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OU Lecture 2008: Africa the exporter

Updated Thursday 29th May 2008

In the fifth part of his lecture, Profesor Kaplinsky warns against treating Africa as if it was a homogenous unit.

Professor Kaplinsky looks at the complex issues and economic effects of importing and exporting of goods from a country as diverse as Africa.

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Well what’s the share? How does Africa do in manufacturing? You can see that Africa’s share of African manufacturing has remained pretty stable and is a lot lower than China, which of course is lower than the world and it’s lower than India, and it’s lower than the developing world, our China. So, certainly since the mid 1990s, Africa has not been able to increase its share of manufacturing. And here’s another important point, I’m sorry, I’m going to slip it in quickly! The orthodoxy says, don’t just get involved in manufacturing, export your manufactured products. Because if you export, you’ll earn from exporting. The research shows that it is not the case. But you certainly get larger and larger scale and you can go down the cost curve and you can reduce your costs of production. So how has Africa done in exporting? And the answer is, it has increased its exports and manufacturing products, but essentially virtually all of it is clothing and textiles.

If you take South Africa out the story, SSA means Sub Saharan Africa. If you take South Africa out the story, more than half of all of Africa’s manufacturing exports are clothing and textiles. So what’s happened to African clothing and textiles and its export performance when China has the shackles removed and can export clothing to the rest of the world? Do you remember that earlier story? And it’s a depressing story because in a period of five or six years, look at the first column, you can see that Kenya from nothing exports 300 million dollars of clothes almost all to the US. Lesotho – Lesotho has got water and AIDS and extreme poverty. And Lesotho exports 400 million dollars of clothing to the USA. Madagascar 700 million dollars, Mauritius 1.4 billion dollars, South Africa 571, Swaziland 171 million. Particularly Kenya, Lesotho, Swaziland are unexpected parts of the story. Countries with not much expectation of manufactured exports, exporting a great deal and predominantly to the US. And that has to do with something which I don’t have time to talk about. But it is particular preferences given to African exporters into the US called AGOA, African Growth and Opportunities Act.

In the case of Lesotho, these exports of clothing and textiles account for all of manufactured exports right? And they were equivalent to 50 per cent of the whole of the GDP. In Kenya the equivalent of 20 per cent of all the labour force were involved in exporting clothes to the USA. And this is before China is allowed to compete. Not on an even playing field, because remember China pays more duties than Kenya and Lesotho and Swaziland but the quantitative controls on China are removed. And the story is terribly depressing. In the space of two years AGOA, all of African exports of clothing to America fell by 26 per cent. In the case of Mauritius they fell by 50 per cent. In the case of Kenya, for particular reasons five per cent, Swaziland, Lesotho, you can see the numbers. So when China begins to be able to export to the US, African manufactured exports, the central plank of development strategy of much of Africa Governments, is severely threatened.

And I want to pick up three lots, the aggregate of AGOA, Lesotho, Swaziland and I want to show you that in the same products that AGOA’s exports fell to the US by a quarter, China almost doubled. In the same products that Lesotho’s exports fell by 15 per cent, China’s exports almost trebled. And again in Swaziland exports fell by 25 per cent, China’s exports more than doubled. And the developmental impact of this on Africa is very striking. Let’s take four countries, Kenya, Lesotho, South Africa and Swaziland. In the space of two years Lesotho, remember Lesotho’s got nothing else right, except water and AIDS, Lesotho loses 26 per cent of its jobs in clothing and textiles and Swaziland loses almost half of its employment. So the story for Africa is very distressing. I wanted to sum it up with a way of aggregating these things. If we look at a set of products and this will become clearer to you as we go along, a series of products which China imports and products which China exports. And a series of products which Africa imports and Africa exports. If Africa exports the things that China imports, Africa gains doesn’t it? If Africa imports the things that China exports, great for Africa because prices are declining. But if Africa exports the same things as China exports, we’re in trouble. And if Africa wants to import the same things that China imports, we’re in trouble. And this is the way of beginning to think through at a macro level of what the implications for Africa of the story are. And you could look at South Africa gains in the clothing and footwear because people get cheaper products. They gain if they can export hard commodities because China is buying them and the price is going up.

When I said that Africa gains from clothing and footwear, well that’s true if you’re a consumer, but if you’re a manufacturer of clothing and footwear, you’re not going. So when we talk about Africa and countries in Africa we have to understand that countries are not homogenous. They’re made up of different communities, different classes, different genders, different areas of location. So you have to decompose this. All of Africa gains in some sense because the price of products which China exports is falling. Some African countries, oil exporters, Zambia with copper, South Africa, the Congo. Well when we say countries gain, I mean it’s a very selective use of the word countries isn’t it? Botswana, Ghana, Gabon, gain because China is importing their products. Most of Africa is in trouble because the price of oil is going up. Incidentally the price of oil is going to go up very significantly in the near future and in the mid-term future as well. And Africa, most African countries import oil. And South Africa loses, particularly those countries which are beginning to export manufactures.

The question I’m going to ask this afternoon is a very simple one, which is – should Africa now concentrate on minerals?

You know the extraordinary thing is, I only discovered this last week, I was going to start off by saying, minerals are good because countries which have minerals grow. Actually the econometric analysis is, this is Sachs Warner, the 20-year period, 1970 to 1990, countries which had commodities actually grew slower than countries without commodities. Actually this was the period when commodity prices were falling. So maybe now commodity prices are increasing, it can be the source of growth. And the striking thing is those of you at the IDC Conference will remember, I think it was Andrew Street from DfID, the Head of Research at DfID, saying that, you know there’s a boom in Africa. Africa’s growing more rapidly than it has for many decades. And part of that story is the boom coming from commodity prices and not just for the commodity exporting countries, but for the countries around them as well. However, bear in mind the lesson of history. But commodities are bad for income distribution. Mining is very capital intensive. It tends to be foreign owned, and interestingly enough manufacturing, particularly in developing countries, tends to be labour intensive. And let’s face it, mining is associated with corruption and, and I’ve learned from my colleagues in DPP, we used to talk about how to avoid conflict in Africa, actually we don’t want to avoid conflict in Africa. Conflict is a good thing. Conflict is the stuff of healthy societies. What is bad is armed conflict. And the problem with mining and minerals is that wherever you look, particularly in Africa, the more minerals you’ve got, the more valuable those minerals are, the more you’re faced with a cluster of problems which has led the economic community to talk about the resource curse.

 

Next: Segment 6

The 2008 Open University Lecture

 

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