Low commodity prices should prompt Africa to diversify

Indeed, during this blessed period of economic revival for the continent, perceptions about African countries, which hitherto tended to be negative, critical, and even scornful, have significantly changed for the better in an immense way.

It is no secret, of course, that the main drivers of Africa’s economic resurgence has been the plentiful reserves of minerals and natural resources that the continent is endowed with and which have fetched extremely good prices in the global commodities market during this golden era of an economic awakening for the continent.

It should be noted here that while Western countries have been keen to snap up and invest in the continent’s abundant natural wealth, the biggest demand has come from the globe’s second largest economy, China.

However, over the last year-and-a-half, things have drastically changed.

For one thing, China’s once insatiable appetite for Africa’s raw materials and natural resources has reduced slightly.

This reduced demand may not come as much of a surprise for dedicated China watchers.

Indeed, for a long time now, China has used the raw materials it purchases mainly from the continent as basic ingredients to manufacture various goods for export to the West and the rest of the world.

It is not for nothing, after all, that China once earned the nickname of the ‘world’s factory’.

This emphasis on exports is the main factor behind China’s economic miracle of recording truly remarkable and even astounding growth rates during the last few decades, an economic transformation perhaps quite like no other in modern times.

Nevertheless, in recent years, China’s finest economic minds have warned their quasi-Communist government that the country’s runaway export-led growth is simply not sustainable.

Instead, these esteemed economists and also global financial institutions such as the World Bank (WB) as well as the International Monetary Fund (IMF) have advised the Chinese government to change their export-oriented economy to one mainly powered by domestic consumption, which in their view would be a more sustainable basis for economic growth.

All this could then help to explain why China’s demand for the continent’s raw materials and natural resources has been slightly reduced in contrast to the past.

In addition to slightly reduced demand from China, major oil-rich countries on the continent have had to grapple with the really unprecedented low prices of the valuable substance nicknamed the ‘Black Gold’ on the world market.

Doubtlessly, the sharply plummeting prices of oil during the last two years has been a major development that arguably few financial wizards foresaw and is already unquestionably one of the most significant economic stories of this decade.

The problem though for oil-producing countries and OPEC members such as Nigeria, Angola, and Equatorial Guinea amongst others is that with oil prices continuing to plumb new depths, an enormous source of revenue for the afore-mentioned nations has been markedly reduced.

And when one chips in the fact that the prices of other commodities such as platinum for example have also fallen on the world market, then it’s clear that the ominous road signs are telling African leaders that Plan B is sorely needed.

Since it is patently obvious that we cannot reinvent the wheel, it seems then that the most reasonable course of action would be for countries on the continent that are rich in minerals and natural resources to wholeheartedly seek to diversify their economies instead of being dependent on just these commodities or indeed placing all their economic eggs in one basket.

To their credit, the African Union (AU) seemed to have the right idea a few years ago when they boldly proclaimed that they would try to revitalize and rejuvenate the continent’s under-performing agricultural sector, which employs the majority of the continent’s labor-force.

But alas! These proclamations made with much fanfare sadly amounted to nought.

Away from the agricultural sector, though, there are quite a few other things that countries on the continent can do.

For instance, governments can resolve to prepare a sort of stimulus package for the nascent renewable energy industry on the continent so as to provide the initial financing for this crucial industry to take off.

After all, manufacturers of solar panels can take advantage of the sunlight which the continent is blessed with and utilize solar energy to power homes and in the long run even enterprises.

Furthermore, another source of renewable or green energy on the continent could be the strong winds which are a feature of many African nations.

Indeed, wind mills could be built in these nations so as to transform the energy inherent in the wind into power.

And the good thing about solar, wind, and other sources of renewable energy is that they do not pollute the atmosphere in an age when the potently harmful phenomenon of climate change is one of the major concerns of our times.

At the end of the day, however, African countries which are rich in oil and other natural resources must read the writing on the wall.

Indeed, it can no longer be business as usual!