The Prepaid Economy: African Edition

from Interview in 4 parts with the head of Sub-Saharan desk of the International Monetary Fund (IMF) Dr. Antoinette M. Saye, former Finance Minister of Liberia:

Shifting patterns of trade and investment
The IMF iron lady also called for shifts in the patterns of trade and investment on the continent recommending that agriculture lead the way for income generation for the majority of households in Sub-Saharan Africa.

“Agriculture will be the main income generator for the majority of households in sub-Saharan Africa for some time, but ongoing shifts in the destinations of the region’s exports—and of the sources of its imports and foreign investment—also have profound implications.”

“These changes,” the IMF Africa Desk chief noted “may eventually cause sizable adjustments in the structure of the region’s industry, and hence to its productivity and stability. Most critically for the quality of growth, these shifts may contribute significantly to sub-Saharan Africa’s future employment potential.”

She over that over the past decade, sub-Saharan African trade and other economic ties have shifted from traditional partners in the West toward the emerging markets of Asia, Latin America, and eastern and central Europe, with enormous implications for growth.

Most obvious is China, which has dramatically increased its economic involvement in Africa. In just the past decade, China has gone from having a barely significant presence in Africa to being a major recipient of sub-Saharan African exports, especially oil, gas, and other commodities; a large supplier of imports, including consumer and other manufactured goods; and a key investor in the region.

But other emerging market economies in Asia, Latin America, and eastern and central Europe—most notably India and Brazil—also want a stake in sub-Saharan Africa. And countries in the region are trading much more with each other too.
Much of this additional interaction simply reflects the fact that the region’s trade is growing fast.

“There has been enough growth for all to claim a piece,” she said.

But the relative importance of emerging markets compared with sub-Saharan Africa’s traditional trading partners has clearly surged. The share of the region’s exports going to members of the Organization for Economic Cooperation and Development (OECD) Development Assistant Committee (DAC), made up primarily of advanced economies, fell over the past decade from 70 percent to 50 percent.