013 has occurred regardless of whether oil is playing a larger (Cameroon, Congo, Gabon), stable (Angola), or declining (Nigeria) role in the export structure, the situation is much more diversified among other countries (Figure 5). On the one hand, in South Africa and to a lesser extent Namibia, the increase in the export-to-GDP ratio has gone hand in hand with an increase in the share of commodities in exports. But in other non-oil-commodity exporters, such as Botswana, Democratic Republic of Congo, or Guinea, export shares progressed despite a stable or even declining role of commodity trade. Similar progress was registered from non-resource-intensive countries such as Seychelles and Togo. On the other hand, some resource exporters, such as Central African Republic and Zimbabwe, saw their export ratios drop despite an increase in the share of commodity exports.

Figure 5.Change in Export Shares, 1995–2013

Sources: IMF, Direction of Trade Statistics; IMF, World Economic Outlook database; and World Bank, World Development Indicators.

Note: See Annex 3.2 Country Groups for a list of countries in each group.

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