The global commodity super cycle has reached its highest peak this year since 2014. This means that global superpowers like the U.S., China and Russia, as well as countries such as Japan, India and Brazil, are turning to the resource rich African continent to supply their overwhelming demands. Approximately 80% of Africa’s fortunes are driven by the commodity sector, so it should seem a blessing that demand for their natural resources are sharply increasing. However, it cannot be ignored that Africa’s people are amongst the world’s poorest. When an economy is too heavily dependant on the exportation of raw materials, governments neglect to improve the livelihoods of their people, as human capital is not deemed to add value to the economy like it is in industrialized societies. Furthermore, in resource dependant countries, African governments are earning billions of dollars from the exportation of its natural resources, while its people receive almost nothing, as the money is often corruptly managed to benefit the economically powerful. Questionable deals between transnational corporations and African governments have been reported to occur, enabling both parties to accomplish their ulterior motives involving openly accessing Africa’s resources in exchange for large sums of money.
As the global commodity super cycle is in overdrive this year, these economic and political issues that have plagued African nations for decades have again become an imminent issue. Efforts to diversify their economies and invest in technology, science and education have been stated to be on the agenda of the African Union (AU). However, many African governments have not been able to execute the will power to invest in long-term action towards industrialization, as the instant gratification received from large amounts of revenue obtained through the exportation of natural resources has been too alluring.
In response to this issue, at the national level the African Union is pushing for more regional integration through the development of pan-African treaties to ultimately decrease the continent’s reliance on investment and economic aid from foreign countries. At the international level, institutions such as the International Monetary Fund (IMF) and the World Bank have been lending money to governments to promote so-called ‘economic development.’
Previous efforts by international institutions to push Africa to restructure its economy and pursue a more sustainable means of economic development have had damaging effects. Institutions including the World Bank and the IMF are active in providing loans and investments to governments in Sub-Saharan Africa to influence sustainable economic development in the region. The IMF and World Bank have attested the most effective means for Africa to develop its economy to be through opening a liberal trading system in which tariff barriers are kept to a minimum. This would apparently solve the issue of Africa’s ‘inward looking trade system’ sustained by the over protection of its domestic market. These assertions were total minsdiagnosises by the World Bank and IMF, only damaging Africa’s economy further as many local industries have been exhausted, unable to sustain competition from subsidized competitors. Through these disreputable loans, these international institutions have prevented African governments from diversifying their economies, ultimately perpetuating their dependence on the demands of the global super cycle.
Governments in Africa have also received private funding from TNCs in the form of development and health aid. In return, these companies have often celebrated their generosity by accessing Africa’s vast array of natural resources, to the extent of depletion, costing far more than what they lent. In research released by a group of U.K. and Africa based NGOs, it was stated that “western countries send in about $30bn in development aid to Africa every year- more than 6 times that amount leaves the continent mainly to the same countries providing that aid.”
It is undeniable that these international actors under the guise of providing development aid, have been operating in the continent with ulterior motives. Motives that ensure open access to the abundance of Africa’s natural resources, by preventing African economies from diversifying.
In response to this foreign intervention, at the local level, the African Union has realized the need to strengthen its regional integration to escape their overwhelming dependence on FDI and natural resource revenue.
The African Union is currently attempting to foster the commitment of African leaders to comply with a culture of good governance, that prioritizes the long term benefits of investing in economic diversification, rather than the instant gratification from the instant wealth generated through resource exportation. It these efforts are sustained, it is likely that Africa will eventually achieve economic diversification.
To avoid being treated as the treasure pit for first world nations to fuel their commodity cycles, it is crucial that Africa embark on measures to squeeze its supply of raw materials into local industries. This will require a serious attempt by African governments at economic diversification. Economic diversification could be achieved through numerous means, including adding value to raw materials locally. This would involve local artisans creating high quality products out of the abundance of natural resources, insuring that there is far less freely circulating and available for exploitation by transnational companies and world superpowers. As a result, the country will also be able to secure higher priced investments for its goods.
Another step to achieving economic diversification includes upgrading the skill-sets of people involved in local production industries. As Sub-Saharan Africa seeks to boost innovation and adopt new technologies to strengthen the economy, it is necessary that the continent addresses the skills gap that prevents this. For this to occur, African governments should partner with institutions to construct courses that provide more vocational opportunities for its populations. This step will be crucial for African governments to improve the livelihoods of their people, as well as training a skilled work force to fuel its different sectors.
In addition to these national level solutions, the nations currently active in Africa must be confronted by African governments to put an end to the exploitation of their natural resources. This should prompt nations currently active in Africa to look elsewhere, and for more sustainable methods to source their commodity chains.
For foreign countries to see African governments as decisively in power whose suggestions and inputs should be considered, institutional reform by African governments will be necessary. Institutional reform has already begun by the AU whose goal is to “win the fight against corruption by building a sustainable path to Africa’s transformation.” To decrease dependence on the interference of foreign actors, the union has created pan-African agreements including: A New Partnership for Africa’s Development (NEPAD) and an African Peer Review Mechanism (APRM), amongst many others. These agreements are ultimately in place to strengthen regional cooperation, paving the way for Africa to regain its sovereignty and control of its abundance of resources.
If these steps are effectively taken, it is likely that Sub-Saharan Africa will be able to decrease its dependence on the global commodity super cycle to fund its economic growth. By squeezing its abundance of natural resources into local industries, there will be less available for foreign countries to exploit. This will force nations currently active in Africa to turn away from the continent and look for more sustainable means to fuel their commodity cycles.
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