Africa must add value to commodity supply chain

28 March 2013

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28 March 2013 | Adam Leach

Africa should maximise the economic benefit from its raw materials by lengthening supply chains and processing to add value rather than relying on exports.

In a report Making the Most of Africa's Commodities published this week, the Economic Commission for Africa and the African Union Commission called for commodities to be put at the heart of the continent’s industrial strategy. The study cited the abundance of raw materials such as oil, gold and platinum and coffee in Africa and the current high prices on the global market for such materials as supporting factors.

The report explained that countries with rich deposits of prized raw materials are already reaping benefits through the export market. But it argued far greater benefits would be delivered if the continent worked together to use the commodities internally and maximise job creation through the supply chain.

“Primary commodity production and exports entail huge forgone income through lack of value addition, the export of jobs to countries that can add value, and exposure to high risks due to dependence on exhaustible commodities and fluctuations in commodity demand and prices,” it said. “Instead of relying on exports of raw materials, the continent should add value to its commodities to promote sustained growth, jobs and economic transformation.”

While the continent has a significant share of many of the most in-demand commodities - 12 per cent of oil reserves, 40 per cent of gold, and 60 per cent of arable land - many of the benefits are delivered instead to the countries that process and add value to the raw material. Africa produces 12 per cent of the world’s coffee beans, but up to 90 per cent of the income derived from the end product goes to consuming countries.

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