Many countries and regions rely heavily on extractive industries for Africa’s exports. These include Nigeria, Southern Africa, Central Africa and the Maghreb region. Countries with more exposure to extractive industries have done well in the past decade as commodity prices have historically been at high levels, but as prices have fallen in recent times, the opposite side of the reliance on commodities has been exposed. Nigeria’s reliance on oil has been well documented, and is the most obvious example, but many parts of the continent also have significant exposures. The most immediate impact on these economies when commodity prices fall is pressure on the currency, which must find a new demand/supply equilibrium. This is followed by an impact on government revenues, which can have a significant impact on the state’s ability to fund commitments and balance budgets.
*Click the ‘mineral products’ title in the legend to view the state of the continent’s exports without the reliance on extractives.
The graph showing the breakdown of regional exports by product is shown from the least diversified on the left of the graph to the most diversified on the right. The more diverse, or complex, a country’s GDP output and exports, the more diverse the skills in the economy, the more resilient the region will be to adverse shocks to individual industries. Nigeria, the Maghreb region, Southern Africa and Central Africa have large exports compared to the rest of the continent (excluding South Africa), but the concentration of those exports on mineral products makes the regions highly sensitive to a decline in the crude oil price for example, something that is very pertinent in the current global economy. On the other hand, South Africa, Egypt & Sudan, East Africa and Francophone West Africa, have a far more diverse set of export products with which to generate foreign currency. Although some of the mentioned regions are much smaller than Nigeria or the Maghreb region, they will be more resilient to negative shocks in single sectors, and offer alternative areas of growth when particular sectors struggle.