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Economic Diversification in Africa: A Review of Selected Countries
OECD Publishing, April 2011, Pages: 84
The global financial and economic crises exposed one of the major weaknesses of a number of African economies: their dependence on too few export commodities and one or two sectors. Such dependence makes many countries vulnerable to fluctuations in commodity prices, demand and extreme weather events such as droughts and floods. This study looks at how African governments can diversify their economies and analyses five countries’ economic diversification profiles in particular.
It begins by examining some of the major determinants of diversification and also looks at how the private sector plays a key role by being at the forefront of innovation, research and development and production. Good governance is needed to create an enabling environment for investment and trade; to manage natural resources; and to set policies to develop strategic sectors. A regional approach to economic diversification is particularly important, especially given the small size of African economies and the benefits of economies of scale from regional initiatives. New economic partnerships, including South-South co-operation and relations, offer Africa the opportunity to expand its economic options. Lastly, infrastructure and human resources help to facilitate trade, productivity and innovation and are key drivers of diversification.
Diversifying African economies is not an easy task. One of the key challenges is how to overcome over-specialisation, whereby some countries have developed systems and know-how for one specific area of the economy but find it difficult to transfer these to other sectors and activities. Also, significant trade barriers exist and African firms may not be able to compete against their peers in other parts of the world because of lack of access to finance, administrative hurdles, weak productive capacities, and other impediments to competitiveness. These challenges need to be addressed if diversification efforts are to gain traction.
This study looks at the economies of five African countries to analyse their diversification profiles and strategies. It starts with relatively well-diversified South Africa which nonetheless faces constraints in its human resources and labour markets; followed by Kenya, which has made great strides in boosting certain sectors such as tourism and telecommunications. It continues with Tunisia’s example of successful diversification efforts and Angola, which depends on oil revenues to fuel growth. The final case study deals with Benin, a country which is dependent on cotton but has a favourable policy environment and a record of good governance that could lead to private sector development and investments in other sectors
This study provides an empirical review of the role of governments, the private sector, regional economic institutions and the broader international community in driving economic diversification. Individual case studies of five African economies describe both the catalysts of and barriers to diversification. The study is published jointly by the United Nations Office of the Special Adviser on Africa (UN-OSAA) and the NEPAD-OECD Africa Investment Initiative.
List of Acronyms
Chapter 1. Introduction to Economic Diversification
-1.2. Major Determinants
-1.3. Major challenges
Chapter 2. Experiences in National Economic Diversification in Africa
-2.1. South Africa case study
-2.2. Kenya case study
-2.3. Tunisia case study
-2.4. Angola case study
-2.5. Benin case study
Chapter 3. Conclusions
-3.1. Building blocks for economic diversification
-3.3. The way forward
-Country-level consultations through country missions
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