Africa’s Economic Engagement with the Emerging South (the BRICX)

Recent economic development in Africa witnessed impressive economic growth on the continent, averaging above five percent per annum over the last five years. This growth is primarily propelled by accelerating natural resources exports. This places much of the future of Africa’s economic rebound in the fate of mineral rich economies. That may be something of a worry for the sustainability of Africa’s recent growth and economic transformation in the continent.

The commodity demand surge that propelled the recent growth in Africa is primarily coming from the emerging Southern economies (BRICX, henceforth; the BRIC referring to Brazil, Russia, India and China; while X refers to the other Southern Nations in the article: Korea, Malaysia, Thailand and Turkey) underscores not only the importance of examining the Africa-Emerging-South (Africa-BRICX) economic cooperation but also the possibility of higher commodity prices for African exports in the foreseeable future.

Experts believe that the demand for energy and non-energy mineral resources by the emerging South, in particular from China and India, is bound to be sustained for the fore seeable future. This is because first the emerging Southern countries are currently in the early stage of their per capita consumption of energy and non-energy minerals and this demand is bound to increase given their history of robust growth; second, from the supply side, low cost deposits of oil have reached their limits, the supply response of soft commodities is constrained by the high cost of irrigation and rising cost of agrochemicals as well as environmental and low productivity factors as recent study by UN-OSAA shows. This is bound to make Africa an attractive destination for BRICX, given Africa’s production and reserve potential of natural resources which is very attractive for them.

Thus, the BRICX growth, in particular that of India and China which are the most relevant for Africa, not only is shaping the global economy but also will significantly alter Africa’s hitherto economic engagement with its traditional trade and financial partners - the Northern/developed economies. The role of primary commodity trade accompanied by financial flows from the emerging South to Africa are the vectors through which this engagement is being shaped. In this and the next issue of EBR, I will highlight the major findings of a study about this issue by Afrexim Bank (the African Import-Export bank) headquartered in Cairo. Readers are advised to locate the study at the Afrexim bank website for further detail. In this issue, I will focus on trade related findings, reserving for the next issue the finance/FDI related findings.

According to this study, the pattern of African trade is shifting and going to change in a significant manner from African traditional partners to the BRICX - the EU share in African trade continuously falling in the last decade. This pattern of trade is generally followed by a similar pattern of FDI flows, albeit at a lesser pace.

Africa’s trade with the new emerging economies grew rapidly, from a combined export plus import total of USD 19 billion in 1995 to USD 291.6 billion in 2011, which is 15 times higher. With regard to the total trade balance, it is generally characterized by a balanced trade. However, this trade registered an overall deficit of USD 3.35 billion for Africa in 1995, which became a surplus of about the same value (USD 3.9) in 2011. The period’s highest surplus of USD 5.22 billion for Africa is recorded in 2010.The highest overall trade deficit for Africa was recorded in the wake of the global economic crisis in 2009 amounting USD 16.64 billion - showing Africa’s vulnerability to global shocks.

The balanced trade noted above masks a sharp deterioration in Africa’s non mineral and non fuel trade balance with emerging economies. This rose over the same period from a deficit of USD 6.7 billion in 1995 to a deficit of USD 87.96 billion in 2011. Excluding mineral fuels, lubricants and related materials, Africa has a negative trade balance with each of the emerging economies. The deterioration in the non mineral and fuel trade balance is most evident in the case of trade with China. This shows that, Most of Africa’s positive trade balance with BRICX is a result of mineral, fuel, lubricants and related material exports.

In aggregate Africa is more important to the emerging trading partners than they are to Africa, though the margin of difference is not significant. Furthermore, there are significant country differences within the emerging economies regarding their importance in Africa’s Export and Import trade. China and India take the lion’s share in importance to Africa’s export to the emerging and imports from the emerging economies. This is followed by Brazil.

The Emerging Economies are increasingly becoming an important market for Africa. For the period 1995 to 2011 the share of Emerging Economies in Africa’s Export to the world reached 25 pct in 2011 from 7.1 pct in 1995. Though its relative importance varies across the emerging economies, Africa’s importance as an export market destination is growing for all emerging economies. The share of these emerging South in Africa’s total imports has grown from 9.5 pct in 1995 to 29.1 pct in 2011. Once again Chain’s and India’s exports are expanding relatively rapidly in the continent.

The bulk of African imports from the emerging South are in the category of manufactured goods. The share has shown a slight decline over the last decade -from a high of about 80 pct in 2000 to 75 pct in 2011. In terms of skill intensity, the emerging Southern economies’ main manufactured exports to Africa are characterized by low and medium skill and technology intensity (about 45 pct).

In contrast to well diversified, manufactured dominated export of the BRICX to Africa, most of Africa’s exports to the emerging economies consist of; mineral fuel, lubricants and related materials, of which oil and gas take the major share. In each of the BRICX’s Nations cases, the share of unprocessed primary products was more than 80 per cent of their total imports from Africa.

Only few African economies are major trading partners to these emerging economies. Brazil, China, India, Thailand, Republic of Korea and Turkey’s imports from the African continent originates predominantly (more than 50 pct from seven countries only (South Africa, Nigeria, Algeria, Angola, Congo, Dem. Rep. of Congo). Furthermore, three fourth of each of Africa’s top trade partners’ (ie., China, India and Brazil) import from the continent is mainly from these seven nations. It is only Russia for which dependence on the seven countries is less than a quarter (17.14 pct) followed by Malaysia (39.42 pct).

Like that of their imports, BRICX exports to Africa are also concentrated in few African countries: Algeria, Angola, Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa and Tunisia. In 2011, these nine countries were a destination for 65 pct of the BRICX’s export destined to Africa. Of all the BRICX countries, Russia and Brazil are found to have the most concentrated export destination in the Nine African countries (86.1 and 81.2 pct respectively). The major trading partners of the continent (China and India) also have their largest share of export being directed to these nine African countries.

The study also found that Africa’s export structure has reasonable matches with the import structure of the BRICX with an average trade similarity index of about 0.41 (0 being no match and 1 a perfect match). The lowest match is found for the Russian Federation (0.27 on average). However, there is significant variation across countries. When this finding is taken together with the fact that the import structure of Africa has a nearly perfect match with export structure of the BRICX, the potential trade between Africa and the BRICX is very larger.

Alemayehu Geda (Prof.)

Alemayehu Geda did his PhD in Development Economics at the Institute of Social Studies, the Netherlands, in 1998. After that he had been teaching at the University of London, School of Oriental and African Studies. He was also a research fellow at the University of Oxford. Prior to that he was at the World Bank in Washington on a special appointment to work on Global Model Building and the Place of Developing Countries in the World Economy. He is currently Professor of Economics at Addis Ababa University. Comments can be sent to ag112526@gmail.com

32 comments

  • Williamsar

    canadian viagra
    Canadian Online Pharmacies
    lloyds pharmacy online
    Canadian Online Pharmacy
    Canadian Pharmacy

    Williamsar Tuesday, 19 September 2017 12:57 Comment Link
  • DonnieHause

    cialis break pills
    cialis canada
    buy cialis soft cheap
    cialis online pharmacy
    where to buy cialis online no prescription

    DonnieHause Monday, 18 September 2017 04:08 Comment Link
  • AndrewBot

    cheap-cialis.net
    cialis from canada
    buy cialis with online prescription
    buy cialis
    cheap viagra or cialis online

    AndrewBot Sunday, 17 September 2017 19:12 Comment Link
  • RalphCrido

    cialis online in canada
    Walmart Pharmacy Prices

    buy cialis online canada
    canadian pharmacies

    canadian pharcharmy online viagra

    RalphCrido Sunday, 17 September 2017 02:11 Comment Link
  • Carlosvog

    viagra 25 mg 4 cpr
    buy viagra online
    buy viagra online
    cheap viagra canada
    cialis online
    buy cialis online
    tadalafil 2 5mg

    Carlosvog Saturday, 16 September 2017 02:41 Comment Link
  • LouisSeaps

    what color are cialis pills
    buy viagra
    buy viagra online
    tadalafil manipulado 10mg
    cialis online pharmacy
    online cialis
    cialis 20 mg prezzo in farmacia italia

    LouisSeaps Friday, 15 September 2017 11:01 Comment Link
  • Jasonmeack

    can you go to rehab for weed
    alcohol rehab houston
    what is alcoholism
    alcohol rehab
    methadone detox

    Jasonmeack Saturday, 09 September 2017 23:00 Comment Link
  • FrankIcolf

    oxycodone abuse signs
    drug addiction rehab centers
    oxynorm side effects
    rehab addict
    meth rehab center

    FrankIcolf Thursday, 07 September 2017 16:37 Comment Link
  • WalterGab

    viagra 100mg von pfizer
    viagra without a doctor prescription
    viagra sale auckland
    viagra without prescription
    viagra pills yahoo answers

    WalterGab Tuesday, 05 September 2017 14:30 Comment Link
  • Anthonyloxia

    how to get the most out of viagra
    viagra without a doctor prescription
    viagra online new zealand
    viagra without prescription
    cheapest place buy generic viagra

    Anthonyloxia Monday, 04 September 2017 14:08 Comment Link

Leave a comment

Make sure you enter the (*) required information where indicated.Basic HTML code is allowed.

Latest News

Ethiopia to Host the 4th International Coffee Conference

Ethiopia to Host the 4th International Coffee Conference

Ethiopia is set to host the 4th International Coffee Conference from March 6 – 8, 2016 in Addis Ababa at the United Nations Conference Center. Previous conferences were held  in England in 2001, Brazil in 2005 and Guatemala in 2010. Read more

Most Popular

  • 1
  • 2
Prev Next

The White-Box of Ethiopian Agriculture

The agricultural sector remains our Achilles heel, nonetheless, we remain convinced that agricultural-based development remains the only source of hope ...

Read more

For Whoever Has, to Him Shall be Given …

As the Ethiopian government seeks to transform the economy into one that’s rooted in manufacturing, the simplicity for local investors to access finance...

Read more

Commentary

  • 1
  • 2
  • 3
Prev Next

Shooting in the Dark: The Anomalies of Headhunting

The war for ‘heads’ – also known as talent – has been raging for many years and the manner headhunters ‘poach’ people is getting tougher ...

Read more

Understanding Chinese Investment in Ethiopia A Critical Evaluation of the World Bank’s “Chinese FDI in Ethiopia” Survey

The World Bank country office in Ethiopia, apparently in response to the request by the government of Ethiopia, has conducted a survey of...

Read more

Mitigating Growing Income Inequality: What Needs to Be Done

Rising income and wealth inequality in many countries around the world has been a long-term trend for three decades or more. But the atte...

Read more

View Point

  • 1
  • 2
  • 3
Prev Next

Delivering Life Insurance: The Untapped Market in Ethiopia

Modern insurance transaction in Ethiopia was started by an Egyptian Bank in 1905. According to Ethiopian Chamber of Commerce there were 19, 33 and 40 insuran...

Read more

Headache When a Key Personnel leaves a Company in the Financial Sector

The financial sector in Ethiopia has undergone considerable changes in recent decades. The dramatic rise of new market players into the sector has vividly al...

Read more

Women and the World Economy

In many countries, public debate about gender equality focuses mainly on women’s access to top positions and high-powered career opportunities. But the “glas...

Read more