From Aidoghie Paulinus, New York
The African Group, has called on the United Nations to address structural conditions that create an overreliance on primary commodity exports.
The African Group said the call is imperative, alongside implementing transformation and diversification strategies in order to address the malaise.
The Permanent Representative of Angola to the United Nations, Ambassador Francisco Jose Da Silva, made the call on behalf of the African Group at the United Nations General Assembly Informal Interactive Dialogue on Commodity Markets which held in New York, United States.
The African Group stated that the challenge, exacerbated by COVID-19, has left the African continent with significant economic repercussions.
The African Group further said commodities remained a substantial segment of international merchandise trade, representing 28.8 percent of global exports from 2019 to 2021.
Energy products, the African Group added, comprised 38.6 percent, agricultural products 35.6 percent and minerals and metals 25.6 percent of all commodity exports.
The African Group also said the price volatility of commodities undermined export and fiscal revenue stability, affecting budgeting and development plans, and heightening the vulnerability of reliant countries to external economic shocks.
“Economies with limited diversification, particularly in Africa, suffer disproportionately due to a heavy reliance on natural resource extraction.
“Climate change poses a significant threat, particularly to African economies reliant on agriculture. This reliance has broad implications for economic vitality, growth, and employment.
“The 2023 UNCTAD Report reveals a high level of commodity dependence among member states, with 101 out of 191 exhibiting such dependence between 2019 and 2021. However, diversification success stories offer hope for breaking this reliance.
“Addressing structural conditions that create an overreliance on primary commodity exports is imperative, alongside implementing transformation and diversification strategies,” the African Group said.
The African Group also said during the dialogue that African economies, especially least developed countries, heavily depend on a narrow range of primary commodity exports.
According to the African Group, “This focus hampers economic growth, making them vulnerable to external shocks.
“The number of commodity-dependent countries increased from 40 to 45 between 2009 and 2019. Nonetheless, a decrease in commodity export share from 81.9 percent to 76.7 percent suggests diversification progress.
“Commodity dependence remains an obstacle to achieving inclusive and widespread economic growth and substantially reducing poverty.
“Price volatility complicates macroeconomic management for commodity-dependent countries, impacting resource mobilization, investment, trade deficits and fiscal stability.
“While higher commodity prices can benefit exporters, they strain the budgets of import-dependent nations, threatening food security and the provision of essential services.
“We face disproportionate impacts from climate change, which threatens agricultural markets. Strategies to mitigate these effects are essential for promoting sustainable development.”
The African Group however said that supporting resilience against market shocks and price volatility is critical for socio-economic stability in developing nations.
The African Group also said progress towards structural transformation in Africa remained insufficient, with manufacturing’s contribution to GDP at just 11 percent in 2020 in Sub-Saharan Africa.
“The Secretary-General’s 2021 report on ‘World Commodity Trade and Prospects” underscores the importance of macroeconomic policies and investment in human and physical capital to aid economic diversification.
“A strong link exists between commodity dependence and technological capacity. Enhancing technology and fostering innovation are vital to overcoming economic challenges related to dependence.
“Tackling climate impact on agriculture requires drought-resistant seeds, efficient water use, and improved infrastructure for energy, transport and storage.
“Leveraging technology and innovation is crucial for structural transformation, diversification and value addition. Bridging digital and gender gaps in ICT access is imperative.
“The African Continental Free Trade Area (AfCFTA) presents opportunities for industrialization and value addition, crucial for creating regional value chains and diversifying economies. Recent developments necessitate a discussion on resilience to economic shocks and the formulation of policies for structural transformation and diversification,” the African Group stated.