Global trade is on the rise in sub-Saharan Africa. As the region has amassed wealth over the last half century, it’s gone to greater lengths to cash in on the increasingly cheaper prices enabled by globalization, spending 47 times as much on imports since 1965 while exporting over 73 times as much value as it had in 1960. Although undoubtedly representing increasing involvement in global economic activity, such figures are down from what they were a decade ago. As a share of GDP, total exports in sub-Saharan Africa have declined from over 32 percent in 2011 to a tad over 23 % in 2021; for imports, there’s a similar 6.4 % decline from the region’s GDP-comparative height of 30.3 % in 2011. What’s to explain this decade-long decline, and is this a problem for sub-Saharan Africa?
On the one hand, sub-Saharan Africa heavily relies on commodities for its exports: the region’s top five exports are petroleum oil, gold, copper cathodes, unrefined copper, and diamonds, all of which are raw materials that are heavily subject to volatile pricing as global supply and demand for them fluctuates. Take crude oil for example, which, with the exception of the Global Financial Crisis in 2008, showed a clear upward trend in prices until it reached a standstill in the summer of 2011. The same can be said for gold, whose upward trend in price stopped in the winter of 2011, and copper, which entered a dramatic decline after the turn of 2011.
Sub-Saharan Africa GDP Growth
Source: MacroTrends
This global decline in commodity prices reflected both a gold bubble bursting and lowered demand for oil and copper, both critical capital goods, in light of fears of a lackluster economic recovery from the Great Recession. With these commodities making up a critical portion of sub-Saharan Africa’s export volume, it's no wonder why the value of the region’s exports sharply declined following this perfect storm of tanking prices. Furthermore, given the fact that international trade represented almost 63 % of sub-Saharan Africa’s GDP in 2011, this sharp decline in export value translated to a sharp decline in income for most of the region’s countries. Consider this graph of sub-Saharan Africa’s GDP growth since 1992.
Although obviously volatile, the general upward economic trend of catch-up growth was interrupted by the Great Recession, then when it picked back up again, was once more interrupted by a decline in 2011, with average GDP growth in the region since then relatively declining. This, again, reflects the fact that from 2011 until the pandemic, prices in the aforementioned commodities had generally been in decline. As economic growth has tapered in sub-Saharan Africa, so has its also aforementioned trade in imports, which are obviously financed by the region’s capital stock.
Nonetheless, in light of a general decline in commodity prices, countries in the region have resorted much more to “intra-African trade,” guiding sub-Saharan Africa to be one of the only regions in the world to see growth in inter-regional trade since 2008. Other countries in the region are far less prone to demand commodities from one another, meaning that as intra-African trade has grown, so have alternative industries in the African continent including banking, construction, and telecommunications.
All of this taken into consideration, however, a historical decline in sub-Saharan Africa’s trade value may nonetheless prove to be a net loss for the region. Although it’s granted the emergence of new industries and larger inter-regional growth, the region’s sheer reliance on global trade, 63 % of its GDP to recall, renders it incredibly susceptible to volatile swings in the prices of commodities that it specializes in.
While there is nothing necessarily problematic in changes in the total import and export value for a country or region, ceteris paribus, this no longer becomes the case when global trade comprises a large extent of said country or region’s income. Thus, looking forward, sub-Saharan Africa would greatly benefit from de-escalating its reliance on the global export of commodities, whose volatility in prices ripple through the region’s economy.
Instead, sub-Saharan Africa ought to invest in alternative industries that are subject to more consistent income streams and that are much more likely to find an audience within the region; doing so not only allows the region greater economic stability, which is paramount for managing financial expectations and attracting new investment, but it also allows more value added and innovation to be captured within sub-Saharan Africa.
In sum, then, if there is any good to come from last decade’s downward trends, it’s the enormous upside that the region has to offer in developing new industries, and thus greater income.
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