- Céline Allard, Jorge Canales Kriljenko, Jesus Gonzalez-Garcia, Emmanouil Kitsios, Juan Trevino, and Wenjie Chen
- Published Date:
- March 2016
Sub-Saharan Africa has experienced a formidable expansion of its trade flows over the past 20 years, helping propel its growth engine. Strong demand for commodities has undeniably played a role in supporting the increase in trade, in particular with emerging markets, but it is far from the entire story, as even non-oil commodity exporters have managed to diversify their export structure and start to integrate in value chains.
Nonetheless, the current global environment—a slowing China, anemic growth in Europe, faltering commodity prices, and the risks of global financial volatility as some advanced economies normalize monetary policy conditions—will be more challenging than in the recent past. This environment, however, provides a unique opportunity to refocus policies on economic diversification and on fostering structural transformation. Further and better integration into global trade can provide such an opportunity. Despite the strong growth in trade flows, sub-Saharan Africa still trades below its potential, in terms of both total flows and positioning in GVCs. Some countries have started to leverage their comparative advantages, either in agriculture and agro-business or, in some cases, in manufacturing. Yet, more broadly, much more could be done to arrest the gradual deindustrialization in the region.
Addressing the barriers to trade could therefore unlock untapped productivity gains, bringing with it more jobs, higher income levels, more diversified economies, and eventually more sustainable growth. Supporting the development of regional trade flows would also better shelter the region from exogenous external shocks. The need to improve infrastructure is one of the most important impediments to trade flows. But lower tariffs, better access to credit for the private sector, and a more conducive business climate are all found to support more intense trade flows and better insertion into GVCs, as do efforts to improve education outcomes. Those are levers on which the authorities have control and have started to work. The efforts should be sustained and even accelerated to leverage the region’s remarkable assets, including sound macroeconomic policies, improving economic institutions, and a young and growing workforce.