the world bank study on africa asia trade and investment relations

Asia-Africa Trade and Investment Conference (AATIC)

Tokyo – November 1 & 2, 2004

Patterns of Africa-AsiaTrade and InvestmentPotential for Ownership and Partnership

October 2004

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The World Bank Group

The World Bank Study on Africa-Asia Trade and Investment Relations

Patterns of Africa-AsiaTrade and Investment:

Potential for Ownership andPartnership

October 2004

iii

Acknowledgments ......................................................................................... vii

Acronyms and Abbreviations ........................................................................ ix

Executive Summary ....................................................................................... xi

1. Introduction .............................................................................................. 1

2. Why Trade? ............................................................................................... 3

3. Structure and Patterns of Africa’s Current Trade ............................... 53.1 Key Features in Africa’s Export Structure ............................................................ 5

Africa’s export matrix ............................................................................................................ 5Detailed analysis of Africa’s major exports .................................................................... 10

3.2 Subregional Features of Africa’s Exports ............................................................ 14Product groups ...................................................................................................................... 16Destined markets ................................................................................................................. 17

3.3 Key Features of Africa’s Import Structure .......................................................... 19Less concentration and wider distribution among countries ...................................... 19Products to support a modern life-style and minimal business connectivity:transportation and communication .................................................................................. 20Emerging supply chains in the automobile and textile sectors ................................. 23Large food imports ............................................................................................................... 23

4. Structure and Patterns of Africa’s Trade with Asia ........................... 254.1 Basic Characteristics of Africa’s Exports to Asia .............................................. 25

Heavy dependency on primary commodities ................................................................ 25Heavy dependency on and high growth of a few oil exporters ................................. 26Small but growing non-oil exporters ................................................................................ 26Does the picture change without oil and major exporters? ....................................... 26Africa outpaces other regions in growth of exports to Asia ........................................ 28

4.2 Top 20 Exports to Asia .......................................................................................... 294.3 Major Asian Trade Partners for Africa’s Exports ............................................... 314.4 Trade Complementarity between Africa and Asia ............................................ 31

Oil matches ............................................................................................................................ 34Gold-diamond matches ....................................................................................................... 34Seafood matches .................................................................................................................. 35Cotton-textile matches ........................................................................................................ 35

5. External Trade Regimes and Africa’s Trade Patterns........................ 375.1 Africa’s Trade Regimes ............................................................................................ 375.2 EBA and AGOA........................................................................................................ 375.3 Apparel under AGOA ............................................................................................. 395.4 Deeper Economic Integration and Africa’s Proactive Efforts ......................... 425.5 Market Access and Tariff Escalation in Asian Countries .................................. 43

Contents

iv ● ● ● ● ● Contents

6. Implications of Africa-Asia Trade Relations for Africa’s Overall TradeStrategy .................................................................................................... 456.1 Overall Export Expansion ..................................................................................... 456.2 Market Diversification: Complementarity of Africa’s Supply and Asia’s

Demand ..................................................................................................................... 45Supplying raw materials and energy resources to manufacturing sectorsin Asia ...................................................................................................................................... 46Supplying food and other consumption goods to Asia’s rising consumerpopulations ............................................................................................................................. 48

6.3 Product Diversification in Manufacturing Sectors ............................................ 49

7. Integration of Trade and Investment Relations between Africa andAsia ........................................................................................................... 557.1 A Framework for Discussion: Three Investment Models ................................ 55

Type 1 – Asian market ........................................................................................................ 55Type 2 – African market ..................................................................................................... 56Type 3 – Global market ...................................................................................................... 57

7.2 Recent Patterns of Asia’s Investment in Africa and Trade and InvestmentInter-Linkages ........................................................................................................... 57Overall characteristics ......................................................................................................... 58Asian FDI to Africa by investment type ........................................................................... 59Japan ....................................................................................................................................... 60Korea ....................................................................................................................................... 61China ....................................................................................................................................... 62Taiwan ..................................................................................................................................... 63

7.3 Investment Strategy of Asian Firms in Africa ..................................................... 64Strong market orientation: targeted market and market linkages ............................ 64Local availability of production resources ....................................................................... 67Local business conditions .................................................................................................... 68Investment facilitation mechanism ................................................................................... 69

7.4 Effective Development Assistance for Asian Investment in Africa ................. 69Donors’ support of technology transfer ........................................................................... 71South-South technology transfer between Asia and Africa ......................................... 71Roles of international organizations ................................................................................. 73Further integration of ODA with trade and investment .............................................. 73Recent development: The Integrated Framework for Trade-Related TechnicalAssistance ............................................................................................................................... 74

8. Key Findings, Future Directions, and Next Steps ............................... 778.1 Summary of Africa’s Export/Import Structure .................................................. 778.2 Summary of Key Findings ....................................................................................... 77

Finding 1 ................................................................................................................................. 77Finding 2 ................................................................................................................................. 78Finding 3 ................................................................................................................................. 78Finding 4 ................................................................................................................................. 78Finding 6 ................................................................................................................................. 79Finding 7 ................................................................................................................................. 79Finding 8 ................................................................................................................................. 79

8.3 Future Directions for Africa-Asia Trade and Investment................................. 80Direction 1 ............................................................................................................................. 80Direction 2 ............................................................................................................................. 80Direction 3 ............................................................................................................................. 81

8.4 Next Steps ................................................................................................................ 81Asian market group .............................................................................................................. 81

Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership ●●●●● v

Global market group ............................................................................................................ 82African market group .......................................................................................................... 84

References ...................................................................................................... 87

Appendices ..................................................................................................... 89A. Africa’s Subregions and Trade Partners ............................................................... 91B. Africa’s Top 20 Exports to the World ................................................................. 93C. Africa’s Top 20 Imports from the World ............................................................ 95D. Trade Complementarity Score ............................................................................. 97E. International Trade Regimes for African Countries .......................................... 99F. African Countries’ Exports to and Trade Arrangements with the

European Union ..................................................................................................... 101G. Growth in African Apparel Exports to the United States, by Countries’

AGOA Status .......................................................................................................... 103H. Africa’s Top 20 Exports to Asia ........................................................................... 105I. Africa’s Top 20 Imports from Asia ...................................................................... 107

vii

Acknowledgments

This report highlights the main findings of a WorldBank study on Africa-Asia trade and investment rela-tions. The study was conducted to facilitate policydialogue on trade and investment under the frame-work of the Tokyo International Conference on Af-rica Development (TICAD), in which the Bank par-ticipates as a co-organizer. In particular, the report isexpected to contribute to discussions of the Asia-Af-rica Trade and Investment Conference to be held inNovember 2004 under TICAD auspices.

The report was prepared by Toshihiro Toyoshima(task team leader), Yutaka Yoshino (co-author), andChad Leechor (chapter 5), who are the core mem-bers of the study team. The report’s preparation hassignificantly benefited from the insightful guidance ofJohn Page, who chaired the review meeting of thereport, as well as valuable comments from four peerreviewers—Lolette Kritzinger-van Niekerk, ElkeKreuzwieser, Tesfaye Dinka, and Paul Brenton. Theteam also appreciates the helpful input of other staffin the World Bank Africa Region’s private sector unit,in particular Michel Wormser, Demba Ba, and

Francois Nankobogo, as well as the input of variousother World Bank staff members, notably Alan HaroldGelb, Jeffrey Katz, Brian Ngo, Claire Thirriot, Ken-neth Kwaku, and Francis Ng, and economists of thecountries covered by the report. The report incorpo-rates analytical work conducted by Mitsubishi Re-search Institute and the joint team of PADECO andUFJ Institute under the study projects on Africa-Asiatrade and investment relations funded by the JapanConsultant Trust Fund. The authors also wish to thankNita Congress for her quality work in editing and lay-ing out this report.

The findings, interpretations, and conclusions expressed hereinare those of the authors and do not necessarily reflect the views ofthe Board of Executive Directors of the World Bank or thegovernments they represent. The World Bank does not guaranteethe accuracy of the data included in this work. The boundaries,colors, denominations, and other information shown on any mapin this work do not imply any judgment on the part of the WorldBank concerning the legal status of any territory or the endorsementor acceptance of such boundaries.

ix

Acronyms and Abbreviations

AGOA African Growth and Opportunity ActASEAN Association of Southeast Asian NationsCIF cost, insurance and freightCOMESA Common Market for Eastern and Southern AfricaDTIS diagnostic trade integration studyEBA Everything But ArmsEU European UnionFDI foreign direct investmentFOB free on boardFTA free trade agreementGATT General Agreement on Tariffs and TradeGDP gross domestic productGSP Generalized System of PreferenceIF Integrated FrameworkIMF International Monetary FundLDC least developed countryMASSCORP Malaysian South-South Corporation BerhadMFA Multifiber ArrangementMFN most favored nationNAFTA North American Free Trade AgreementNEPAD New Partnership for Africa’s DevelopmentODA official development assistanceOECD Organisation for Economic Cooperation and DevelopmentRCA revealed comparative advantageRTA regional trade agreementSACU Southern African Customs UnionSADC Southern African Development CommunitySITC Standard International Trade ClassificationSKD semi-knocked downTICAD Tokyo International Conference on African DevelopmentUN Comtrade United Nations Commodity Trade Statistics DatabaseUSAID U.S. Agency for International DevelopmentWITS World Integrated Trade SolutionWTO World Trade Organization

xi

Executive Summary

African countries are highly dependent on the Euro-pean Union (EU), which is presently the destinationfor more than half of all African exports (52 per-cent). In contrast, exports to Asia are a small but in-creasing market for Africa in recent years. World-wide, Africa’s exports are predominantly primarycommodities; these account for more than two-thirdsof all African exports. Chief among these is crudeoil, Africa’s single largest exported product. ManyAfrican countries export other mineral and miningproducts, as well as agricultural and fishery products.Recently, some African countries have become moreprominent as exporters of manufactured products,most notably of textiles and apparel. Africa’s South-ern and Northern subregions have growing industrialsectors, whose products range well beyond textilesand apparel. South Africa, in particular, has emergedas an important regional industrial hub, with increas-ing exports of automobiles to the rest of the world.

Compared to its exports profile, Africa’s import trad-ing partners are more diverse, encompassing coun-tries around the world. Products that support the fun-damental economic activities of African countries,such as transportation and communications equip-ment, are among the continent’s major imports. Foodproducts are another significant import. On the otherhand, those African countries with growing manu-facturing sectors increasingly import component prod-ucts. African import data show that the increasinglyindustrialized countries in Africa have emerged as partof the global supply chains in their respective sec-tors.

Against this backdrop, Asia has emerged as an im-portant partner in Africa’s trade and development.Africa’s exports to Asia grew significantly in both rela-tive and absolute terms during the 1990s. Of Africa’stotal export earnings, which are estimated at aboutUS$130 billion per year (1999–2001 average), 16percent derive from sales to Asia. The rate of in-crease in export values to Asia—10 percent peryear—has been higher than the comparable rates forthe EU or United States during the past decade. Overthe same period, Asia’s developing economies haveincreased their imports from African countries sig-nificantly. In fact, Asia’s imports from Africa outpacedits imports from other regions. Countries such as In-dia, China, and Taiwan have significantly increasedthe overall volume of their African imports.

Africa’s exports to Asia are mainly driven by primarycommodities and related products. As with Africa’sEU and U.S. exports, oil and oil-related products ac-count for a large share of the continent’s exports toAsia. However, other primary commodities such asagricultural and fishery products and minerals andcrude materials are also and increasingly being ex-ported to Asia. African exports to Asia of mineralfuels and other raw materials such as mineral andmining products have experienced strong growthbecause of rising manufacturing sectors in Asia, par-ticularly in China, India, Korea, Taiwan, and South-east Asian countries such as Indonesia, Malaysia, thePhilippines, Singapore, and Thailand. Although onlya limited number of African countries are endowedwith mineral and mining resources, a wide range of

xii ● ● ● ● ● Executive Summary

non-oil-producing countries also benefit from othertypes of raw materials and processed raw materials,such as cotton, wood, and leather, as well as foodand agricultural commodities, for expanding theirexport potentials. The growth in African exports offood and agricultural commodities to Asia can beexplained by the large populations with growing in-come levels in Asian countries. Nonessential foodssuch as coffee, cocoa, tea, and nuts are experiencingstronger demand in Asia than in the already satu-rated markets of developed countries.

Sub-Saharan Africa’s share of exports, excluding ex-ports from South Africa and exports of oil, is around17 percent of total African exports to Asia. Albeit ata smaller scale, this segment of Africa’s exports—which is mostly agricultural commodities—has showna similar growth pattern to that of minerals and min-ing products. These agricultural commodities tend tohave dominant shares in each non-oil-exporting coun-try. Thus, the significance of commodity demands inAsia is also applicable to non-oil-producing Sub-Sa-haran Africa countries, which are not necessarilystrong in oil and other mineral exports.

Asia could thus become a strategic target in diversify-ing the markets of African products. Demand fromAsian markets has a potentially good fit with the ex-isting supply base of traditional primary commoditiesin Africa. Such linkages have been revealed on a coun-try-to-country basis from the analysis ofcomplementarity between the respective export andimport profiles of individual African and Asian coun-tries. The scope of value-added processing in Africais still limited, but by recognizing these linkages anddeveloping consumer relations with Asian countries,African producers/exporters could significantly ben-efit from expansion of traditional primary commodi-ties, which are Africa’s stagnated core business.

Market diversification is not the only benefit of deep-ened trade relations between the two regions. Asiacan also contribute to Africa’s quest for product di-versification in its export structure. South Africa has

recently shown strong growth in its manufacturingexports to Asian countries. Although only a few Afri-can countries export manufacturing goods to Asia, awider range of countries have benefited from manu-facturing-related imports from Asia. Asian countriesare providing essential inputs to Africa’s growingmanufacturing sector, most notably its textile andapparel sectors, and, in some cases, its automobilesector. There is a positive relationship betweenAfrica’s growth in manufacturing exports to the EUand United States and growth in imports from Asia.

Some developed countries have pursued various pref-erential trade initiatives with Africa, such as tariff-and quota-free access. Notably, the textile benefitsafforded under the African Growth and OpportunityAct, combined with the Multifiber Arrangement quotasystem, have triggered visible changes in the apparelexports of some African countries. Still, it should benoted that these preferential measures are often time-bound and redundant with existing Generalized Sys-tems of Preference. While continuation and expan-sion of well-targeted preferential treatment is desir-able for many African countries, these measures alonedo not guarantee the full benefits of sustainable ex-port expansion. The response of African countries iscritical. Successful African exporters must workproactively to improve their business environment interms of governance, infrastructure, and industrial ca-pacity, and strengthen their supply-response capac-ity to seize on just such opportunities arising fromthe external environment as preferential trade agree-ments. Successful countries tend to have consolidatedand carefully targeted initiatives for providing an en-abling environment for potential industries.

Tariff rates for processed commodities tend to stayhigher than rates for raw materials, which typically isa discouraging factor for the value-added activities inthe raw material–producing countries. In Asia, thisissue of tariff escalation on resource-based productsis generally more visible within low- and middle-in-come countries where higher growth of raw materialdemand has been observed. With the expansion of

Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership ●●●●● xiii

global trade, and with more links in supply chains,tariff escalation has become an issue not only in North-South trade but in South-South trade as well.

Sectoral analysis of the foreign direct investment ofseveral Asian countries in Africa shows that relationsbetween Asian investors and host countries in Africaare deeply motivated by trade. Asian investment inAfrica takes three forms. The first type is investmenttargeted to products to be sold in Asia; this typicallyinvolves natural resources and processed raw materi-als (e.g., food), both of which are in high demand byAsian manufacturers and consumers. Macro-instabili-ties in African host countries have often hamperedthis kind of investment in the past, but, driven bygrowing demand from Asia, there are signs that suchinvestment may gain momentum. The second typeof investment targets Africa’s domestic markets. Suchinvestment has been constrained by the small size oflocal markets and the high transaction costs resultingfrom a lack of efficient infrastructure. With loweredtariffs, foreign investors in African production havefound it difficult to compete against low-cost importsfrom other regions. Effective regional integration andadequate infrastructure services are essential in pro-moting this type of investment. The third investmenttype is targeted to the global market, typically thirdcountries such as the EU or United States. This typeof investment effectively integrates production activi-ties in Africa with global supply chains. Investment inless developed countries tends to focus on the textileand apparel sectors, motivated largely by the low la-bor costs and/or favorable trade regimes providedby the host country. The notable development in coun-tries such as South Africa has attracted more sophis-ticated manufacturing and service investment; suchinvestment is genuinely attracted to the productivityincrease in these countries.

Compared with the synergies that emerged amongAsian countries in the course of trade expansion,intraregional dynamism in Africa is still weak. Afri-can countries could better benefit from export op-portunities by improving the intraregional mobility of

goods and services. Improvement of the regionaltransportation and telecommunications systems mustbe addressed to enhance the supply-response capac-ity of African countries.

Trade data indicate the existence of a significant po-tential for expanding trade relations between Africaand Asia. To realize the full benefits of such tradeexpansion, initiatives must be strengthened in thefollowing three directions.

● The knowledge base on Africa-Asia trade andinvestment relations needs to be strengthened tofacilitate the discovery of market opportunitiesbetween Africa and Asia and to better understandhow the market works between the two regions.Such a knowledge base should be strengthenedby first ensuring relevant data reporting and gath-ering and by accumulating a series of in-depthanalytical studies based on such data. The stud-ies should identify existing potentials to expandtrade and investment relations, as well as iden-tify geographic and manmade constraints andother impediments to promoting trade and in-vestment activities between the two regions. Suchstudies will provide the basis for formulating ef-fective measures to improve connections to glo-bal supply chains.

● An institutional arrangement will be needed toenhance strategic dialogue between African andAsian countries and to raise awareness aboutemerging opportunities among businesses in thetwo regions. Building on existing frameworks suchas the Tokyo International Conference on Afri-can Development, such an arrangement shouldfacilitate broad-based, consolidated policy dia-logues between African and Asian countries—byboth their governments and their businesses.While exports to Asia account for 16 percent oftotal African exports, they are no more than 2percent of the total imports by Asian countries.Therefore, an institutional arrangement needs tobe designed to avoid asymmetrical expectations.

xiv ● ● ● ● ● Executive Summary

● African countries and international donors shouldrenew their commitment to an enabling environ-ment for cross-border business activities, whichare essential engines for economic growth. Atthe same time, coordination and consolidationof efforts dedicated to production capacity build-ing within Africa is critically important in enablingAfrican countries to respond to international busi-ness opportunities. Such domestic conditions, aswell as a cross-border environment, are essentialfor ensuring the economic growth that is criticalto African countries’ ability to achieve the Mil-lennium Development Goals.

Based on the above analyses and discussions, nextsteps for public and private players are listed below,each categorized by its main targeted markets as ex-plained in the key findings:

1. Goods and services for Asian markets (e.g., natu-ral resources, agricultural, and other primary com-modities).

2. Goods and services for the global market (e.g.,textile and apparel products, automobiles andtheir parts, exported to the EU, United States,Asia, and elsewhere).

3. Goods and services for African markets (e.g., foodand agricultural products, goods and services re-lated to privatization projects in Africa, franchis-ing and licensing opportunities).

For the Asian market, potential products are naturalresources, agricultural, and other commodities inwhich African countries already have a solid supplybasis. African commodity exports to Asia could ac-

celerate current trends if transaction costs could bereduced and the business information gap betweenAfrica and Asia were narrowed. Stronger processingcapacity in African countries is desired. In this con-text, the tariff escalation in many Asian countriesshould be reviewed, which would give more motiva-tion for Asian businesses to invest in such areas. Also,good governance and the honoring of codes of con-duct in extractive/commodity industries are critical.

For the global market, a continuation of preferentialmeasures for manufactured imports from Africa, suchas textiles and apparel as well as automobiles, needsto be considered in order to foster industrial develop-ment in African countries. Development of local andregional backward and forward linkages in such in-dustries are instrumental in achieving this goal. Im-provement of local and intraregional logistics systemsis also essential. Sectoral capacity building is vital infacilitating the transfer of knowledge and skills thataccompany investment flows. Asian businesses couldprovide effective resources in this area.

For the African market, intraregional integration mustbe enacted to provide a minimum market size to cap-ture economies of scale. Realistic and substantive re-gional integration schemes must be implemented.Efficient intraregional transportation and other logis-tics systems are necessary to promote dynamic com-mercial flows. The creation of merchant networks inintraregional business activities is also essential. Fos-tering alternative arrangements such as franchisingand licensing could be the key to success in buildingcredible and mutually beneficial business relationships,along with trade in actual products.

1

CHAPTER 1

Introduction

The main objective of this report is to build a basicunderstanding of the potential of Africa-Asia tradeand investment relations—a priority area recognizedin the Tokyo International Conference on AfricanDevelopment (TICAD). As one of the co-organizersof TICAD, the World Bank has been undertaking aseries of studies on this subject with funding supportfrom the Japan Consultant Trust Fund. The potentialof enhanced interregional trade and investment rela-tions has generated strong interest among the par-ticipants of the third TICAD summit (TICAD III, whichwas held from September 29 to October 1, 2003, inTokyo), leading to a firm belief among them that bet-ter business relations between Africa and Asia couldprovide significant benefits for economic developmentin both regions. Following up on this discussion, thegovernment of Japan announced its intention to holdthe Asia-Africa Trade and Investment Conference inNovember 2004 under the auspices of the TICADinitiative. Bank study findings are expected to serveas the baseline references for discussions during theconference.

The importance of South-South trade has been rec-ognized for some time; however, there has been noin-depth study conducted specifically on Africa-Asiatrade relations to date. Two major reasons why littleresearch attention has been paid to this issue are thelack of available data and the relatively small size ofthe trade flows between the two regions. Becausemany African countries do not maintain and reporton their trade data, this information can only be ob-tained—with substantial effort—with data from their

trading partners. Moreover, the minor significance ofAfrica-Asia trade flows relative to those involving theU.S. or European markets has brought limited atten-tion from analytical researchers. According to Inter-national Monetary Fund (IMF) data, African exportsto Asia account for only 0.3 percent of total worldtrade (IMF 2002).

Furthermore, Africans have historically tended to viewtrade with European countries as more important thantrade with other regions. It is only since the introduc-tion of the African Growth and Opportunity Act in2000 that the United States has begun to receive thecontinent’s attention as a potential trade partner. Fortheir part, Asians have tended to view the amount ofimports from Africa as relatively insignificant; Afri-can imports only account for 1.4 percent of total Asianimports today.

Despite these traditional perceptions, the importanceof Africa-Asia trade should not be underestimated,especially for its potential in contributing to the eco-nomic development of African economies. IMF tradedata show that Asia-destined exports have grown rap-idly in the past decade and accounted for 14.2 per-cent of total African exports in 2000, up from 7.7percent in 1990. The average annual growth rate ofAfrican exports to Asia throughout the 1990s was10.4 percent, much higher than either the EuropeanUnion (EU) or U.S. rate of export growth—3.7 and4.6 percent, respectively (figure 1.1). And, in reality,the relatively small level of trade in Asia equates to aquite considerable amount in Africa. Based on the

2 ● ● ● ● ● Chapter 1 – Introduction

IMF data, total African exports to Asia make up onlya little over 1 percent of Asia’s total imports, but ac-count for over 14 percent of Africa’s total exports.Thus, Asia has undoubtedly emerged as a significantbusiness partner for African export opportunities.

For this reason, it is especially timely to study thenature of the trade flows between the two continents.The IMF data, however, do not break down exportsby product.1 This report thus looks to identify changesin patterns of African trade in the 1990s by using the

Figure 1.1Africa’s Exports to Asia: 1990–2000

Source: IMF (2002).

Exports to Asia 1990 2000

Dollar amount $6.4 billion $17.2 billion

Share of all African exports 7.7% 14.2%

Annual growth rate, 1990–2000

European Union 3.7%United States 4.6%

Asia 10.4%

United Nations Commodity Trade Statistics Database(UN Comtrade), as analyzed by the World IntegratedTrade Solution (WITS), the World Bank’s data accesssoftware package. UN Comtrade is the only data-base with global coverage, containing each country’sexport and import data by destination, by producttype, and over a series of years.2 One shortcomingof this database is the limited availability of data forsome African countries that have not done routinereporting.3 In these cases, import data from tradecounterparts were used as a proxy for country ex-ports. Despite some inconsistencies in data treatment,the data compiled from UN Comtrade overall showpatterns similar to those of other trade data, such asthe IMF’s Direction of Trade Statistics Yearbook orthe World Trade Organization’s International TradeStatistics. We hope this pioneering work will con-tribute to the promotion of African exports in thefuture through a broadening of Africa-Asia trade re-lations.

1These data also incorporate certain IMF estimates to maintainconsistency.

2Statistics Canada has recompiled the UN trade data (i.e., industry-specific data in the Standard International Trade Classification[SITC] Rev. 2 coding system) into the World Trade Analyzer dataset. By using partner-side data, the data set controls for statisticaldiscrepancies between export and import data. It also is reportedto have a significantly high level of data coverage (87 percent ofbilateral trade information and 98 percent of single-direction flowinformation). Limitations of the data set include the fact thatStatistics Canada has recompiled the UN data so that they bettermatch Canadian trade and industry classifications. Also, the dataare available only up to 1997.

3Even for countries with sufficient data submissions, data are notalways complete because governments sometimes suppress tradestatistics of individual products in individual trade flows for variousreasons. Because UN Comtrade is a compilation of data setssubmitted by governments, it is not possible to identify such casesautomatically in the data. These cases are treated as zero tradehere.

0.0

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1990

1991

1992

1993

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Billion $

3

CHAPTER 2

Why Trade?

World trade dramatically expanded in the 1990s—adecade well characterized by the term globalization.Globalization has been facilitated by various factorssuch as the end of the Cold War; the establishmentof the World Trade Organization (WTO), which setsa new momentum for trade expansion; and, moreimportantly, the unprecedented development of in-formation and communication technology, whichhelped recreate worldwide the division of labor inproduction. Countries became more reliant on exter-nal markets throughout the 1990s. The World Bank’sWorld Development Indicators show that world tradeaccounted for 38 percent of total world productionin 1991; this figure jumped to 49 percent in 2001.Economic globalization affects developing countries,which significantly increased their share of worldwidetrade during the 1990s. For example, the develop-ing country share of world exports increased by 4percentage points during the decade to 27.4 percentin 1999. In 1999, the rate of exports expansion fromdeveloping countries was twice as high as the ratefor the world as a whole. Undoubtedly, trade has in-creasingly significant implications in the context ofdevelopment.

Against this backdrop, African economies have beenunfavorably affected by their trade during the pastdecades. Although the absolute decline in trade vol-ume experienced in the 1980s was halted in the1990s, Africa’s export market shares were still fall-ing throughout the 1990s. The continent’s share ofworld exports declined from over 3.5 percent in 1970to about 1.5 percent by the end of the 1990s. The

dramatic decline in Africa’s exports over the last threedecades represents a staggering income loss of $68billion annually,1 equivalent to 21 percent of regionalgross domestic product and five times larger than thecurrent level of official development assistance Af-rica receives.2 As competition heats up in the worldtrade market, the gap is widening between those coun-tries that have successfully harnassed globalization andthose that have not—a phenomenon often describedas marginalization. The international community musttake appropriate measures to enhance Africa’s traderelations in the context of a multilateral framework,but additional attention is needed to halt the stagna-tion in Africa’s trade. This can be accomplished byidentifying unexploited opportunities for African coun-tries to expand their trade activities and by analyzingthe ways in which these countries can acquire suffi-cient supply-response capacity to seize these newopportunities.

The importance of trade for development has beenwidely recognized and amply discussed from variousaspects. In general, trade contributes to economicdevelopment by helping developing countries garnerforeign exchanges indispensable for servicing theirexternal debts and improving domestic economic ef-ficiency by reallocating resources toward sectors inwhich they have comparative advantages. Trade isalso seen as playing a catalytic role in promoting tech-

1All dollar figures cited throughout this report are current U.S.dollars, unless otherwise indicated.

2See the WTO website, www.wto.org.

4 ● ● ● ● ● Chapter 2 – Why Trade?

nological innovation domestically. More broadly, itworks to overcome size constraints of domestic mar-kets, captures benefits from economies of scale, cre-ates new employment, and, ultimately, reduces pov-erty.

The Doha Round of the WTO shall play a key role inpromoting integration of developing countries—in-cluding African countries—into the world trade sys-tem and enhancing their access to world markets.However, the multilateral framework of the interna-tional trading system alone cannot guarantee the suc-cess in trade-led development of African countriesand their integration into the world market. Althoughsignificant, the framework is only one of the neces-sary conditions that characterize the external envi-ronment for African countries in trading with otherregions. In parallel with initiatives under WTO aus-pices, there have been accelerated moves in somedeveloped countries to extend preferential trade treat-ments to African countries or to form bilateral freetrade agreements, which make the environment morecomplex. These preferential treatments contain vari-ous rules and restrictions regarding such items as rulesof origin and eligibility of products. Although theserules and restrictions should preferably be subsumedunder the multilateral framework in the long run, theygenerate some unique dynamics in the short run bymotivating various actors, including the third coun-tries, to gain from opportunities through reallocatingsome of their capital to Africa in the form of foreigndirect investment.3

In the context of Africa’s trade relations, it is impor-tant to analyze how African countries have seized orcan seize the opportunities arising from their exter-

nal environment and to draw specific policy prescrip-tions based on such analysis. Additionally, more ef-forts must be made to identify specific African prod-ucts or sectors that are already growing, or that havethe potential to grow further, and to strategize ex-port promotion of such products by pooling togetherinterregional supply and demand potentials. There isno panacea in trade policies. Best policies for indi-vidual countries need to be tailored to the existingsupply and external demand potentials as well as tothe environment they face. Individual African coun-tries, with support from the international community,need to build supply capacity to respond effectivelyto the rising opportunities from external demand orfrom changes in the external environment. The strat-egy for such supply-response capacity building alsoneeds to be formulated specifically for individual coun-tries.

Trade is important for Africa not only because theworld economy has become more integrated or glo-balized. Fundamentally, trade is an important lever-age for growth. Many African countries are desper-ate for economic growth and an opportunity to reducetheir poverty level. However, their growth in domes-tic production has been hampered by the capacityconstraint of their domestic markets, which are toosmall to leverage in transforming the economies.Many African countries, with a small domestic mar-ket characterized by both low population and low in-come level, cannot attain production growth basedonly on domestic demand. However, as illustrated bythe Southeast Asian economies, many developingcountries that have recorded a high income growthin recent years have strongly relied on the externalsector to achieve this growth. These countries haveeffectively used trade and foreign investment to le-verage their economic growth. The use of trade asan engine for growth remains valid. For many Afri-can countries, it is a paramount task to use externaltrade and foreign investment effectively in their de-velopment strategies.

3For example, the United States’ African Growth and OpportunityAct (AGOA) exempts the least developed among eligible countriesfrom its strict rules of origin which require countries to exportproducts produced only from materials made either in other AGOA-eligible countries or the United States in order to receive duty-freebenefits under AGOA.

5

CHAPTER 3

Structure and Patterns of Africa’s Current Trade

This chapter presents a preliminary analysis of Africa’scurrent export and import patterns and structure. Amatrix of export shares for product groups and desti-nations is featured, constructed from a set of cross-sectoral bilateral trade data compiled under the UnitedNations Commodity Trade Statistics Database (UNComtrade).1 Although several studies have reportedon the structure of Africa’s exports by highlightingspecific aspects—such as oil versus non-oil or primarycommodities versus manufacturing products, only afew have tried to analyze the structure of Africa’sexports based on standardized product groups.2

The chapter also analyzes Africa’s major exports andimports by investigating both the types of productsand the major importers and exporters of such prod-ucts. Here again, although a number of studies haveanalyzed exports of African countries in the contextof economic development, few have looked at Africa’s

import structure. While exports serve as foreign-ex-change-earning opportunities, imports represent ex-pense of earned foreign exchanges or provide scopefor foreign exchange saving. Also, imports, in addi-tion to foreign direct investment, serve as an impor-tant channel for countries to acquire raw materials,intermediate materials, capital goods, and technolo-gies. Analyzing both the import and export structuresof African countries is therefore essential in provid-ing more dynamic scenarios for African countries toenhance their new export opportunities based onmore integrated trade strategies and providing op-portunities to save earned foreign exchanges.

3.1 Key Features in Africa’sExport Structure

Africa’s export matrixTable 3.1 shows the export matrix for all Africa, com-piled from data from 77 of Africa’s trade partners(see appendix A for the list of partners).3 This matrixprovides an overview of changing patterns in and thecomposition of Africa’s exports by product group andregion of destination.

3Trade partner data were used in compiling the matrix becauseonly a few African countries submitted trade data consistently toUN Comtrade throughout the 1990s. The 77 countries representedin the matrix were selected for inclusion based on the availabilityof consistent data for this time period. Note that UN Comtradereports imports on a CIF basis (i.e., inclusive of insurance andfreight costs) and exports on an FOB basis (i.e., excluding thesecosts).

1Products are grouped according to the Standard InternationalTrade Classification (SITC), Rev. 2. Although this is not the newestclassification system, it has the largest coverage of trade datasubmitted to the United Nations by African countries. The analysishere attempts to link the general structure of African exports withinformation on specific products at highly disaggregated levels (i.e.,three- and four-digit SITC codes).

2Ng and Yeats (2002) studied the patterns of African exports atsimilarly disaggregated levels using UN Comtrade with more in-depth analysis on traditional exports of African countries. Thepresent study, however, places more emphasis on specificinterregional trade relations—namely trade relations between Africaand Asia—and analyzes Africa’s imports from Asia as well asexports to Asia, and discusses the implications of promotinginterregional, South-South trade.

6 ● ● ● ● ● Chapter 3 – Structure and Patterns of Africa’s Current Trade

Table 3.1Africa’s Export Matrix

Product Africa EU US Asia Other WorldFood and live animals (SITC 0)

Share of total world export (1999–2001 average) 0.44 6.60 0.63 1.41 0.77 9.84Average annual change (1990–92 and 1999–2001) 8.42 1.99 4.23 4.01 7.82 2.99

Beverages and tobacco (SITC 1)Share of total world export (1999–2001 average) 0.06 0.57 0.06 0.18 0.12 0.99Average annual change (1990–92 and 1999–2001) 7.55 5.28 -0.11 2.55 12.89 5.05

Crude materials, inedible, except fuels (SITC 2)Share of total world export (1999–2001 average) 0.29 3.81 0.62 2.47 0.74 7.93Average annual change (1990–92 and 1999–2001) 3.08 -0.31 2.23 5.68 3.53 1.90

Mineral fuels, lubricants and related materials (SITC 3)Share of total world export (1999–2001 average) 1.46 21.97 13.28 6.84 4.73 48.28Average annual change (1990–92 and 1999–2001) 10.45 -0.49 4.11 21.14 9.19 3.26

Animal and vegetable oils, fats and waxes (SITC 4)Share of total world export (1999–2001 average) 0.02 0.26 0.01 0.01 0.01 0.32Average annual change (1990–92 and 1999–2001) 3.42 -1.72 8.12 -3.26 11.16 -1.02

Chemicals and related products, n.e.s. (SITC 5)Share of total world export (1999–2001 average) 0.29 1.19 0.29 0.72 0.51 3.00Average annual change (1990–92 and 1999–2001) 2.57 1.33 15.69 2.30 4.49 3.01

Manufactured goods classified chiefly by material (SITC 6)Share of total world export (1999–2001 average) 0.46 6.31 2.21 3.07 0.73 12.79Average annual change (1990–92 and 1999–2001) -0.83 2.55 5.37 5.51 3.73 3.56

Machinery and transport equipment (SITC 7)Share of total world export (1999–2001 average) 0.27 3.29 0.49 0.62 0.50 5.16Average annual change (1990–92 and 1999–2001) 3.25 14.25 24.23 13.99 1.32 11.77

Miscellaneous manufactured articles (SITC 8)Share of total world export (1999–2001 average) 0.12 6.07 1.20 0.08 0.14 7.61Average annual change (1990–92 and 1999–2001) 8.72 6.73 17.05 12.28 8.58 7.96

Commodities and transactions n.e.c. in the SITC (SITC 9)Share of total world export (1999–2001 average) 0.01 2.11 0.29 1.02 0.61 4.03Average annual change (1990–92 and 1999–2001) -12.57 -3.96 14.48 12.34 49.61 1.51

TotalShare of total world export (1999–2001 average) 3.42 52.23 19.07 16.43 8.85 100.00Absolute export volume (million $) 4,411 67,385 24,599 21,201 11,415 129,010Average annual change (1990–92 and 1999–2001) 5.64 1.28 5.14 10.06 7.77 3.68

Notes: Bold data are high share, high annual change; italic data are low share, high annual change; and shaded data are high share, lowannual change. High share is above 2 percent (20 percent in the last row, and 10 percent in the last column), and high annual change isabove 2 percent. Average annual change was calculated by computing the changes between 1990–92 averages and 1999–2001averages, and then annualizing these changes. All figures are based on partners’ import data.Source: UN Comtrade.

Three major features of African exports can be identi-fied from the table: (1) Africa’s high dependency onexports to the European Union (EU) market and thehigh growth in exports to Asian markets, (2) the depen-dency on primary commodities, and (3) small but prom-ising growth in the export of manufactured products.

Heavy dependency on EU market and high growth inAsian marketsThe matrix shows that in 2000 Africa as a regionexported approximately $129 billion to the world,52.23 percent of which went to the EU, 19.07 per-cent to the United States, 16.43 percent to Asia,

Patterns of Africa-Asia Trade and Investment: Potential for Ownership and Partnership ●●●●● 7

and 3.42 percent to Africa.4 A comparison of an-nual rates of change among Africa’s trading partnerregions shows another dimension of the export pat-tern. African exports to Asia experienced a 10.06percent average annual increase in value throughoutthe 1990s; this was significantly higher than the in-creases for the EU or United States over the sameperiod (1.28 and 5.14 percent, respectively). The lim-ited increase in Africa’s exports to the EU could bepartly explained by the latter’s increasing reliance onimports from transitional economies in Eastern Eu-rope and the Commonwealth of Independent States,a trade flow that had been rather restricted prior tothe end of the Cold War. Of the EU’s total importsfrom developing countries, the share of imports fromAfrica declined by 6 percentage points during the1990s, dropping from 17 percent (1989–91 aver-age) to 11 percent (1999–2001 average), while theshare of imports from Eastern Europe and CentralAsia increased by 8 percentage points, rising from23 to 31 percent (IMF 2002).

Heavy dependency on primary commoditiesAfrican exports depend heavily on primary commodi-ties. SITC groups 0–5 account for about a 70 per-cent share of Africa’s total exports. Among theseproduct groups, mineral fuels, lubricants, and relatedmaterials (SITC 3) accounts for an overwhelming 48percent share of total exports, reflecting Africa’s highreliance on petroleum exports. Other heavily exportedminerals include gold, silver, platinum, pearls, anddiamonds.5 Food and live animals (SITC 0) is anotherimportant category of commodities for non-oil-export-ing countries, accounting for approximately 10 per-cent of Africa’s total exports. This group includes fruitsand nuts, fishery products, tea, cocoa, coffee, andspices.

The amount of these commodities exported has beenlargely subject to changes in commodity prices. Re-flecting the downward trend in major commodityprices in the late 1990s, the average annual rates ofincrease for exports of SITC groups 0–5 have re-mained mediocre, ranging between -0.02 percent to5.05 percent for the period between 1990 and 2000.These figures reflect the general stagnation of Afri-can exports. For this reason, fostering diversified andcompetitive industries that are less dependent onnatural resources has been considered a policy prior-ity for many African countries.

A regional breakdown of commodity exports, how-ever, provides a different view. Although most com-modity exports destined for the EU show relativelystagnated or even decreasing trends, exports boundfor Asia, although relatively small in size, have in-creased sharply for most items. Exports to Asia ofmineral fuels, lubricants, and related materials(SITC 3) and of crude materials, inedible, except fu-els (SITC 2) have shown notable annual rates of in-crease—21.14 percent and 5.68 percent, respec-tively. Trends for food and live animals (SITC 1), whichinclude agricultural products that many African coun-tries rely on as their main source of export revenues,follow suit. Africa’s total food exports to Asia are lessthan one-third of those exports to the EU, but theformer is growing twice as fast as the latter, with anannual rate of increase of 4.01 percent. The rapidgrowth in Asia’s importation of primary commodi-ties from Africa suggests that African products areresponding to the rising demand in Asia caused byrapid industrialization and growth of the consumerpopulation.

Promising growth for manufactured productsIn 2000, export of manufactured products (SITCgroups 6–8) represented 26 percent of total Africanexports. Manufactured goods classified chiefly bymaterial (SITC 6)—a category that includes silver,platinum, aluminum, pig iron, copper, diamonds,leather, and textile yarn—demonstrated relatively sig-

4Calculated as 1999–2001 averages. The $129 billion figure isbasically consistent with those obtained from InternationalMonetary Fund data.

5Gold is classified under SITC 9 in SITC Rev. 2.


nificant growth in exports to all EU, U.S., and Asianmarkets. Examining these data more closely at the

Asia European Union United StatesRank Code Product Share Rank Code Product Share Rank Code Product Share1 333 Petrol. oils & oils obt. 32.89 1 333 Petrol. oils & oils obt. 28.88 1 333 Petrol. oils & oils obt. 55.23

fr. bitum. min., crude fr. bitum. min., crude fr. bitum. min., crude2 971 Gold, nonmonetary 7.55 2 341 Gas, natural and mfd 6.06 2 334 Petroleum prods., refined 12.31

3 681 Silver, platinum & other 4.99 3 667 Pearls, precious & semi- 4.82 3 681 Silver, platinum & other 5.54metals of platinum group precious stones metals of platinum group

4 263 Cotton 3.55 4 334 Petroleum prods, refined 4.81 4 341 Gas, natural and mfd 1.905 522 Inorganic chem. elements, 3.46 5 843 Outer garments, women’s, 2.84 5 667 Pearls, precious & semi- 1.85

oxides & halogen salts of textile fabrics

6 684 Aluminium 3.15 6 057 Fruit & nuts (not incl. oil 2.69 6 845 Outer garments & other 1.51nuts), fresh or dried articles, knitted

7 671 Pig iron, spiegeleisen, sponge 2.73 7 842 Outer garments, men’s, 2.57 7 843 Outer garments, women’s, 1.42iron, iron or steel of textile fabrics of textile fabrics

8 247 Other wood in the rough 2.54 8 072 Cocoa 2.52 8 072 Cocoa 1.34or roughly squared

9 036 Crustaceans & mollusks 2.45 9 322 Coal, lignite and peat 2.17 9 842 Outer garments, men’s, 1.29of textile fabrics

10 322 Coal, lignite and peat 2.43 10 971 Gold, nonmonetary 1.96 10 671 Pig iron, spiegeleisen, sponge 1.05iron, iron or steel

11 334 Petroleum prods, refined 1.85 11 846 Under garments, knitted 1.78 11 287 Ores & concentrates of 0.98or crocheted base metals, n.e.s.

12 682 Copper 1.77 12 845 Outer garments & other 1.69 12 288 Nonferrous base metal 0.71articles, knitted waste and scrap, n.e.s.

13 281 Iron ore & concentrates 1.65 13 036 Crustaceans & mollusks 1.23 13 846 Under garments, knitted 0.66or crocheted

14 057 Fruit & nuts (not incl. oil 1.64 14 034 Fish, fresh (live or dead), 1.22 14 844 Under garments of textile 0.49nuts), fresh or dried chilled or frozen fabrics

15 287 Ores & concentrates of 1.55 15 681 Silver, platinum & other 1.15 15 776 Thermionic, cold & photo- 0.47base metals, n.e.s. metals of platinum group cathode valves, tubes, parts

16 667 Pearls, precious & semi- 1.47 16 071 Coffee & coffee substitutes 1.15 16 743 Pumps & compressors, fans 0.41precious stones & blowers, centrifuges

17 251 Pulp and waste paper 1.21 17 287 Ores & concentrates of 1.09 17 781 Passenger motor cars, for 0.39base metals, n.e.s. transport of pass. & goods

18 793 Ships, boats & floating 1.04 18 684 Aluminium 0.97 18 278 Other crude minerals 0.38structures

19 246 Pulpwood (incl. chips and 1.02 19 743 Pumps & compressors, fans 0.97 19 684 Aluminium 0.37wood waste) & blowers, centrifuges

20 034 Fish, fresh (live or dead), 1.02 20 248 Wood, simply worked, and 0.96 20 511 Hydrocarbons n.e.s., & their 0.35chilled or frozen railway sleepers of wood derivatives

21 121 Tobacco, unmanufactured; 1.01 21 773 Equipment for distributing 0.93 21 784 Parts & accessories of 722-, 0.34tobacco refuse electricity 781-, 782-, 783-

22 672 Ingots & other primary 0.92 22 781 Passenger motor cars, for 0.91 22 522 Inorganic chem. elements, 0.31forms, of iron or steel transport of pass. & goods oxides & halogen salts

23 074 Tea and maté 0.90 23 037 Fish, crustaceans & mollusks, 0.87 23 034 Fish, fresh (live or dead), 0.30prepared or preserved chilled or frozen

24 271 Fertilizers, crude 0.76 24 671 Pig iron, spiegeleisen, sponge 0.86 24 674 Universals, plates & sheets, 0.29iron, iron or steel of iron or steel

25 776 Thermionic, cold & photo- 0.68 25 054 Vegetables, fresh, chilled, 0.85 25 121 Tobacco, unmanufactured; 0.28cathode valves, tubes, parts frozen/pres.; roots, tubers tobacco refuse

26 689 Misc. nonferrous base metals0.68 26 247 Other wood in the rough 0.75 26 689 Misc. nonferrous base metals 0.28empl. in metallurgy or roughly squared empl. in metallurgy

Table 3.2Current Major African Exports to Asia, the European Union, and the United States, by Three-Digit SITC Level

(continued)

SITC three-digit level reveals that apparel and textileproducts have come to account for sizable shares of


Asia European Union United StatesRank Code Product Share Rank Code Product Share Rank Code Product Share27 562 Fertilizers, manufactured 0.65 27 061 Sugar and honey 0.72 27 071 Coffee & coffee substitutes 0.27

28 061 Sugar and honey 0.57 28 121 Tobacco, unmanufactured; 0.68 28 057 Fruit & nuts(not includ. oil 0.27tobacco refuse nuts), fresh or dried

29 071 Coffee & coffee substitutes 0.52 29 821 Furniture & parts thereof 0.67 29 061 Sugar and honey 0.2430 282 Waste & scrap metal 0.52 30 292 Crude vegetable 0.65 30 075 Spices 0.24

of iron or steel materials, n.e.s.

31 341 Gas, natural and 0.52 31 562 Fertilizers, manufactured 0.63 31 673 Iron and steel bars, rods, 0.23manufactured angles, shapes & sections

32 674 Universals, plates & 0.51 32 263 Cotton 0.59 32 672 Ingots & other primary 0.23sheets, of iron or steel forms, of iron or steel

33 683 Nickel 0.50 33 289 Ores & conc. of prec. 0.54 33 659 Floor coverings, etc. 0.21metals;waste, scrap

34 072 Cocoa 0.50 34 844 Undergarments of 0.54 34 292 Crude vegetable materials, 0.20textile fabrics n.e.s.

35 278 Other crude minerals 0.47 35 281 Iron ore & concentrates 0.52 35 562 Fertilizers, manufactured 0.1936 222 Oil seeds & oleaginous 0.44 36 522 Inorganic chem. elements, 0.51 36 232 Nat. rubber latex; nat. 0.19

fruit, whole or broken oxides & halogen salts rubber & sim.nat. gums

37 288 Non-ferrous base metal 0.42 37 611 Leather 0.49 37 651 Textile yarn 0.18waste & scrap, n.e.s.

38 611 Leather 0.41 38 793 Ships, boats & floating 0.47 38 821 Furniture & parts thereof 0.18structures

39 781 Passenger motor cars, for 0.41 39 776 Thermionic, cold & photo- 0.47 39 335 Residual petroleum products, 0.17transport of pass. & goods cathode valves, tubes, parts nes. & related materials

40 673 Iron and steel bars, rods, 0.35 40 851 Footwear 0.45 40 897 Jewelry, goldsmiths & other 0.16angles, shapes & sections art. of precious metals

41 273 Stone, sand and gravel 0.35 41 784 Parts & accessories of 0.43 41 251 Pulp and waste paper 0.16722-, 781-, 782-, 783-

42 075 Spices 0.31 42 423 Fixed vegetable oils, soft, 0.43 42 271 Fertilizers, crude 0.16crude, refined/purified

43 058 Fruit, preserved, & fruit 0.30 43 651 Textile yarn 0.42 43 896 Works of art, collectors 0.16preparations pieces & antiques

44 511 Hydrocarbons n.e.s., & 0.28 44 112 Alcoholic beverages 0.38 44 971 Gold, nonmonetary 0.16their derivatives

45 523 Other inorganic chemicals 0.27 45 674 Universals, plates & sheets, 0.36 45 058 Fruit, preserved, and fruit 0.15of iron or steel preparations

46 211 Hides & skins (except 0.27 46 772 Elect. app.such as switches, 0.35 46 634 Veneers, plywood, improved 0.14

furskins), raw relays, fuses, plugs etc. or reconstituted wood47 651 Textile yarn 0.26 47 074 Tea and maté 0.33 47 248 Wood, simply worked, & 0.13

railway sleepers of wood

48 516 Other organic chemicals 0.24 48 058 Fruit, preserved, and fruit 0.32 48 056 Vegetables, roots & tubers, 0.12preparations prepared/preserved, n.e.s.

49 292 Crude vegetable 0.22 49 634 Veneers, plywood, improved 0.31 49 782 Motor vehicles for 0.12materials, n.e.s. or reconstituted wood transport of goods/materials

50 512 Alcohols, phenols, phenol- 0.22 50 271 Fertilizers, crude 0.30 50 658 Made-up articles, wholly/chiefly0.12alcohols, & their deriv. of textile materials

Total 94.41 88.24 94.83

Table 3.2Current Major African Exports to Asia, the European Union, and the United States, by Three-Digit SITC Level (continued)

exports to the EU and United States (table 3.2). Con-currently, South Africa has experienced rapid growth

in its industrial sector, emerging as a major producerand worldwide supplier of manufactured products,

Notes: Shares represent percentages of total African exports to each partner region/country. For Asia, shares are based on 1998–2000 averages; for the European Union and United States, shares are based on 1999–2001 averages. All figures are based on partners’import data.Source: UN Comtrade.


including automobiles and their parts. South Africahas also become the hub of industrial development inthe Southern African subregion.

Detailed analysis of Africa’s major exportsTable 3.3 presents a list of Africa’s top 20 majorexport products to 77 significant trade partners, cit-ing the leading country exporters and importers ofthese products. The table is based on a more detailedchart which appears as appendix B to this report.

The three key features of Africa’s export structurediscussed above can also be discerned with regard tothe major exported products of African countries.

Primary commodities constitute the major share oftop exports from African countries. Crude oil is byfar the largest among Africa’s major products, total-ing $38 billion a year (based on a three-year averagefrom 1998–2000) or about a third of the total valueof all African exports. Nigeria, Libya, Angola, andAlgeria are the leading exporters of crude oil. On theimporter side, the United States leads all other coun-tries, buying 30 percent of Africa’s oil exports; it isfollowed by some European countries (Italy, Spain,France, and Germany) and some Asian countries(China, Korea, India, and Taiwan). Other oil prod-ucts, such as petroleum gases, motor spirits, and otherlight oils, and fuel oil, are also top-ranked Africanexports; they are largely exported by Algeria. Al-though several Sub-Saharan African countries exportoil, they have yet to develop an oil refining and pro-cessing capacity comparable to that of Northern Af-rican oil exporters such as Algeria and Libya.6

The leading primary commodities of African coun-tries are not limited to oil and oil products, but alsoinclude other natural resources and resource-basedproducts. South Africa provides most of the coal sup-

ply from the continent, which is shipped to Europeanand Asian countries. Also, metal and nonmetal prod-ucts, diamonds, gold, platinum, and aluminum ap-pear on the top 20 list. South Africa again is thedominant exporter of these products. In fact, there isa large concentration of non-oil mining and mineralsin the Southern African subregion. A large share ofdiamonds is shipped to Europe (primarily Belgiumand the United Kingdom). Italy imports about half ofAfrica’s gold exports, with the remainder shippedmostly to Asian countries such as India and Korea.Platinum is mostly imported by the leading industrial-ized countries in the world (the United States, Japan,Germany, and the United Kingdom) for both indus-trial and non-industrial purposes. On the other hand,aluminum is imported by a mix of Asian and Euro-pean countries. Korea and Japan lead in these im-ports, but Southeast Asian countries including Malay-sia, Thailand, and Indonesia also import significantquantities, demonstrating their growing industrial sec-tor.

Figure 3.1 shows the share of mining, minerals, andrelated products in total exports of individual Africancountries. Oil exporters are obviously significantlymore dependent on mining and minerals as the sourceof their export revenue. Box 3.1 discusses those Af-rican countries that have recorded high rates of in-crease in such exports in recent years. Although oil-exporting countries have experienced the fastest rateof growth for their exports, countries exporting com-modities such as electricity and oil products to theregional market are also experiencing rapid growth,hinting at recent developments in intraregional link-age of energy resources.

Agricultural and fishery products are similarly domi-nant among major African exports. Where miningand minerals are concentrated in a handful of coun-tries on the continent, a wider range of countries—both in terms of quantity and geography—accountsfor Africa’s agricultural and fishery exports. As non-food agricultural products, cotton, in particular, andsawlogs are two of the important manufacturing raw

6This observation is verified in the accompanying Country AnalyticalBriefs. In fact, the briefs show that Nigeria imports petroleumproducts from the EU as do other major oil-exporting countriessuch as Senegal, Angola, and Sudan.


Product Exporters ImportersMineral fuelCrude oil (1st, 32.1%) Nigeria (36), Libya (20), Angola (13), Algeria (11), United States (30), Italy (13), Spain, Germany, France,

Gabon, Rep. of Congo, Egypt, Cameroon, China, Korea, India, Taiwan, Netherlands, Canada,Equatorial Guinea, Sudan Brazil, Turkey, Portugal, Austria, UK

Petroleum gases Algeria (84), Nigeria, Libya, Rep. of Congo France (25), Spain (17), Turkey (10), Belgium, United(2nd, 3.5%) States, Brazil, Mexico, MoroccoMotor spirit and other Algeria (61), Egypt (15), Libya, Nigeria, Brazil (39), United States (10), France, Italy, Belgium,light oils (6th, 2.2%) Morocco, South Africa Spain, Japan, Netherlands, Germany, Korea, UK,

Canada, SingaporeFuel oil (8th, 1.6%) Algeria (36), Libya (27), Nigeria, Rep. of Congo, United States (56), Italy (24), UK, France, Greece,

Angola, Egypt, Morocco, Tunisia, Cote d’Ivoire, SingaporeCameroon, Ghana, South Africa

Coal (9th, 1.5%) South Africa (99) Spain (13), Germany (11), Netherlands, Italy, Belgium,France, Korea, Taiwan, Japan, India, UK, Turkey,Morocco, Colombia, Japan, Spain, China, Mauritius

Metal and nonmetal mineral productsDiamonds (3rd, 3.4%) South Africa (40), Dem. Rep. of Congo (18), Belgium (58), UK (26), United States, China, Thailand,

Angola (13), Liberia Hong KongGold (4th, 2.9%) South Africa (96), Zimbabwe Italy (43), India (29), Korea, Saudi Arabia, Hong Kong,

China, Germany, United StatesPlatinum (5th, 2.4%) South Africa (100) United States (41), Japan (33), Germany (12), UK,

France, Korea, CanadaAluminum (18th, 0.9%) South Africa (68), Ghana (13), Cameroon, Korea (18), Japan (18), France (12), Netherlands,

Egypt, Nigeria Taiwan, Germany, Malaysia, Italy, Thailand, UnitedStates, Indonesia, Belgium, Austria, Greece, Spain,Hong Kong

Nonmineral primary commoditiesCotton (11th, 1.3%) Mali (14), Cote d’Ivoire (13), Egypt (12), Benin (10), Thailand (11), Taiwan (11), Italy (10), Portugal (10),

Zimbabwe, Burkina Faso, Cameroon, Chad, Togo, Brazil, Indonesia, India, Malaysia, Germany, SouthSudan, Tanzania, South Africa, Mozambique, Africa, Turkey, Korea, Morocco, Colombia, Japan,Central African Republic, Zambia, Senegal Spain, China, Mauritius

Sawlogs (17th, 1.0%) Gabon (39), Cameroon (25), Rep. of Congo, China (25), France (17), Portugal (10), India, Italy,Equatorial Guinea, Liberia, Nigeria, Cote d’Ivoire, Spain, Hong Kong, Germany, Turkey, Japan, Morocco,South Africa, Dem. Rep. of Congo, Central African Greece, Taiwan, Netherlands, UKRepublic, Mozambique

Agricultural and fisheryCocoa (7th, 1.8%) Cote d’Ivoire (64), Ghana (20), Nigeria, Cameroon Netherlands (25), United States (15), Germany (15),

UK (11), France, Belgium, Italy, Spain, Japan, Poland, Turkey, Canada, Brazil, Austria

Coffee (12th, 1.3%) Ethiopia (20), Cote d’Ivoire (18), Uganda (15), Germany (21), Italy (12), France (10), Algeria, Japan,Kenya (13), Cameroon, Tanzania, Madagascar, United States, Spain, Belgium, Poland, Netherlands, UK,Burundi, Dem. Rep. of Congo, Rwanda, Guinea, Saudi Arabia, Portugal, Sweden, Morocco, Finland,Zimbabwe, Togo Austria, Denmark

Crustaceans & mollusks Morocco (36), Mauritania (11), Madagascar, South Japan (32), Spain (30), Italy (12), France (10), Portugal,(15th, 1.1%) Africa, Mozambique, Tunisia, Nigeria, Angola, Ghana, Hong Kong, Thailand, Netherlands, Greece, United

Gabon, Tanzania States

Manufactured productsTextile fabric trousers Tunisia (45), Morocco (28), Mauritius (10), Egypt, France (32), United States (16), Germany (12), UK(10th, 1.3%) South Africa, Madagascar, Zimbabwe, Lesotho (10), Italy (10), Belgium, Netherlands, SpainTextile fabric outer Tunisia (44), Morocco (35), Egypt, Mauritius, France (28), United States (18), Germany (16), garments(14th, 1.2%) Madagascar, South Africa, Kenya Belgium (11), UK (10), Italy, Netherlands, SpainCotton knit under- Mauritius (26), Morocco (26), Tunisia (21), France (32), UK (19), United States (11), Germanygarments (19th, 0.8%) Egypt (19), South Africa, Madagascar (10), Italy (10), Belgium, Spain, Netherlands

Table 3.3Top 20 Major African Exports: 1999–2001 Annual Average

Note: Numbers in parentheses after country names are the percentage shares of total trade values (only 10% or above are indicated.)Source: UN Comtrade.


0.0 20.0 40.0 60.0 80.0 100.0Angola

LibyaNigeriaAlgeria

Republic of CongoEquatorial Guinea

Dem. Rep. of CongoSudan

GabonZambia

Cent. African Rep.MozambiqueALL AFRICA

CameroonBotswana

NigerGuinea-Bissau

South AfricaEgypt

GuineaRwanda

GhanaNamibia

Sierra LeonGambia

TogoCote d'Ivoire

TanzaniaKenya

DijiboutiEritreaTunisia

ZimbabweLiberiaSenegal

Cape VerdeBurundi

MoroccoLesotho

BeninMauritius

UgandaSomalia

MaliBurkina FasoMadagascar

EthiopiaSeychellesSwaziland

MauritaniaMalawi

Sao Tome & PrincipeChad

Comoros

Share of total exports (%)

Figure 3.1Mining and Mineral Products as a Share of Africa’s Exports: 2001

Source: UN Comtrade.

materials Africa provides to the world. Several West-ern and Central African countries are significant ex-porters of cotton, including Mali, Cote d’Ivoire, Benin,Burkina Faso, Cameroon, Chad, Togo, Central Afri-can Republic, and Senegal. On the importer side,countries from various regions—but particularly de-veloping countries—import African cotton. This isbecause cotton-based textile industries are the mosttypical light manufacturing industry countries developat the early stage of their industrialization. AlthoughAsian countries are perhaps more visible than coun-tries in other regions as importers of African cotton(Thailand, Taiwan, Indonesia, India, Malaysia, Korea,Japan, China), it is worth noting that some of thegrowing textile-producing countries in Africa such asSouth Africa and Mauritius are also buying signifi-cant amounts of cotton, creating an intra-Africa sup-ply network for the textile industry.

As for food products, cocoa, cof-fee, and crustaceans and mollusksare among the top 20 African ex-ports. Several Western Africancountries account for most ofAfrica’s cocoa exports, with Coted’Ivoire contributing more thanhalf. European countries are themain importers of African cocoa.7

Africa’s coffee exporters arespread across the continent, withsome large exporters located inEastern Africa (Ethiopia,Uganda, Kenya, and Tanzania).Major coffee importers include afew European countries, theUnited States, Japan, and MiddleEastern and Northern Africancountries. No other Asian coun-tries besides Japan are among themajor importers of African coffee.The major importers of crusta-ceans and mollusks similarly reflecttheir traditional food cultures: Ja-pan, Spain, Italy, France, Portu-gal, and Hong Kong.

Manufacturing exports have not yet contributed toAfrica’s overall export value to the extent that pri-mary commodities do. However, as noted above,some manufacturing industries—most notably thetextile and apparel industries—have shown promis-ing growth in recent years. Three garment products(trousers, outer garments, and undergarments) arealready among the top 20 exports of African coun-tries. The major African exporters of these productsare still limited to a handful of countries—Mauritius,Madagascar, South Africa, and the Northern Africancountries of Tunisia, Morocco, and Egypt. Europeancountries are the main importers of Africa’s garmentproducts. The United States is beginning to emerge

7Switzerland is not included here because Swiss trade data wereincomplete for the period covered.


as a significant importer as well, and will likely be,thanks to the effects of the African Growth and Op-portunity Act, a still stronger importer in future. Table

3.4 lists the major exporters andimporters of Africa’s apparelexports in recent years (2000–02). Southern African countriessuch as South Africa, Lesotho,Madagascar, Swaziland, Zimba-bwe, Malawi, and Botswana arewell represented on the list ofmajor exporters. The EU andUnited States top the list of im-porters.

Automobiles are another majorproduct exported from Africa tothe EU (22nd on the list, 0.9 per-cent of total exports to the EU)and United States (17th, 0.3 per-cent of total exports to the UnitedStates). Automobiles are almostentirely exported by South Af-rica, where a few leading worldmanufacturers have assemblyplants (box 3.2). Although theauto assembly plants in SouthAfrica were initially built for thepurpose of assembling automo-biles to be supplied to other coun-tries in Africa, these plants haveinstead emerged as importantsupply bases for the automobilessold in major consumer marketsoutside the region such as the EUand United States. Companiessuch as GM, Ford, Daimler-Chrysler, BMW, Volkswagen,Toyota, Nissan, Fiat, and Volvoall have assembly plants in SouthAfrica.

Although not on the list of majorAfrican exports, there are some

products that, while small in total value, have grownrapidly in recent years. These so-called “dynamicexport products” include horticulture and leather-re-

Box 3.1African Countries with Growing Mining, Minerals and Related Exports

The table below shows those African countries that have dramatically increased

their extractive exports over the 10-year period 1991–2001. Oil production has

played a prominent role in increasing Africa’s exports in products related to min-

ing and minerals.

Besides confirming the region’s new oil exporters, the table shows that other

countries—notably Mozambique and Cote d’Ivoire—have become exporters of

electric current, signaling an increase in regional power pool development.

Mozambique, for example, increased its electric current exports from 0 percent

in 1991 to 5 percent in 2001. That country is a success story in another way as

well: as the site of the Mozal aluminum smelter project (see box 7.4), Mozambique

has shifted from only mining minerals to processing them too. Aluminum’s share

of the country’s exports jumped from 0 percent in 1991 to 48 percent in 2001.

Kenya’s increased exports of oil products are a notable example of regional

economic integration. Kenya imports oil from Saudi Arabia and the United Arab

Emirates; it has downstream industries developing around its port areas such as

Mombassa. Petroleum is there refined and made into various petroleum products;

these are then exported to neighboring countries including Tanzania, Rwanda,

Uganda, Burundi, and Mauritius. This is a clear example of the growing significance

of the intra-Africa energy trade.

Fast-Growing African Exporters in Mining, Minerals and Related Products

Export amount Growth Share of total(thousand $) 1991–2001 exports (%)

Exporter 1991 2001 (%) 1991 2001 ProductEq. Guinea 770 1,469,761 19,0901 2 89 OilSudan 8,724 1,458,101 16,714 2 77 OilMozambique 25,419 404,905 1,593 7 58 Aluminum,

electricityCape Verde 89 1,062 1,193 1 6 OilKenya 32,190 245,265 762 3 13 Oil productsDjibouti 1,108 7,597 686 3 10 OilNiger 20,980 121,629 580 9 47 OilTogo 11,608 42,968 370 5 16 OilCote d’Ivoire 222,603 619,706 278 8 16 Oil, electricityGuinea 94,006 238,046 253 15 26 Diamonds, oilCongo 1,086,655 2,388,093 220 83 92 OilAngola 3,712,805 7,509,768 202 99 99 OilRwanda 16,834 20,968 125 13 25 Oil



Table 3.4Major Exporters and Importers of Africa’s Apparel Exports: 2000–02

Avg. annual Share of Avg. annual Share ofexports total exports imports total imports

Exporter ($ million) (%) Importer ($ million) (%)

Tunisia 2,899.00 34.33 France 2,514.58 29.78

Morocco 2,672.32 31.65 United States 1,519.52 18.00

Mauritius 922.37 10.92 U.K. 1,027.84 12.17

Egypt 689.64 8.17 Germany 840.61 9.96

South Africa 385.80 4.57 Italy 786.07 9.31

Madagascar 351.46 4.16 Belgium 519.89 6.16

Lesotho 244.67 2.90 Spain 472.24 5.59

Kenya 87.74 1.04 Netherlands 226.83 2.69

Swaziland 64.88 0.77 Austria 67.45 0.80

Zimbabwe 36.13 0.43 Ireland 48.32 0.57

Malawi 31.19 0.37 Namibia 47.69 0.56

Botswana 19.85 0.24 Botswana 38.97 0.46

Cote d’Ivoire 4.89 0.06 Canada 32.84 0.39

Cape Verde 4.68 0.06 South Africa 25.53 0.30

Mozambique 3.68 0.04 Swaziland 24.28 0.29

Mauritania 3.65 0.04 Japan 23.42 0.28

Sierra Leone 3.32 0.04 Norway 17.57 0.21

Namibia 2.85 0.03 Lesotho 16.57 0.20

Tanzania 2.84 0.03 Sweden 15.65 0.19

Cameroon 1.62 0.02 Singapore 15.37 0.18

All Africa 8,443.76 100.00 World 8,443.76 100.00


lated products. Tables 3.5 and 3.6 show the majorexporters of two dynamic exports: cut flowers and hide.These products represent promising cash-earning op-portunities for African producers. The cut-flower tradeis rather concentrated in some countries, and the Neth-erlands is the dominant importer given its central role inthe worldwide flower marketing network. Hide tradingrelations are more diversified. Note that several Asiancountries such as Hong Kong, India, Singapore, Pa-kistan, Thailand, Malaysia, and Indonesia appear inthe list of top 20 importers of African hide.

In sum, primary commodities, both mineral- and ag-riculture-based, and their semi-processed products,

are the dominant major exportsof Africa. Exports of these prod-ucts are concentrated in a hand-ful of countries in certain subre-gions for geographical andgeological reasons. Crude oiloverwhelmingly leads other com-modities in terms of export value.Besides developed countries suchas various European nations, theUnited States, and Japan, cer-tain Asian countries with grow-ing domestic industrial sectorsare significant importers ofAfrica’s mineral fuels and min-ing and mineral products. Thesecountries, along with rapidly in-dustrializing African countries(e.g., South Africa and Mauritius)also buy a significant share ofAfrica’s cotton exports. Foodproducts such as coffee, cocoa,and seafood are mostly importedby developed countries. Somemanufacturing products—nota-bly garment products—constituteother major African exports.South Africa has emerged as amajor automobile supply base,exporting to key markets outside

the region. Its export capacity, however, is still lim-ited to only a few countries, and the importers arebasically European countries and the United States.African countries also have some dynamic exportsfor which they have seen growing export revenues inrecent years.

3.2 Subregional Features ofAfrica’s ExportsThis section provides a brief overview of the subre-gional features of Africa’s exports, based on a com-parison of patterns in and the composition of ex-ports at the subregional level. For this purpose, Africa


Box 3.2Car Manufacturers in South Africa

The automotive sector is the largest manufacturer in South Africa and the country’s biggest manufacturing exporter.

South Africa’s automotive exports may be small in global terms—around 0.2 percent—but its presence in the world auto industry is significant for

a developing economy. The local industry has a world-beating cost ability on short or low-volume runs, competitive tooling costs and a high degree of

manufacturing flexibility. It also has good access to southern hemisphere and African markets, and offers right-hand drive production facilities (SA is a

right-hand driving country). Volkswagen SA produces all right-hand drive Golfs for the UK, while BMW exports 70 percent of its output.

Major motor vehicle production operations are located around Port Elizabeth, Durban, East London and Pretoria. Companies include BMW,

DaimlerChrysler, Delta Motor Corporation, Fiat, Ford Motor Corporation, Nissan, Toyota and Volkswagen.

Current exports of built-up cars are destined primarily for Europe, the United States, the Far East, and Africa. The majority of commercial vehicles

are exported to Southern African Development Community countries, including Mozambique, Malawi, Zambia, Kenya and Zimbabwe.

According to the Motor Industry Development Programme strategy, local assemblers should aim at producing over 30 000 vehicle models by the

middle of the decade, with some planning on higher figures of 60 000 to 80 000. The bulk of these will be produced for export. Local model ranges will

be supplemented by imports to satisfy the needs of the local market.

Ford South Africa. Ford SA recently announced that it would start producing two new vehicles for export under a R1-billion investment

program, joining BMW, DaimlerChrysler, Volkswagen and Toyota as major exporters of vehicles from the country. The value of Ford’s additional exports

is expected to reach about R4-billion a year. As a result of the new investment in the country, exports of components by the local company will also

increase. “Production parts to support an estimated 70 000 vehicles per annum will be exported from local suppliers to other international markets,”

the company said. Ford’s SA plant was the only industrial facility visited by U.S. president George Bush on his recent trip to the country.

Volkswagen South Africa. Volkswagen SA will in future focus its export program on the Asia-Pacific region instead of the European market.

According to Business Day, Volkswagen SA expects to export 30 000 vehicles this year, bringing in R4-billion, with an additional R2-billion in component

exports, but will withdraw from the European market. Despite a free-trade accord with the EU, local vehicle exports are still subject to a seven percent

import tariff, which makes them less competitive than European-produced vehicles. However, the similarity in freight costs from South Africa to Asia and

from Europe to Asia mean that South African exports can compete with European exports in the Asian region, making it the sole Asia-Pacific supplier

of Golf and Polo models. In 2002, Volkswagen SA produced 30 000 Golf 4s for export to Europe and the United Kingdom. The company also exported

components to the value of R1.6-billion last year.

Toyota South Africa. Toyota South Africa will start exporting its vehicles to Australia this year. According to media reports, some 8 000 vehicles

are expected to leave Durban for Australia, and this number is expected to increase to substantial volumes from 2004. Last year, Toyota Motor

Corporation reached an agreement with joint venture partner Wesco Investments to boost the percentage of shares Toyota Motor Corporation holds

in Toyota South Africa (TSA) from 35.7 percent to 74.9 percent. TSA is a holding company of Toyota South Africa Motors, which handles production and

distribution of Toyota vehicles in South Africa. Wesco currently owns 64.3 percent of TSA. The company recently opened a new R168-million pressing

plant for car side panels in Durban.

BMW South Africa. Over the past five years, BMW South Africa’s Rosslyn plant near Pretoria has moved from operating as a completely

knocked down production facility, assembling vehicles with limited customization possibilities for the local market, to a world-class plant capable to

producing customized 3 Series vehicles (four-door, right- and left-hand drive) for global export. This evolution is largely due to BMW AG’s R1-billion

investment in the Rosslyn plant during the mid 1990s. The investment, used to upgrade the production facility into one of the most modern in the world,

brought Rosslyn in line with other BMW plants worldwide. In the five years since 1998, BMW SA has grown its overall production volume by 220

percent, while its production of cars for export has quadrupled. Almost 80 percent of BMW’s production of 55,555 units in 2002 were exported.

Primary markets for South African manufactured BMWs are the United States (22,000 units or 47 percent) and Japan (13,000 units or 18 percent).

Australia received 5,500 units or 8 percent of production, while the balance went to New Zealand, Hong Kong, Singapore and Taiwan. Export produc-

tion was up 18 percent in 2002, with over 43,000 units leaving South Africa compared with 36 750 in 2001.

Source: Reprinted from the International Marketing Council of South Africa (2003).


Table 3.5Major Exporters and Importers of Africa’s Cut-Flower Exports: 2000–02



Kenya 172.27 50.93 Netherlands 208.99 61.79

Zimbabwe 67.43 19.93 U.K. 48.50 14.34

South Africa 32.10 9.49 Germany 24.83 7.34

Zambia 19.22 5.68 Switzerland 10.95 3.24

Uganda 12.75 3.77 France 8.93 2.64

Tanzania 12.44 3.68 Japan 7.19 2.12

Morocco 6.30 1.86 Norway 6.33 1.87

Mauritius 4.29 1.27 United States 4.51 1.33

Cote d’Ivoire 3.60 1.06 Italy 4.12 1.22

Cameroon 1.29 0.38 Australia 2.97 0.88

Rwanda 1.22 0.36 United Arab Em. 1.72 0.51

Egypt 1.17 0.35 Belgium 1.11 0.33

Ethiopia 1.14 0.34 Greece 0.71 0.21

Malawi 0.75 0.22 Botswana 0.63 0.19

Madagascar 0.67 0.20 South Africa 0.60 0.18

Tunisia 0.46 0.14 Portugal 0.57 0.17

Mali 0.28 0.08 Namibia 0.53 0.16

Burundi 0.19 0.06 Hong Kong 0.51 0.15

Ghana 0.09 0.03 Czech Republic 0.44 0.13

Namibia 0.07 0.02 Saudi Arabia 0.41 0.12

All Africa 338.25 100.00 World 338.25 100.00


is divided into five subregions—Northern, Eastern,Western, Central, and Southern Africa.8

Product groupsTable 3.7 compares the five subregions in terms ofthe SITC product groups that account for their ex-ports. In all subregions except Eastern Africa, min-eral fuels, lubricants, and related materials (SITC 3)account for significantly high shares of overall Afri-can exports. Major oil exporters are distributed widely

across Africa: Egypt, Libya, andAlgeria in Northern Africa;Sudan in Eastern Africa;Cameroon, Central African Re-public, Congo Republic, Demo-cratic Republic of Congo, Equa-torial Guinea, and Gabon inCentral Africa; Guinea, Niger,and Nigeria in Western Africa;and Angola in Southern Africa.

The relative importance of min-eral fuels differs sharply amongsubregions. Northern, Western,and Central Africa depend onmineral fuels for more than 60percent of their exports. In East-ern Africa, where oil exports aremuch smaller than in the othersubregions, food and live animals(SITC 1) and miscellaneousmanufactured articles (SITC 8)have prominent shares. (SITC 1products include textile and ap-parel products from Mauritius,Madagascar, and Kenya, amongothers; SITC 8 products includetea, fruits, nuts, spices, and fish-ery products from various coun-tries in the subregion.) In South-ern Africa, manufactured goods

classified chiefly by material (SITC 6)—including sil-ver, copper, platinum, aluminum, diamonds, leather,and textile yarn from various countries in the subre-gion—account for a higher share of exports than doSITC 3 products. Southern Africa—considered themost industrialized and fastest growing region in Sub-Saharan Africa—scores high shares in various SITCgroups including crude materials, inedible, except fuels(SITC 2; this includes iron ore), machinery and trans-port equipment (SITC 7; this includes automobilesfrom South Africa), miscellaneous manufactured ar-ticles (SITC 8; this includes textile and apparel prod-ucts from countries such as South Africa and Lesotho),

8See appendix A for the countries constituting the individualsubregions.


Table 3.6Major Exporters and Importers of Africa’s Hide Exports: 2000–02



South Africa 78.63 36.30 Italy 71.54 33.03

Kenya 31.77 14.67 Hong Kong 54.52 25.17

Ethiopia 30.18 13.93 U.K. 14.29 6.60

Uganda 12.33 5.69 India 12.82 5.92

Libya 8.93 4.12 Turkey 9.64 4.45

Tanzania 7.95 3.67 Pakistan 8.64 3.99

Zimbabwe 7.07 3.26 France 8.33 3.85

Sudan 6.64 3.06 Singapore 5.18 2.39

Somalia 4.45 2.06 Spain 4.75 2.19

Senegal 4.39 2.03 Thailand 4.48 2.07

Egypt 4.13 1.91 Malaysia 2.94 1.36

Madagascar 4.01 1.85 Portugal 2.94 1.36

Algeria 2.54 1.17 Indonesia 2.63 1.21

Nigeria 2.47 1.14 Japan 2.27 1.05

Djibouti 1.78 0.82 Tunisia 1.95 0.90

Mali 1.55 0.71 Greece 1.32 0.61

Tunisia 1.54 0.71 U.A.E. 1.17 0.54

Zambia 1.04 0.48 U.S. 1.17 0.54

Rwanda 0.68 0.31 South Africa 1.03 0.48

Cote d’Ivoire 0.58 0.27 Germany 0.92 0.42

All Africa 216.59 100.00 World 216.59 100.00


and commodities and transactions not elsewhere clas-sified in the SITC (SITC 9; this includes gold fromSouth Africa and Zimbabwe).

Even in the three subregions where oil dominatesexports, other groups of products also have signifi-cant shares. Northern Africa, for example, has a sig-nificant share of exports in miscellaneous manufac-tured articles (SITC 8), reflecting established supplybases for textile and apparel products. Like South-ern Africa, Northern Africa also exports a wide rangeof manufactured products. In Central and WesternAfrica, manufacturing products are not as diversified

as in the north and south; how-ever, they do have here tangiblenon-oil exports such as food andlive animals (SITC 0), crude ma-terials, inedible, except for fuels(SITC 2), and manufacturedgoods classified chiefly by mate-rial (SITC 6). These groups in-clude such products as cocoa,fruits and nuts, fishery products,cotton, diamonds, woods,leather, and aluminum.

Destined marketsTurning to the question of howsubregions differ in terms of ex-port destinations, table 3.8 com-pares the five subregions in termsof their share of total Africanexports for each major tradingpartner region and average an-nual changes in exports per tradepartner during the 1990s. It isapparent that the EU is the lead-ing export destination for all fivesubregions. Northern, Eastern,and Southern Africa score signifi-cantly high shares of exports tothe EU. With over 70 percent ofits export earnings from sales to

the EU, Northern Africa shows the highest depen-dence on this market, a reflection of its geographicalproximity to Europe. Eastern Africa receives morethan half of its export earnings from the EU market;all other subregions receive over 35 percent of theirexport earnings from the EU. The large EU sharesof exports have held rather steady for Africa as awhole, but Southern Africa is increasing its exportsto the EU rapidly as a result of a free trade agree-ment between the EU and South Africa.

Other significant bilateral relations include Westernand Southern Africa’s exports to the United States,


Table 3.7Current Subregional Export Structures by SITC Product Group

SITC Northern Eastern Western Central Southern All$45,735,398,974 $6,760,354,091 $27,091,035,527 $10,518,181,658 $39,929,981,778 $130,034,952,028

0 1.69 4.80 2.16 41.56 3.02 14.49 0.45 5.56 2.54 8.26 9.86 9.861 0.02 0.07 0.07 1.43 0.01 0.04 0.01 0.08 0.88 2.87 0.99 0.992 1.04 2.95 0.57 10.98 1.90 9.11 1.35 16.70 3.14 10.24 8.00 8.003 21.66 61.57 0.78 15.04 13.90 66.72 5.13 63.47 6.48 21.12 47.96 47.964 0.19 0.53 0.01 0.11 0.10 0.46 0.00 0.03 0.03 0.08 0.31 0.315 1.68 4.77 0.05 1.05 0.19 0.90 0.03 0.43 1.20 3.91 3.15 3.156 1.55 4.40 0.21 4.06 0.88 4.22 1.01 12.43 9.11 29.68 12.76 12.767 1.65 4.70 0.09 1.78 0.58 2.78 0.05 0.60 2.77 9.03 5.14 5.148 5.24 14.90 1.18 22.63 0.09 0.42 0.02 0.20 1.03 3.35 7.55 7.559 0.46 1.32 0.07 1.36 0.18 0.86 0.04 0.49 3.52 11.47 4.27 4.27 Total 35.17 100.00 5.20 100.00 20.83 100.00 8.09 100.00 30.71 100.00 100.00 100.00

Notes: Share figures are based on 1999–2001 averages. Within each subregion, the first figure represents share of all African exports;the second is share of total subregional exports. Because of rounding, the figures for all subregions differ slightly from those in table3.1. All figures are based on partners’ import data.Source: UN Comtrade.

Region Northern Eastern Western Central Southern All$45,735,398,974 $6,760,354,091 $27,091,035,527 $10,518,181,658 $39,929,981,778 $130,034,952,028

Africa 0.75 2.14 0.19 3.62 1.21 5.79 0.11 1.35 1.29 4.21 3.55 3.552.43 1.79 13.19 -2.79 4.18 5.68

EU 25.34 72.07 2.71 52.06 7.79 37.38 3.19 39.49 12.77 41.56 51.80 51.801.38 2.59 -1.29 -2.08 3.94 1.28

U.S. 3.06 8.70 0.54 10.48 7.02 33.71 2.29 28.28 6.00 19.52 18.91 18.913.80 7.47 4.02 5.91 6.91 5.14

Asia 1.93 5.48 1.46 28.03 2.80 13.42 2.22 27.43 8.57 27.90 16.97 16.974.59 11.73 10.96 21.57 9.15 10.06

Others 4.08 11.61 0.30 5.81 2.02 9.70 0.28 3.45 2.09 6.80 7.77 8.7710.00 6.78 5.30 0.91 7.97

World 35.16 100.00 5.20 100.00 20.83 100.00 8.09 100.00 30.72 100.00 100.00 100.002.47 5.20 2.63 3.36 5.99 3.70

Table 3.8Current Subregional Export Structures by Partner Region

Notes: Share figures are based on 1999–2001 averages. Within each subregion, the first figure in the first row represents share of allAfrican exports; the second is share of total subregional exports; the figure in the second row is average annual increase in share oftotal African exports (1989–2001). Because of rounding, the figures for all subregions differ slightly from those in table 3.1. All figuresare based on partners’ import data.Source: UN Comtrade.


and Southern Africa’s exports to Asia. In terms ofdegree of reliance on the U.S. and Asian marketsamong subregions, Western and Central Africa re-ceive more than a quarter of their export earningsfrom the United States; Eastern, Central, and South-ern Africa each receive more than a quarter of theirexport earnings from Asia. Although the degree ofreliance on Asian markets is not comparable to thaton the EU for all subregions, the average increase inexport values noted in the table indicates that all sub-regions are increasing their reliance on Asian mar-kets; this is consistent with findings presented earlierin this report. Central Africa, in particular, is increas-ing its exports to Asia most rapidly. Although crudeoil exports from such countries as Equatorial Guinea,Republic of Congo, and Gabon are the principal driv-ers for this growth, cotton exports from Chad alsocontribute significantly.

In all subregions, the shares of intra-Africa trade ac-count for much smaller numbers as compared to otherpartner regions. Given that most of the subregionscontain a large number of land-locked countries, theestablishment of regional infrastructure to connectthese with major seaports is a critical condition forexpanding trade opportunities. Improvement inintraregional transportation and logistics is undoubt-edly one of the most important elements in buildingan enabling environment that allows local private sec-tor development in Africa to respond effectively toopportunities in the global market. Success in regionalintegration projects such as the Chad-Cameroon pipe-line project, the Maputo Corridor project, the NileBasin project, the New Partnership for Africa’s De-velopment regional infrastructure project, and theWest African Economic and Monetary Union roadnetwork project is critical. Also, regional integrationconducive to trade enhancement needs to be achievedthrough effective agreements (box 3.3). None of theseregional integration initiatives can succeed withoutsufficient political will among and within the partici-pating countries.

3.3 Key Features of Africa’sImport StructureIn general, discussion of trade issues in African coun-tries tends to be concentrated more on their exportsthan imports. Such questions as how African coun-tries can diversify their export structure, improve theirexport supply capacity, and acquire international com-petitiveness have been first-order concerns. However,in order to obtain a more dynamic picture of Africa’strade structure and see how Africa interacts with therest of the world through global supply chains of prod-ucts, it is important to look at both exports and im-ports of African countries. This perspective also al-lows for an analysis of opportunities to save earnedforeign exchanges.

Moreover, analyzing imports helps in understandingthe issue of self-sufficiency African countries are fac-ing. Because Africa is a major importer of food, theneed to improve the internal supply of food becomesobvious.

Table 3.9 is a list of major African imports from the77 countries used in the previous discussion of ex-ports. The list includes the top 20 major importedproducts, as well as their leading exporters and Afri-can importers. A chart of all imports is presented asappendix C; key elements are further discussed be-low.

Less concentration and wider distributionamong countriesIt is immediately apparent from table 3.9 that theAfrican importers of these major products are, interms of country composition, much more diversi-fied within the region than are Africa’s major export-ers. With the exception of cotton, the exporters ofAfrica’s major exports are limited to a few countries,largely because many of the products involved de-pend on countries’ natural endowments and becauseonly a limited number of countries have developedoutward-oriented manufacturing sectors. On the other


Box 3.3Regional Integration Agreements in Africa

Regional integration agreements have evolved considerably in Africa. There are currently 10 such important agreements

in Africa, which are summarized in the table opposite. Several major automobile plants already operate in South Africa,

targeting neighboring markets in addition to South Africa itself. In 2002, two Japanese appliance manufacturers of

refrigerators and air conditioners established assembling factories in Egypt, as an entry point into the Common Market

for Eastern and Southern Africa.

Although issues remain regarding the practical effectiveness of those regional economic zones and infrastructure

within the zones, the global trend is suggesting a direction for regional integration under the World Trade Organization

framework. One of the strategies would be to develop a regional hub with sufficient infrastructure for accommodating

foreign direct investment with a concentration of services in trade, finance, transportation, communication, and other

service infrastructure. South Africa has already taken a hub role in Southern Africa, as has Egypt in Northern Africa. The

U.S. Agency for International Development (USAID) is assisting through its program, Trade for African Development and

Enterprises, in developing so-called Regional Hubs for Global Competitiveness in three USAID regional missions: Acra

(Ghana), Nairobi (Kenya), and Gaborone (Botswana).

Viable regional integration would help African countries overcome the capacity constraints of small domestic

markets in their individual countries. Regional integration will broaden the scope of market-based economic develop-

ment in small African countries, each of which has a highly fragmented domestic market of factors and goods. Through

regional integration, these countries could have a better allocation of resources and economies of scale. To make

regional integration more conducive to trade enhancement in Africa, the regional integration agreements need a more

outward-looking trade orientation and must avoid unnecessary overlapping and inconsistency among different agree-

ments. Adequate infrastructure and appropriate governance over the infrastructure are essential for effective regional

integration.

(continued)

hand, for all top 20 major African imports, exceptships and crude oil, there are more than 10 countriesthat have a 1 percent or greater share of all Africa’simport value of these products. With the exceptionof ships and crude oil, the leading importers of theindividual top 20 products are either South Africa orNorthern African countries, reflecting the purchas-ing power of domestic consumers as well as relativelydeveloped domestic industrial sectors.

Products to support a modern life-style andminimal business connectivity:transportation and communicationA significant number of the major imports of Africancountries are modernized manufactured products.Many are related to means of transportation—suchas automobiles, aircraft, and ships—or to means of

communication—such as telecommunications equip-ment. Regardless of a country’s income level, theseproducts are essential for a country to maintain ex-ternal economic linkages with the global market.

A few imported products support Africa’s manufac-turing and mining sectors, either directly and indi-rectly. Although the largest import value is recordedfor ship imports—due to Liberia’s competitive taxpractice toward flag-of-convenience ships—there areother transportation-related products that are widelyexported to African countries in support of theirmanufacturing and mining industries. These productsinclude passenger cars (2nd largest export, 3 percent),motor vehicle parts and accessories (4th, 2.3 percent),motor vehicles for goods transportation (6th, 1.6 per-cent), and aircraft (10th, 1.2 percent). Communica-


Subregional Arrangements in Africa

Agreement Date Members DescriptionCross-Border Initiative 1992 Burundi, Comoros, Kenya, Madagascar, Malawi, A voluntary framework agreement for the(CBI) Mauritius, Namibia, Rwanda, Seychelles, implementation of trade and investment

Swaziland, Tanzania, Uganda, Zambia, Zimbabwe policies

East African Community 1999 Kenya, Tanzania, Uganda Focus on regional integration of trade and(EAC) investment policy, monetary and fiscal policy,

and labor and capital markets

Economic and Monetary 1994 Cameroon, Central African Republic, Chad, Aims to promote harmonious development ofCommunity of Central Congo, Gabon, Equatorial Guinea member states within the framework of an(CEMAC) African economic and monetary union

Economic Community 1975 Benin, Burkina Faso, Cape Verde, Cote d’Ivoire, Promotes economic integration in all fields ofof West African States Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, economic activity(ECOWAS) Mali, Mauritania, Niger, Nigeria, Senegal, Sierra

Leone, Togo

Common Market for 1993 Angola, Burundi, Comoros, Djibouti, Egypt, Promotes intraregional trade through removalEastern and Southern Ethiopia, Kenya, Lesotho, Malawi, Mauritius, of all internal tariffs and nontariff barriers toAfrica (COMESA) Mozambique, Rwanda, Somalia, Sudan, trade

Swaziland, Uganda, Zambia, Zimbabwe

India Ocean Commission 1984 Comoros, Madagascar, Mauritius, Seychelles Supports economic and trade cooperation(IOC) in agriculture, fisheries, and ecosystems

Southern African Devel- 1980 Angola, Botswana, Dem. Rep. of Congo, Formerly Southern African Developmentopment Community Lesotho, Malawi, Mauritius, Mozambique, Coordination Conference(SADC) Namibia, Seychelles, South Africa, Swaziland,

Tanzania, Zambia, Zimbabwe

West African Economic 1994 Benin, Burkina Faso, Cote d’Ivoire, Guinea- Aims to create a common market based on theand Monetary Union Bissau, Mali, Niger, Senegal, Togo free movement of goods, services, capital, and(WAEMU) persons

Southern African 1910 Botswana, Lesotho, Namibia, South Africa, Aims to maintain free trade among memberCustoms Union (SACU) Swaziland countries, and common external and excise

tariffs for customs areaSource: Japan Center for International Finance (2003).

Box 3.3Regional Integration Agreements in Africa (continued)

tions-related products and parts are also amongAfrica’s major imports (e.g., radiotelegraphic andradiotelephonic transmitters, electronic line telephonicand telegraphic apparatus, and telecommunicationsequipment parts). Although the use of these prod-ucts is of course not limited to industry and does in-clude residential use, it is nonetheless important tonote that these products are essential for Africanmanufacturers in trading with the rest of the world.Machineries and appliances are also significant im-ports for African countries; these are obviously sup-

plied to industries in Africa, including mining indus-tries.

South Africa and North African countries are the lead-ing importers of these products of transportation,communication, and machinery, reflecting their rela-tively large industrial sectors as well as consumers’purchasing power. The products are exported by suchleading manufacturing nations as France, Germany,the United Kingdom, the United States, Japan, Swe-den, and Korea.


Product Exporters ImportersAgricultural and fisheryWheat, non-durum United States (44), France (26), Germany, Egypt (32), Algeria (13), Morocco (13), Nigeria,(5th, 1.7%) Argentina, Canada, Belgium, Turkey Tunisia, Ethiopia, South Africa, Kenya, Cote d’Ivoire,

Senegal, Ghana, Sudan, Cameroon, MozambiqueRice (14th, 0.9%) Thailand (46), India (15), China (14), Pakistan, South Africa (19), Nigeria (19), Cote d’Ivoire (12),

United States, Egypt, Taiwan, Italy, Spain Senegal, Ghana, Togo, Libya, Kenya, Benin, Somalia,Mauritius, Tanzania, Guinea, Madagascar, Rep. ofCongo, Angola

Sugar (15th, 0.8%) Brazil (38), France (22), Belgium (12), Algeria (18), Nigeria (17), Egypt (14), Libya, Tunisia,South Africa, Spain, Italy, Germany, Netherlands, Ghana, Mauritania, Somalia, Kenya, Angola, Morocco,UK, Zimbabwe, Mexico, Thailand Guinea, Mozambique, Tanzania, Gambia, Mali

Milk and cream France (27), Netherlands (21), Belgium, Germany, Algeria (38), Egypt, Nigeria, Libya, Cote d’Ivoire,(16th, 0.8%) UK, Poland, New Zealand, Australia, South Africa, Senegal, Mauritius, Mali, Angola, Ghana, South Africa,

United States, Canada, Ireland, Denmark, Spain Tunisia, Sudan, Benin, Morocco, CameroonMaize (20th, 0.7%) United States (65), Argentina (2), South Africa, Egypt (47), Algeria (12), Morocco, Tunisia, Zimbabwe,

Zimbabwe, France Kenya, South Africa, Libya, Tanzania, Angola, Malawi, Zambia

AutomobilePassenger cars France (20), Germany (19), Japan (17), Korea (12), South Africa (25), Algeria (13), Egypt (11), Tunisia,(2nd, 2.9%) Belgium, Spain, UK, United States, Netherlands, Morocco, Libya, Nigeria, Ghana, Cote d’Ivoire, Kenya,

Italy, South Africa, Turkey, Brazil, Austria Angola, Benin, Mauritius, Zimbabwe, Tanzania, CameroonAutomobile parts Germany (17), Japan (16), France (12), Italy, UK, South Africa (44), Egypt (10), Algeria, Morocco,(4th, 2.2%) United States, Oman, Spain, Korea, Taiwan, Belgium, Nigeria, Tunisia, Libya, Tanzania, Kenya, Zambia,

South Africa, Sweden, Thailand, Turkey Zimbabwe, GhanaTransportation vehicles Japan (37), France (13), Germany, South Africa, South Africa (16), Egypt (14), Algeria (10), Tunisia,(6th, 1.6%) United States, UK, Spain, Korea, Belgium, Italy, Morocco, Nigeria, Kenya, Zimbabwe, Ethiopia, Ghana,

Netherlands, China Libya, Mozambique, Angola, Tanzania, Mauritius,Cameroon, Cote d’Ivoire, Zambia, Malawi, Sudan, Gabon

Telecommunication equipmentRadio-telegraphic France (21), UK (16), Finland (14), Sweden (13), South Africa (45), Egypt (15), Morocco (11), Tunisia,(11th, 1.1%) Germany (11) Nigeria, Algeria, Cote d’Ivoire, Kenya, Dem. Rep. of

Congo, Tanzania, MauritiusTelecommunication France (16), Germany (15), United States, Sweden, South Africa (34), Egypt (20), Algeria, Morocco, Tunisia,equipment parts UK, Italy, Spain, Korea, Belgium, Japan, Finland, China, Nigeria, Libya, Cote d’Ivoire, Kenya, Zimbabwe, Angola,(12th, 1.1%) South Africa, Singapore, Ireland, Taiwan, Netherlands Sudan, GhanaElectric line tele- France (26), UK (10), Germany, Sweden, United States, South Africa (34), Egypt (21), Morocco, Nigeria, Algeria,phones (17th, 0.8%) Italy, Finland, Japan, Belgium, Spain, South Africa, China, Tunisia, Kenya, Cote d’Ivoire, Zimbabwe, Senegal,

Netherlands, Norway, Ireland, Taiwan, Singapore Libya, Ghana, Tanzania

Capital goods and appliancesElectric appliances, incl. France (34), Germany (19), Italy, UK, Japan, United South Africa (18), Egypt (18), Tunisia (17), Morocco, Algeria,switches, relays, fuses, States, China, South Africa, Sweden, Spain, Malta, Libya, Nigeria, Cote d’Ivoire, Sudan, Ghana, Mozambique,(9th, 1.2%) Belgium, Portugal, Netherlands Zimbabwe, Tanzania, Senegal, Angola, KenyaMachinery for special- Italy (27), Germany (13), France (12), United States, Egypt (22), South Africa (18), Algeria, Morocco, Nigeria,ized industries UK, Spain, Taiwan, Korea, Japan, India, China, Austria, Tunisia, Libya, Sudan, Angola, Kenya, Cote d’Ivoire,(13th, 1.0%) South Africa, Belgium, Canada, Netherlands, Sweden Ghana, Zimbabwe, Cameroon, TanzaniaConstruction & mining United States (68), UK, France, Germany, Italy, Algeria (16), Nigeria (15), Egypt (14), Angola (12),machinery parts Netherlands, Singapore, Sweden, China South Africa, Equatorial Guinea, Gabon, Libya, Rep. of(18th, 0.7%) Congo, Ghana, Cameroon, Sudan, TunisiaConstruction & mining France (13), Japan (13), United States (11), Germany, South Africa (23), Egypt (17), Tunisia, Nigeria, Morocco,machinery (19th, 0.7%) UK, Belgium, Italy, South Africa, Austria, China, Brazil, Algeria, Ghana, Libya, Cote d’Ivoire, Ethiopia, Sudan,

Korea, Finland, Netherlands, Sweden, Spain Angola, Zimbabwe, Cameroon, Tanzania, Zambia

Table 3.9Top 20 Major African Imports: 1999–2001 Annual Average

(continued)


Product Exporters ImportersCotton-textileCotton fabrics France (19), China, Italy, India, Germany, Spain, Tunisia (32), Morocco (22), Benin, South Africa,(7th, 1.5%) Belgium, Netherlands, Pakistan, UK, Hong Kong, Mauritius, Egypt, Nigeria, Madagascar, Togo, Cote d’Ivoire,

Taiwan, Thailand, Mauritius Gambia, Kenya, Tanzania, Mali, Niger, Ghana, Algeria

OtherShips (1st, 3.5%) Korea (29), Japan (20), France (15), Italy (11), Liberia (92), Tunisia

Germany, Spain, Norway, Singapore, Poland,China, Taiwan

Medicine (3rd, 0.7%) France (44), UK, Belgium, India, Germany, Italy, Algeria (18), South Africa (17), Nigeria, Egypt, Tunisia,Netherlands, Denmark, South Africa, United States, Cote d’Ivoire, Morocco, Libya, Kenya, Cameroon,China, Jordan, Austria, Spain, Kenya Senegal, Ghana, Uganda, Rep. of Congo, Sudan,

Burkina Faso, Zimbabwe, Benin, Gabon, Tanzania, MaliCrude oil (8th, 1.4%) Nigeria (90), UK, Venezuela, Mexico Cote d’Ivoire (38), South Africa (18), Ghana (16),

Cameroon (11), Senegal, Morocco, Burkina FasoAircraft (10th, 1.2%) United States (62), France (18), Italy (11), South Africa (30), Tunisia (15), Ghana (11), Morocco

Germany (11), Egypt, Algeria, Cote d’Ivoire, Kenya, Mauritius,Madagascar, Ethiopia, Nigeria

Table 3.9Top 20 Major African Imports: 1999–2001 Annual Average (continued)


Emerging supply chains in the automobileand textile sectorsAlthough the automobile is one of Africa’s majorimports, note that South Africa is emerging as anindustrial hub for this product on the continent. Thedata show that roughly 2 percent of all passengercars and 6.5 percent of all motor vehicles for goodstransportation imported by African countries are ac-tually shipped from South Africa. In fact, South Af-rica is ranked fourth for the export of motor vehiclesfor goods transportation after Japan, France, and Ger-many. At the same time, South Africa imports 45percent of all African imports of automobile partsfrom these same countries. Thus, there are clear link-ages between the imports of assembly componentsfrom the home countries of major automobile com-panies and the exports of assembled automobiles fromSouth Africa.

While the automobile provides one example of anAfrican country participating in the global supply chainof manufactured products, another—perhaps morevisible—example is the global supply chain of cottonfabrics and garment products. Cotton fabrics repre-

sent Africa’s seventh largest import, brought in bythe major apparel-making countries on the continentsuch as South Africa, Mauritius, and Northern Afri-can countries. Exporters of cotton fabric include Chinaand Taiwan, both of which have invested significantlyin Southern Africa’s garment industry. Mauritius isone of the important exporters of cotton textiles toAfrica, hinting at the effect of an intraregional supplynetwork for garment production. Cotton is, as men-tioned earlier in this chapter, a major African export,particularly from a few countries in the Western andCentral African subregions; the leading importers ofAfrican cotton are—also as noted earlier—found inAsian countries. Therefore, a global value chain canbe traced from cotton production in Africa, to fabricproduction in Asia’s textile industry, and back to Af-rica for garment production by the African apparelindustry.

Large food importsSome food products appear among the top 20 ma-jor imports of African countries. Wheat is ranked fifth(1.7 percent) and is largely supplied by the United


States (45 percent) and France (26 percent). Rice isranked 14th (0.9 percent) and is supplied mostly byAsian countries such as Thailand (46 percent), India(16 percent), China (15 percent), and Pakistan (9percent). Preserved, concentrated, or sweetened milkand cream also account for a significant share ofAfrica’s imports (16th, 0.9 percent); these are mostlyimported from Europe. Taken as a whole, Africa ex-hibits a high level of external dependency for its foodsupply, importing $16 billion annually in recent years(table 3.10). The fact that a significant share of Africa’stotal import value is spent for food is in sharp con-trast to the general perception that Africa’s compara-tive advantage is in the agricultural sector.

Table 3.10Food Imports, by Region/Country: 1997–2002 Average

Region/country Value (million $)United States 49,695.91Japan 46,684.44Germany 37,951.49United Kingdom 28,379.58France 28,241.92Netherlands 22,631.19Italy 22,106.23All Africa 16,008.81Spain 14,846.10Canada 12,193.93Russia 10,441.24Hong Kong 9,534.15Mexico 8,482.21Belgium 8,362.97China 8,128.92Sub-Saharan Africa 7,923.02Korea 7,720.13Denmark 5,539.53Switzerland 4,801.98Sweden 4,739.84

Source: World Bank (2004).

25

CHAPTER 4

Structure and Patterns of Africa’s Trade with Asia

The previous chapter provided an overview of theexport structure of African countries based on ex-port matrices. One of the basic findings discussed inthat chapter is that Africa’s exports to Asia havegrown rapidly over the past decade, driven mostly bycrude oil and other primary commodities. This chap-ter presents a more in-depth look at the patterns oftrade between Africa and Asia throughout the 1990s.

4.1 Basic Characteristics ofAfrica’s Exports to Asia

Heavy dependency on primary commoditiesFigure 4.1 illustrates trends in the value of Africa’sexports to Asia for each product group at the one-

digit Standard International Trade Classification (SITC)level. As is apparent in the figure, Africa’s exports toAsia are mainly driven by primary commodities andrelated products. Although the figure confirms ear-lier findings, it clearly illustrates that a particular driverof export growth during the 1990s was the SITC 3product group (mineral fuels, lubricants, and relatedmaterials), exports of which increased dramaticallythroughout the decade.1 As with the European Union(EU) and United States, oil and its related products ac-count for a large share of Africa’s exports to Asia. An-other significant product group is SITC 9, which in-cludes gold. Asian imports of another group of Africanprimary commodities—crude materials, inedible, ex-cept fuels (SITC 2), which include cotton and woods—

have also increased significantlysince the beginning of the decade.In contrast, a few traditional com-modity exports—notably food andlive animals (SITC 0)—thoughshowing a steady increase in salesto Asia, do not share the samemagnitude of increase as theseother product groups.

1Because the government of India did notreport on the country’s crude oil importsfor 2000, the United Nations CommodityTrade Statistics Database (UN Comtrade)cannot provide more accurate figuresregarding Asian imports from Africaeither in the aggregate or for SITC 3alone. The statistics used here thereforedo not include Indian crude oil importsfor 2000.

0

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Chemicals (SITC 5)

Manufactured goods (SITC 6)

Machinery & transport equipment (SITC 7)

Miscellaneous manufactured articles (SITC 8)

Other (SITC 9)

Million $

Figure 4.1Trends in Africa’s Exports to Asia, by SITC Product Group: 1990–2002

Note: All figures are based on partners’ import data. Share figures are based on averages of1998–2000.Source: UN Comtrade.

26 ● ● ● ● ● Chapter 4 – Structure and Patterns of Africa’s Trade with Asia

Heavy dependency on andhigh growth of a few oilexportersOf the estimated $22 billion Af-rica earns annually from its ex-ports to Asia in recent years(2000–02), a large share ofearnings is concentrated in arelatively small number of coun-tries. Table 4.1 shows the majorAfrican countries exporting toAsia, and presents both share oftotal African export values andaverage annual increase in thosevalues. Of the 53 African coun-tries covered in this report, thetop five exporters—South Africa(37.8 percent), Angola (9.9 per-cent), Nigeria (8.4 percent), Re-public of Congo (7.1 percent),and Sudan (6.5 percent)—ac-count for more than two-thirdsof total African exports to Asia.These countries are primarily oilexporters. Oil exporters are simi-larly notable in terms of theirgrowth performance. As shownin the table, many oil-exportingcountries are among the fastestgrowing exporters to Asia.2

Small but growing non-oil exportersWhile oil-exporting countries have recorded highgrowth in their exports to Asia, other African coun-tries have recorded high growth due to the export ofother—and quite diverse—products. Notably, SouthAfrica, which has recently and successfully embarkedon a path toward industrialization, contributes to the

2Note that the countries listed in table 4.1 do not include SouthernAfrican Customs Union countries other than South Africa, sincethese did not report their trade statistics independently to UNComtrade prior to 2000. Some of these countries have recordedhigh growth in their exports of garment products in recent years.

Table 4.1Top 20 African Exporters to Asia: 1991 and 2001

2001 1991Share of total

Export value African exports % changeCountry ($ million) to Asia (%) Country 1991–2001South Africa 8,409.57 37.80 Equatorial Guinea 785088.04Angola 2,210.15 9.94 Republic of Congo 31847.15Nigeria 1,788.94 8.04 Niger 6997.44Republic of Congo 1,586.02 7.13 Angola 6878.22Sudan 1,452.68 6.53 Sudan 968.32Morocco 1,017.60 4.57 Sao Tome & Principe 960.03Egypt 664.32 2.99 Guinea 879.98Gabon 497.05 2.23 Comoros 730.23Algeria 461.04 2.07 Somalia 539.00Equatorial Guinea 455.51 2.05 Nigeria 410.91Zimbabwe 385.64 1.73 Cameroon 372.67Cameroon 368.96 1.66 Djibouti 366.09Kenya 272.28 1.22 Benin 357.49Zambia 250.89 1.13 Guinea-Bissau 338.79Tanzania 223.42 1.00 Uganda 223.31Cote d’Ivoire 211.04 0.95 Mauritius 186.19Tunisia 167.46 0.75 Rwanda 162.60Ghana 147.48 0.66 South Africa 141.44Senegal 138.66 0.62 Gabon 131.54Madagascar 127.75 0.57 Algeria 102.27All Africa 22,245.78 100.00 All Africa 148.56

Notes: Share figures are based on 1998–2000 averages. Rates of changes were computed bytaking annual average changes between 1989–91 and 1998–2000. All figures are based onpartners’ import data.Source: UN Comtrade.

region’s exports to Asia with a number of nontradi-tional goods, including manufactured products. Othercountries with a high rate of increase in Asian ex-ports include Uganda (fish, cotton, and hide), Rwanda(tea), Mauritius (fish), and Comoros (vanilla).3

Does the picture change without oil andmajor exporters?It is useful to determine the resilience of these tradepatterns across the various African countries. Spe-cifically, do the patterns hold when the oil-exportingcountries in North Africa are excluded, along with

3The accompanying Country Analytical Briefs provide country-specific information on major exports and imports.


South Africa and its growing manufactured goodsexports, leaving the small, primarily agricultural, ex-porters from the other parts of the continent? Thissection, then, examines the effects on Africa’s ex-ports to Asia when exports from Sub-Saharan Africaonly, non-oil exports, and exports from Sub-SaharanAfrican countries other than South Africa are sepa-rately considered.

Average annual exports from Africa to Asia are esti-mated to be $22.2 billion. If North Africa is excludedand only Sub-Saharan African exports are consid-ered, this figure drops to $19.8 billion (89.2 percentof total). If only non-oil exports from Sub-SaharanAfrican to Asia are considered, the total value is $11.7billion (52.7 percent of all African exports to Asia).Given the dominant position of South Africa in theoverall African economy, total Sub-Saharan Africancountries other than South Africa account for a rela-tively small amount of annual non-oil exports to Asia—$3.7 billion, or 16.5 percent of total.

How does this compare with Africa’s worldwide ex-ports, which are estimated to be $134 billion annu-ally? Again excluding North Africa and focusing onlyon Sub-Saharan Africa, total world exports equal$86.8 billion (64.8 percent of all Africa). Total non-oil Sub-Saharan African exports are $52 billion (38.8percent of all Africa). Sub-Saharan African countriesother than South Africa export $24.9 billion (18.6percent of all Africa) of all non-oil products.

These relative shares are presented in figure 4.2. It isclear from the figure that North Africa has a smallershare of all Africa’s exports to Asia as compared toits share of all Africa’s exports to the world. This dis-proportion reflects the dominance of the EuropeanUnion as an export destination for North Africancountries (table 3.8). The share of non-oil Sub-Sa-haran exports as a proportion of all African exportsis higher among exports to Asia than it is for exportsto the world as a whole. Although oil is the leadingexport from Africa to Asia, the United States andsome European countries surpass Asian countries in

Exports to Asia

Exports to the world

All Africa

MinusNorthern Africa

Minusoil

MinusSouth Africa

All Africa

MinusNorthern Africa

Minusoil

MinusSouth Africa

Figure 4.2Breakdown of All Africa’s Exports to Asia and to theWorld: 1999–2001 (Average)

Note: Areas of circles represent proportional shares ofrespective levels of disaggregation of all Africa’s exports.Source: UN Comtrade.

the amounts of oil they import from Sub-SaharanAfrican countries. On the other hand, South Africahas become very critical to trade relations betweenAfrica and Asia, because of both its growing domes-tic industries and its rich natural resources. SouthAfrica’s growing importance as a trade partner forAsian countries, particularly Japan, makes the shareof other Sub-Saharan African countries’ non-oil ex-ports relatively small with regard to Africa’s total ex-ports to Asia.


Given the small amount of non-oil exports to Asiafrom Sub-Saharan Africa except for South Africa,should it be concluded that such exports are insignifi-cant to interregional trade? And are the general trendsdiscussed above still valid in the absence of oil and with-out South Africa and the Northern African countries?

Figure 4.3 shows that the general trend is still validwith regard to the relatively small amount of exports.The figure traces historical trends for some majorcategories of non-oil exports during the 1990s. Al-though modest, there is an increase in total non-oilexports to Asia from Sub-Saharan African countriesother than South Africa. The trend in agriculturalexports essentially resembles the pattern for total non-oil exports, suggesting that the latter are primarilydriven by the former. Manufacturing exports wererather stable over the 1990s. In contrast, there was asmall but steady increase in food exports from Africato Asia. Thus, the general observation that non-oilexports to Asia are small but are steadily increasingis valid.

Africa outpaces other regions in growth ofexports to AsiaIs the strong growth of Africa’s exports to Asia dueto economic growth among the Asian countries,rather than a reflection of Africa’s own economic

0

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Figure 4.3Trends in Non-Oil Exports to Asia from Sub-SaharanAfrica, Excluding South Africa: 1990–2001


growth? This question can be answered by determin-ing the extent to which Africa has grown its exportsto Asia relative to other regions’ exports to Asia. HasAfrica outpaced these other regions?

Table 4.2 indicates that it has. The table shows theannualized rate of change in exports from variousregions to Asia during the 1991–2001 period for 10SITC product groups. African exports have outpacedother regions’ exports, recording a 10.8 percent an-nual average growth rate, as compared to 7.22 per-cent for Asia’s total worldwide imports. Note that thisrate is higher than that for Asia’s intraregional trade(9.10 percent), which is considered an important driv-ing force of economic development in the region.

By product category, SITC 3 and 9 show strong growth,reflecting increases in oil and gold exports. Primarycommodities in SITC 2 and resource-based process-ing products in SITC 6 are apparently reflected inthe above-average growth rates of those groups. Theimportance of Africa’s small but growing manufactur-ing exports to Asia, discussed in chapter 3, is appar-ently also significant from Asia’s perspective, as theincrease in imports from Africa in SITC 7 and SITC8 has outpaced imports from other regions. Althoughonly a handful of countries including South Africa andNorthern African countries are behind those figures,

Table 4.2Average Annual Change in Asian Imports by Region ofOrigin and SITC Product Group: 1990–2001 (%)

SITC Africa EU U.S. Asia Others World0 3.26 4.26 2.36 3.58 5.01 3.661 5.74 2.57 2.08 7.53 7.01 3.422 5.45 6.49 -1.91 1.11 3.34 1.653 22.19 6.48 -4.02 4.34 5.31 4.774 -3.46 -0.79 1.18 6.13 11.17 5.895 5.51 5.26 3.16 11.11 3.06 6.926 6.46 3.07 1.51 5.86 0.09 4.477 13.96 7.39 8.56 12.54 9.39 10.718 18.12 4.79 8.52 9.66 5.71 8.579 24.25 1.56 1.17 5.07 3.42 3.70 Total 10.80 5.58 5.11 9.10 4.36 7.22



it is nonetheless true that the fastest growing manu-facturing exporters to Asia are found in Africa.

4.2 Top 20 Exports to AsiaTable 4.3 presents a summary of a detailed list ofmajor African exports to Asia by their relative value

Product Exporters ImportersMineral fuelCrude oil (1st, 32.9%) Nigeria (34), Angola (23), Rep. of Congo (17), Sudan, China (23), Korea (22), India (22), Taiwan (21), Japan,

Egypt, Cameroon, Gabon, Niger, Equatorial Guinea Indonesia, SingaporeCoal (10th, 1.5%) South Africa (99) Korea (24), Taiwan (24), Japan (24), India (24), Hong

Kong, ChinaMotor spirit and other Egypt (53), Algeria (35), Morocco, South Africa, Japan (59), Korea (28), Singapore (11), Indonesialight oils (14th, 1.3%) Sudan, Angola, Libya

Metal and nonmetal mineral productsGold (2nd, 7.6%) South Africa (98), Zimbabwe India (64), Korea (19), Hong Kong, China, Thailand, JapanPlatinum (3rd, 5.0%) South Africa (100) Japan (92), Korea, Hong Kong, ChinaAluminum (6th, 3.3%) South Africa (99) Korea (32), Japan (32), Taiwan (13), Malaysia, Thailand,

Indonesia, Hong Kong, ChinaFerro alloy (7th, 3.1%) South Africa (91), Zimbabwe Japan (51), Taiwan (29), Korea (18)Copper (11th, 2.4%) Zambia (57), South Africa (38), Tanzania Taiwan (25), Japan (18), Thailand (17), Korea, Malaysia,

China, India, Singapore, Indonesia, PakistanIron ore (12th, 1.7%) South Africa (99) China (54), Japan (42), KoreaDiamonds (13th, 1.6%) South Africa (60), Rep. of Congo (19), Ghana (18) China (38), Thailand (37), Hong Kong (20), India

Nonmineral primary commoditiesCotton (4th, 3.5%) Cote d’Ivoire (13), Mali (13), Egypt, Togo, Benin, Thailand (23), Taiwan (22), Indonesia (15), India (15),

Zimbabwe, Burkina Faso, Cameroon, Tanzania, Malaysia, Korea, Japan, China, Hong Kong, PhilippinesSouth Africa, Sudan, Chad, Central African Republic,Uganda

Sawlogs (8th, 2.6%) Gabon, Cameroon, Equatorial Guinea, Nigeria, China (57), India (20), Hong Kong (10), Japan, TaiwanCote d’Ivoire, South Africa, Mozambique, Liberia

Pulpwood (16th, 1.1%) South Africa (99) Japan (97), KoreaChemical wood pulp South Africa (100) Indonesia (29), Taiwan (25), Thailand (16), Japan (12),(20th, 0.8%) India (10), China

Agricultural and fisheryCrustaceans & mollusks Morocco (51), Mauritania (20), South Africa (10), Japan (85), Hong Kong, Thailand, China(9th, 2.5%) Madagascar, Mozambique, Senegal, Ghana, GambiaNuts (15th, 1.2%) Tanzania (36), Guinea-Bissau (16), Cote d’Ivoire (14), India (97), Japan

Mozambique, Benin, Kenya, Nigeria, Senegal, GhanaTea (18th, 0.9%) Kenya (83), Tanzania, Rwanda, Burundi, Malawi, Pakistan (95), Singapore, Japan

South AfricaTobacco (20th, 0.8%) Zimbabwe (62), Malawi (25), South Africa, Japan (47), China (25), Philippines, Indonesia,

Tanzania, Zambia Singapore, Malaysia, Hong Kong, Thailand

OtherOrganic acids (5th, 3.3%) Morocco (53), Tunisia (25), South Africa (12), Senegal India (94), China, IndonesiaShips (17th, 1.0%) Liberia (72), South Africa (26) Singapore (62), India (28), Korea, Pakistan

Table 4.3Top 20 Major African Exports to Asia: 1999–2001 Annual Average


as shares of total African exports to the region (seeappendix H for the full list). The table also shows themajor exporters and importers of these products toestablish a pattern of Africa’s exports to Asia. Asiancountries have become important customers of Afri-can products, both of those considered to be indus-trial inputs and of consumer products.


As anticipated, crude oil and gold are the top twoexports from Africa to Asia. These two products ac-count for the basic patterns observed for the corre-sponding one-digit SITC categories, SITC 3 and 9(figure 4.1). A few countries export crude oil to Asia,which accounts for one-third of total African exportsto the region; the largest of these exporters are Ni-geria (33.92 percent of total Africa-Asia oil exports),Angola (23.31 percent), and Republic of Congo(17.32 percent). On the import side, China, Korea,India, and Taiwan import the largest—and almostequal—shares of crude oil from Africa.4 India andChina are experiencing particularly high growth inoil imports from Africa. As figure 4.4 shows, thesetwo countries are relatively more dependent on Af-rica for their oil supplies than are Japan and Korea,for example, which are more reliant on Gulf coun-tries.

Besides oil and gold, other minerals, mining, and re-lated products are key exports, including aluminum,ferro-alloys, iron ore, coal, copper, and diamonds.Industrialized Asian countries such as Japan, Korea,Taiwan, China, Malaysia, and Taiwan are the majorimporters of these metal products. Some specificpoints are noteworthy. India dominates in terms ofgold and diamond imports. Trade in platinum, which

4If more accurate data were available (see footnote 1), India’sshare would likely be higher.

0.0

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Share in total oil imports (%)

Middle East & North Africa Sub-Saharan Africa All Africa

Figure 4.4Origins of Asian Oil Imports: 1999–2001 (Average)


is used for industrial catalysts, is highly concentratedbetween South Africa and Japan. Coal exports fromAfrica are mostly from South Africa.

Africa’s major SITC 2 (crude materials, inedible, ex-cept fuels) exports to Asia include cotton and sawlogs;several African countries lead in the export of theseproducts. Cotton is the fourth-largest African exportto Asia, accounting for over $700 million annually.The main Asian importers of this product includeThailand, Taiwan, Indonesia, India, and Malaysia,each of which has rapidly growing textile and otherlight industries. Although exports in fishery productsare not prominent at the one-digit SITC level, someagricultural commodities such as crustaceans andmollusks (shrimps, lobsters, crabs, octopus, squid,etc.), nuts, and tea are on the top 20 exports list.Asian importers of these products are concentratedin specific countries, which reflects the particular tastesand food cultures of consumers in those countries.Japan buys 85 percent of Africa’s seafood products,reflecting both its traditional food culture and the factthat domestic supplies of these products have becomevery costly in recent years.5 Nuts are mostly importedby India (97 percent), where again local consumersdemand such imports. Almost all tea exported byAfrica to Asia (95 percent) is imported by Pakistan,presumably reflecting the tea distribution networkamong the British Commonwealth countries.

Although not on the top 20 list, there are some non-traditional exports that are being increasingly exportedfrom Africa to Asia. Notably, table 4.4 lists the majorimporters of passenger cars exported by South Af-rica. Asian countries with a relatively higher level ofincome, such as Japan, Taiwan, Hong Kong,Singapore, Macao, and Korea, are among the topimporters of these cars, underscoring South Africa’srole as a major production base serving these Asian

5The fishing quota imposed on octopus in Morocco has driven upthe market price in Japan, creating difficulties for vendors of tako-yaki, the popular baked octopus balls. Ninety percent of theoctopus consumed in Japan is imported from Africa.


markets. Also, as discussed in the chapter 3 (table3.6), a number of Asian countries, including devel-oping countries, are major importers of African hide,a so-called “dynamic export.” Japan and, to a lesserextent, Hong Kong are among the major Asian im-porters of cut flowers from Africa (see table 3.5). Fi-nally, some Asian countries—notably Japan andSingapore—are increasingly importing African gar-ment products, although the volume involved is stillmuch less than that purchased by the EU and UnitedStates (see table 3.4).

Major exports from Africa to Asia can be roughlycategorized into three groups:

● Minerals and mining products, including min-eral fuels such as oil—these are exported by ahandful of countries rich in these natural re-sources.

Table 4.4Major Importers of Passenger Cars from South Africa:2000–02 Annual Average


Average annual Share ofImporter value ($million) total (%)Germany 333.89 20.90Japan 277.70 17.38United Kingdom 275.48 17.24United States 186.19 11.65Australia 166.33 10.41Namibia 128.96 8.07Botswana 84.31 5.28Taiwan 41.13 2.57Hong Kong 34.44 2.16Zimbabwe 31.00 1.94Singapore 29.30 1.83Swaziland 26.26 1.64Austria 13.60 0.85New Zealand 13.02 0.81Zambia 8.65 0.54Malawi 6.07 0.38Kenya 5.63 0.35Mauritius 3.12 0.20Macao 2.91 0.18Korea 2.28 0.14World 1,597.57 100.00

● Agricultural and fishery products—althoughrelatively small in total export value, these prod-ucts constitute a significant part of exports fromnon-oil-exporting countries.

● Heavy manufacturing products—mainly pro-duced by the rapidly growing industrializedeconomy of South Africa, these products pro-vide significant export earnings to the region.

4.3 Major Asian Trade Partnersfor Africa’s ExportsTable 4.3 shows that the leading importers of Afri-can products in Asia are a diverse mix of countries.Although Japan dominates the region as the leadingpartner in overall world trade, this is not true for Af-rica-Asia trade relations. Countries such as China,India, Korea, and Taiwan are significant partners withregard to many high-share African export products.In fact, as shown in figure 4.5, the increase of Afri-can exports to Asia is mainly driven by exports tothese four countries. Japan was the largest importerof African products in the early 1990s, but India andChina had surpassed it by the mid-1990s.6 Table 4.3shows that China, Korea, India, and Taiwan are thelargest importers of crude oil from Africa. Finally,note that, although the share of mineral fuels in Asia’soverall imports from Africa has grown most rapidlysince the beginning of the 1990s, Asia’s large oil im-porters have also increased their imports of non-oilproducts from Africa during this period.

4.4 Trade Complementaritybetween Africa and AsiaIn the previous sections, the growing trade relationsbetween Africa and Asia were characterized in termsof the industries and countries contributing to thisgrowth. This section analyzes the extent to whichAfrica and Asia complement each other in their re-

6In terms of non-oil exports, however, Japan maintained itsdominance as the major importer of African products throughoutthe 1990s.


0

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Value of imports from Africa (million $)

ASEAN

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China

Korea

Taiwan

India

1995

Figure 4.5African Exports to Asia, by Importer: 1989–2000

Notes: The ASEAN countries are Indonesia, Malaysia, thePhilippines, Singapore, and Thailand. All figures are based onpartners’ import data.Source: UN Comtrade.

spective trade profiles. More specifically, thecomplementarity between the export structure ofAfrican countries and the import structure of Asiancountries is assessed—that is, how products that Af-rican countries are relatively strong in exportingabroad coincide with products Asian countries arerelatively dependent on as imports.

Table 4.5 is a matrix of complementarity betweenAfrican countries as exporters and Asian countriesas importers. A complementarity score in the matrixessentially represents goodness of fit of a particularAsian country’s import profile to a particular Africancountry’s export profile relative to the world as awhole, applying revealed comparative advantage(RCA) to African countries as exporters and its im-port analogy to Asian countries as importers.7 In com-

7The accompanying Country Analytical Briefs contain country-and product-specific complementarity analyses using the conceptof RCA and its import analogy. In the briefs, the exported andimported products are ranked in order of revealed advantages.The ranking concordance between the exporter side in Africa andthe importer side in Asia is then analyzed for specific bilateral pairs.

8Some figures are negative due to log transformation of numbersless than 1. The negative index figures simply indicate weaknessof complementarity; they do not mean a reversal incomplementarity.

puting the score, the RCA figures for individual prod-ucts are aggregated, with each product weighted byshare of total exports or imports of the country. Thecomplementarity score is higher if there are particu-lar products for which both countries are, respectively,a significant exporter and importer and have highshares in their respective trade profiles. Appendix Dpresents the detailed methodology for computing thecomplementarity score.

Among Asian countries, India (27.8), Korea (11.8),and Japan (6.3) have strong complementarity withAfrican countries on average; these countries are fol-lowed by Thailand (3.9), Pakistan (3.3), the Philip-pines (1.9), and Indonesia (1.6). Other countries suchas Singapore (0.6), Hong Kong (0.1), Taiwan (0.0),China (-0.3), and Malaysia (-1.2) do not show highcomplementarity.8 The average complementarityscore for the 12 Asian countries studied here is 2.0.The weak complementarity for some Asian econo-mies such as China and Taiwan seems counterintuitivegiven the growing volume of African exports to theseAsian economies. The reason for China’s unexpect-edly low score, for example, is because the countryhas been obtaining raw materials mostly from do-mestic sources until recently. Also, commodity trad-ing represents only a very small portion of well-diver-sified trading countries such as Hong Kong orSingapore, a fact that brings down their comple-mentarity scores.

India’s score is outstanding compared to the rest ofthe Asian countries. India imports a large amount ofimports from Africa, and its dependence on theseimports is quite high. As shown in figure 4.6, Indiahas a significantly higher level of dependence on im-ports from Africa as compared to other Asian coun-tries. This fact certainly drives up the complementarityof the India-Africa trade structure. Specific products


Table 4.5Africa-Asia Trade Complementarity Score Chart

Source: Authors’ computation based on UN Comtrade.

India Korea Japan Thailand Pakistan Philippines Indonesia Singapore Hong Kong Taiwan China Malaysia AsiaAngola 98.2 41.9 20.1 14.2 8.9 7.4 4.3 2.5 0.3 -0.2 -1.4 -4.4 6.9Burundi 4.5 0.3 0.4 0.1 4.8 -0.4 -0.2 -0.3 0.1 -0.2 0.0 -0.2 -0.3Benin 4.3 1.5 0.0 6.4 21.8 0.3 30.6 0.0 -0.2 1.3 0.0 0.2 0.7Burkina Faso 5.1 2.1 0.1 6.3 17.7 0.3 30.7 0.0 -0.1 1.3 -0.1 0.6 0.8Botswana 97.3 -0.1 -0.5 1.9 0.0 0.0 0.0 -1.0 4.2 -0.5 -1.0 -0.6 0.2Cen. Afr. Rep. 95.8 0.0 -0.8 2.5 1.6 0.1 2.8 -1.0 4.1 -0.3 -0.6 -0.6 0.3Cote d’Ivoire 0.5 -0.1 0.0 0.3 1.4 -0.1 1.6 0.0 0.0 0.1 0.1 0.3 0.0Cameroon 30.9 13.5 6.8 5.0 3.8 2.4 2.6 0.8 0.0 0.2 0.5 -1.4 2.4Rep. of Congo 81.2 36.5 17.9 12.2 9.1 6.4 3.8 2.6 0.1 -0.1 -0.9 -3.8 6.1Comoros 0.4 -0.1 0.1 0.0 1.1 0.1 0.8 0.0 0.0 -0.1 0.1 0.2 0.0Cape Verde 0.7 0.4 1.2 0.3 1.8 -0.1 0.4 -0.2 0.7 -0.1 0.7 -0.2 0.2Djibouti 0.3 0.3 0.3 0.1 2.7 -0.1 0.2 0.5 0.0 0.1 0.1 -0.1 0.0Algeria 23.4 17.3 15.6 4.2 6.7 1.9 2.8 1.6 -0.2 0.4 0.0 -1.0 3.7Egypt 21.1 10.3 5.0 3.4 3.0 1.7 2.3 0.8 0.2 0.0 -0.3 -0.9 1.7Eritrea 52.9 8.3 0.1 1.1 7.4 0.8 0.2 -0.5 0.8 0.1 -0.1 2.3 1.4Ethiopia 0.1 -0.2 0.3 0.0 0.4 -0.3 0.0 -0.2 0.0 -0.2 0.0 -0.3 -0.3Gabon 74.4 33.3 16.1 11.3 6.7 6.0 3.5 1.9 0.0 -0.1 -0.1 -3.5 5.6Ghana 7.8 0.3 0.7 0.4 0.8 -0.1 0.1 -0.1 0.3 0.2 0.1 0.2 0.1Guinea 22.2 1.1 0.4 0.8 0.4 0.2 1.1 -0.2 0.8 -0.2 0.7 -0.4 0.1Gambia 83.8 -0.2 0.9 1.7 0.1 0.0 0.1 -1.0 3.6 -0.5 -0.9 -0.6 0.4Guinea-Bissau 35.5 14.0 7.5 5.2 5.1 2.5 2.1 0.7 0.0 -0.2 -0.5 -1.6 2.4Eq. Guinea 78.1 35.4 17.6 12.4 7.1 6.3 3.8 2.0 0.0 -0.1 -0.4 -3.7 6.0Kenya 0.0 -0.2 0.2 0.0 18.2 -0.2 0.1 -0.4 -0.1 -0.2 0.0 -0.2 -0.1Liberia 29.2 -0.3 -0.4 0.3 0.1 -0.2 0.0 4.0 1.1 -0.3 -0.1 2.3 0.1Libya 82.4 38.2 18.5 12.7 10.7 6.7 4.4 2.9 0.0 -0.1 -1.1 -3.9 6.3Lesotho 9.0 -0.5 0.7 0.0 0.0 -0.1 0.0 -0.6 2.8 -0.5 -0.5 -0.3 -0.3Morocco 2.7 -0.1 0.6 0.1 0.9 -0.1 0.1 -0.1 0.5 0.0 0.2 0.1 0.1Madagascar 0.1 -0.2 2.0 0.0 1.3 0.0 0.7 -0.2 1.0 -0.2 -0.2 -0.1 0.1Mali 3.9 2.1 0.0 8.8 24.4 0.3 42.0 -0.3 -0.3 1.6 -0.2 0.1 0.9Mozambique 2.0 0.2 4.1 0.9 2.6 0.0 4.0 -0.3 0.1 0.1 0.0 -0.1 0.6Mauritania 0.0 1.6 9.3 1.9 0.1 0.5 -0.1 -0.4 0.0 -0.2 3.2 -0.5 1.7Mauritius 0.8 0.1 0.7 0.1 0.0 0.0 2.5 -0.3 1.5 -0.3 -0.1 0.6 0.0Malawi 0.0 -0.1 0.4 0.3 5.0 1.6 1.9 -0.2 -0.1 -0.1 -0.1 0.2 0.0Namibia 14.6 0.4 3.2 2.1 0.2 0.0 0.0 -0.2 0.5 -0.1 0.0 -0.2 0.5Niger 47.4 22.0 11.4 7.3 4.6 3.9 2.4 1.2 0.0 -0.2 -0.8 -2.4 3.6Nigeria 94.6 43.7 21.2 14.6 9.0 7.7 4.5 2.6 0.0 -0.1 -1.3 -4.6 7.2Rwanda 18.0 2.6 0.2 0.3 9.0 -0.4 -0.1 -0.3 0.2 -0.1 0.0 0.4 0.2Sudan 45.8 21.1 10.1 7.4 5.2 3.7 3.8 1.2 0.0 0.0 -0.6 -2.2 3.5Senegal 3.2 0.0 3.2 0.6 1.1 0.0 0.9 -0.3 0.0 -0.1 0.0 -0.2 0.4Sierra Leone 39.8 -0.2 -0.8 0.4 -0.7 -0.6 -0.3 -1.0 1.1 -0.8 -0.7 -1.0 -0.5Somalia 0.0 0.0 0.2 0.1 0.7 0.1 0.3 0.1 0.0 0.0 0.0 0.0 0.0S. Tome & Principe 0.0 0.4 3.9 3.1 1.6 -0.1 0.1 0.0 -0.1 -0.2 0.2 0.0 0.6Swaziland 0.8 0.9 0.3 0.5 0.1 2.4 5.4 -0.1 0.4 -0.1 0.1 2.9 0.2Seychelles 0.0 -0.1 4.2 1.0 0.0 -0.1 0.0 -0.4 -0.3 -0.3 0.0 -0.3 0.3Chad 3.7 2.3 0.0 9.0 24.9 0.4 42.8 0.0 -0.2 1.8 -0.2 0.3 1.0Togo 5.0 0.9 0.1 3.4 9.7 0.2 16.3 -0.1 0.0 0.6 0.0 0.1 0.4Tunisia 1.8 0.1 0.3 0.2 0.7 0.0 0.1 -0.2 0.7 -0.2 0.1 -0.2 -0.1Tanzania 2.6 0.1 0.4 0.7 3.1 0.1 2.8 -0.1 0.0 0.1 0.0 0.0 0.0Uganda 0.1 -0.2 0.4 0.3 0.9 -0.2 1.1 -0.2 0.0 -0.1 0.0 -0.2 -0.3South Africa 16.1 2.4 1.2 0.2 1.7 -0.1 0.1 -0.2 0.3 0.4 -0.1 0.3 0.5D. R. of Congo 92.8 1.8 0.2 2.3 0.4 0.3 0.2 -0.8 3.8 -0.4 -0.9 -0.8 0.5Zambia -0.1 2.0 0.0 0.9 0.3 -0.1 1.0 -0.3 0.0 3.1 1.4 0.6 0.4Zimbabwe 2.0 0.7 0.3 0.6 1.9 0.6 3.2 -0.1 0.0 0.4 0.0 0.2 0.1All Africa 27.8 11.8 6.3 3.9 3.3 1.9 1.6 0.6 0.1 0.0 -0.3 -1.2 2.0OilGold, diamondsCotton, textilesSeafood


0

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Share of imports from Africa (%)

2001

Figure 4.6African Imports as Shares of Total Imports to AsianCountries


such as oil, precious metals, and gemstones makeIndia’s complementarity with a few African countriesquite strong.

One caveat in interpreting these score figures is thatcountries with an undiversified export profile that havea high reliance on countries with an undiversified im-port profile tend to have significantly high averagescores.

Certain groups of products are considered to consti-tute the high complementarity in some African andAsian pairs. There are basically four types of prod-ucts that characterize the strong exporter-importermatches between Africa and Asia, which contributesto the higher complementarity figures between somespecific countries. The findings can be verified by look-ing at the product-country specific data that were usedto construct the index figures.

Oil matchesStrong oil-related matches are found between Angola,Republic of Congo, Nigeria, and Sudan on the Afri-can exporter side and India, Korea, and Japan onthe Asian importer side. As shown in the CountryAnalytical Briefs, oil constitutes most of the exportsto Asia from these African countries: Angola (99.6percent), Republic of Congo (93.2 percent), Nigeria(93.3 percent), and Sudan (88.8 percent). Some Af-rican countries have emerged as major oil-producingcountries in recent years. At the same time, with theexception of a few countries such as Indonesia, manyAsian nations are dependent on a foreign supply ofoil—which is indisputably a most integral need forthe numerous manufacturing activities growing upthroughout Asia. The rising standard of living amongthe Asian population also makes for a significantamount of oil consumption. Since oil accounts forthe major portion of Africa’s exports to Asia (one-third of the total export value is from crude oil), theoil trade pattern between Africa and Asia seems tobe influencing complementarity significantly.

Gold-diamond matchesThere is a group of African countries that have sig-nificant complementarity with some Asian countries—most prominently with India—due to their strong pro-file in gold and diamond exports. However, exceptfor Botswana (diamonds, 46.9 percent of exports toAsia) and South Africa (gold, 16.4 percent of exportsto Asia), this type of match is not realized in actualtrade relations between Africa and Asia. As can beverified in the Country Analytical Briefs, other coun-tries with high complementarity scores with India dohave strong export performance in diamonds, butthey mostly export their diamonds to the EU ratherthan to India. Those countries do, however, exportother products to Asia: Gambia (fishery), Central Af-rican Republic (cotton), Sierra Leone (fishery), Eritrea(thermionic, cold cathode, and photocathode tubes),Guinea (oil), Liberia (ships), Lesotho (wool, textileyarn), and Democratic Republic of Congo (base


metal). Thus, the gold-diamond matches are captur-ing overall an unrealized potential in Africa-Asia traderelations.

Seafood matchesAs with gold-diamond matches, another match thatis quite limited to specific countries is seafood.Some Asian countries are known for their tradi-t ional seafood cul ture. There are strongcomplementarities between Mauritania on the Af-rican exporter side and Japan and China (HongKong) on the Asian importer side. Historically, sea-food (octopus, squid, lobster, etc.) has been sourcedfrom neighboring waters. But with rising labor costsand declining harvests in nearby waters, a significantportion of seafood is now either caught in more re-mote waters by domestic fishery vessels or importedfrom other countries. African countries with strongfishery industries such as Mauritius and Madagascarhave somewhat diversified export profiles (e.g., theyboth export garment products). Thus, although theirseafood exports to Asia are growing, they have yet

to drive up their overall complementarity scores withAsia.

Cotton-textile matchesCotton-textile is another significant type of match forAfrican countries in general. Strong matches are foundbetween a group of African countries that includesBenin, Burkina Faso, Mali, Togo, and Chad, and agroup of Asian countries that includes Thailand, Pa-kistan, the Philippines, and Indonesia. The CountryAnalytical Briefs show that cotton accounts for a sig-nificantly high proportion of the Asian-bound exportsof these African countries: Chad (98.2 percent), Mali(96.2 percent), Burkina Faso (83.6 percent), Benin(70 percent), and Togo (64.5 percent). In spite ofsuch dominance in their actual export profiles, cot-ton has not been as influential as oil, diamonds, orgold in terms of driving up country-to-countrycomplementarity scores. One reason is probably thefact that highly priced products such as oil and dia-monds weigh more in the complementary scoreswhich are based on trade values.

37

CHAPTER 5

External Trade Regimes and Africa’s Trade Patterns

This chapter provides an overview of external traderegimes and how preferential arrangements by its trad-ing partners have contributed to an expansion ofAfrica’s exports.

5.1 Africa’s Trade RegimesRecent years have witnessed a proliferation of re-gional trade agreements (RTAs), including bilateral andmulti-party agreements as well as preferential arrange-ments, provided by developed countries to develop-ing countries to facilitate market access. While it isdebatable as to whether RTAs actually enhance glo-bal welfare (box 5.1), it is a fact that they have hadsignificant implications for the trade-related economicdevelopment of developing countries.

Appendix E provides comprehensive data on themultilateral, bilateral, and regional trade institutionswith which African countries are affiliated. The ap-pendix also shows countries’ eligibility status vis-à-visseveral preferential treatments provided by major in-dustrialized countries. World Trade Organization(WTO) membership has been extended to 41 ofAfrica’s 53 countries. Even though membership inthe WTO is expected to provide these countries withmost favored nation (MFN) status, membership itselfdoes not necessarily guarantee a growth in exportearnings for African countries; this is because mostAfrican countries have already been granted prefer-ential treatment under the Generalized System ofPreference (GSP) and accorded tariff rates much lowerthan MFN rates.

5.2 EBA and AGOABased on the belief that export growth could acceler-ate African development, developed countries haveextended preferential market access to African coun-tries with the aim of promoting the continent’s exter-nal trade and thereby facilitating its integration intothe global economy. In particular, the European Union(EU) and the United States have implemented vari-ous measures to facilitate exports from the region.The EU currently extends preferential access to itsmarket under the Cotonou Agreement and the Every-thing But Arms (EBA) initiative (box 5.2). The CotonouAgreement, which replaced the Lomé Conventionfor Africa, the Caribbean, and the Pacific, covers allSub-Saharan African countries; the EBA initiativecovers all African least developed countries (LDCs).

Despite preferential treatment, Africa’s exports to theEU have been stable overall during the past decade.Furthermore, it is considered that the introduction ofthe EBA has had little incremental effect on increas-ing African trade because all industrial and most agri-cultural and fishery products exported to the EU hadalready enjoyed preferential access.1

The United States enacted the African Growth andOpportunity Act (AGOA) in 2000 with the aim of

1Brenton (2003). Also, appendix E of this report summarizes thecoverage of these preferential treatments and average annualchange in export values for African countries over the past decade.As shown in the appendix, there is no direct correlation betweenextension of preferential treatments and increases in exports fromAfrica to the EU.

38 ● ● ● ● ● Chapter 5 – External Trade Regimes and Africa’s Trade Patterns

As world trade has grown in recent decades, so too has the use of regional trade agreements. About 260 RTAs were in

force or under negotiation in 2000, compared to only 20 in 1979. The share of world trade conducted under RTAs has

grown as well, reaching 43 percent in 2000 (WTO 2002); this proportion is expected to exceed 50 percent in 2005.

Clearly, people around the world have come to view RTAs as beneficial and pursue them vigorously. This does not mean

that global trade arrangements (under the aegis of the World Trade Organization) have been neglected; in fact, they have

become more important than ever, with expanding membership and increasingly ambitious aims. But it is worth explor-

ing whether the expansion of regionalism is helping or hurting the goals of multilateralism.

The use of RTAs has spread across all regions, seized on by nations at all stages of development. The initial impetus

for regionalism came from the Western European push in the 1980s for a deeper and broader economic integration,

which ultimately resulted in the European Union. In North America, the United States, Canada, and Mexico signed the

North American Free Trade Agreement in 1994. The 1990s also saw the emergence of Mercosur (1991) in Latin

America, the Association of Southeast Asian Nations Free Trade Agreement (1991) in Asia, and the Southern African

Development Community (1992) and Common Market for Eastern and Southern Africa (1994) in Africa. But parties to

free trade agreements (FTAs) do not necessarily belong to the same geographical region. The United States, for instance,

has signed FTAs with Australia and Singapore. Similarly, the EU has concluded FTAs with Mexico and South Africa.

It is not difficult to see why more and more countries and groups are pursuing RTAs. Much of the original impetus

came from a dissatisfaction with the lack of progress made under the General Agreement on Tariffs and Trade (GATT,

now the WTO), which requires the consent of all members. With high trade barriers around the world, many countries

recognized the potential for improving global welfare by proceeding with trade liberalization on a bilateral or regional

basis. In addition, some countries wished to pursue a deeper integration (covering investment, labor, and harmonization

of rules) that was unlikely to be achieved at the global level, but would be feasible if done selectively.

But RTAs are not always beneficial or benign to global welfare. Some effectively keep out, or discriminate against,

more efficient foreign competitors. Instead of creating more trade, such arrangements produce trade diversion, result-

ing in less specialization and higher cost of production. In addition, the proliferation of RTAs, with multiple agreements

and overlapping membership for individual countries, has added considerable complexity to the global trade environ-

ment, making it difficult for each country to comply fully with all its commitments. For example, one imported item may

be subject to several possible tariff rates, depending on the country of origin and whether certain standards are met.

Is the spread of regionalism actually hurting or slowing the progress of multilateral liberalization? There is as yet no

clear verdict. Critics argue that RTAs adversely affect multilateral goals by distracting attention and diverting energy

from the multilateral process. Moreover, RTAs often exclude problematic sectors, such as agriculture, and thus blur the

focus on the deeper reforms needed at the global level. It is nonetheless clear that RTAs serve important purposes,

including creating competition to the multilateral approach. The potential harm of regionalism can be kept to a minimum

by avoiding new trade barriers to outsiders and including all sectors under each RTA.

Box 5.1Global versus Regional Trade Arrangements

improving economic development and political sta-bility in the region. Overall, the impact of the initia-tive has largely been limited to apparel products andproducts from non-LDC AGOA beneficiaries, whichhave gained preferential treatment beyond that cov-ered by the U.S. GSP. As with the EU’s EBA initia-tive, most African products entering the United States

were already covered by similar preferential treat-ments under the U.S. GSP.

The incremental effects of these new initiatives arethus limited to only a few products; expanding thescope and coverage of GSP programs would essen-tially yield the same effects. In fact, Japan expanded


its GSP in April 2003 to provide duty- and quota-free access to an additional 198 items from LDCs;this means that approximately 93 percent of Japan’simports from LDCs will be duty- and quota-free. Al-though such expansion of GSP coverage is desirable,

it does not necessarily make it apriority for Japan to initiate anAGOA-equivalent program.

Of course, GSPs themselves arenot flawless. Nontariff barriers,such as standards and other “be-hind-the-border” issues, as wellas the concept of rules of origin,continue to restrict African coun-tries’ access to developed coun-try markets. These issues remainto be discussed at various bilat-eral and multilateral trade fo-rums, including the WTO, andrequire further cooperationamong countries for mutuallybeneficial resolution.

5.3Apparel underAGOAThe apparel benefits reaped un-der AGOA have had a tangibleeffect on beneficiary countries’ability to attract foreign invest-ment—especially from Asia—and on promoting trade in thesector.2 Brenton and Ikezuki(2004) summarize the exportperformance of AGOA benefi-ciaries as shown in table 5.1. Itis apparent from the table thatLDC AGOA beneficiaries withapparel benefits have increasedtheir exports considerably to theUnited States (an 80 percent in-crease), while LDC AGOA ben-

2Various studies have been conducted to estimate AGOA’squantitative impact. Ianchovichina, Mattoo, and Olarreaga (2002)use a computable general equilibrium model to estimate impactbased on ex ante simulation. Brenton and Ikezuki (2004) use thenumber of tariff lines liberalized by AGOA to claim that the AGOAapparel preference leads to significant transfers to a small group

In 2001, the EU introduced the Everything But Arms initiative. The EBA regulation

grants duty-free access to imports of all products from the least developed coun-

tries, with the exception of arms and munitions, and without any quantitative

restrictions. Liberalization was immediately implemented except for three prod-

ucts: fresh bananas, rice, and sugar, whose tariffs will be gradually reduced to zero.

Prior to the EBA initiative, the Generalized System of Preference and the Lomé

Convention—the latter of which has since been replaced by the Cotonou Agree-

ment in 2000—had existed to grant developing countries, including African coun-

tries, preferential trade access to the EU. Under these schemes, all industrial prod-

ucts from Africa enter the EU duty- and quota-free; most agricultural products

have been completely liberalized or enjoy preferential access such as duty-free

quotas.

The African Growth and Opportunity Act was signed into U.S. law in 2000 as

the latest in a series of regional initiatives in U.S. trade policy toward Sub-Saharan

African countries. It aims at broadly promoting economic development in Africa,

enabling countries to embrace globalization, and securing durable political and

economic stability. It offers increased preferential access for African exports to

the United States. AGOA benefits are not extended automatically. Rather, the act

establishes a set of eligibility criteria involving economic reforms, rule of law, pro-

tection of human rights, labor rights, corruption, and other matters. Countries

must meet these criteria to be eligible for the AGOA program.

AGOA’s impact is particularly significant for the textile and apparel sectors,

because such items are exported by nearly all Sub-Saharan African countries and

because their tariff and quota barriers are relatively high. AGOA countries enjoy

preferences only if they meet strict rules of origin. Apparel products assembled

and even further processed from fabrics and yarns made in the United States are

unrestricted, whereas those assembled from regional fabrics made from U.S. or

African yarn are subject to a cap of 1.5 percent of overall U.S. apparel imports; this

cap will increase to 3.5 percent by 2008 (Office of the U.S. Trade Representative

2003). For LDCs with per capita gross national product under $1,500, unrestricted

access has been granted even for apparel assembled in those countries using

foreign fabric or yarn until 2004, whereupon they will be subject to the same

restrictions cited earlier. Thus, at least until 2004, LDCs in Africa can enjoy duty-

free access to the U.S. apparel market as long as their products are assembled in

their own countries.

Box 5.2EU and U.S. Preferential Trade Measures for African Countries

40 ● ● ● ● ● Patterns and Potential of Africa-Asia Trade and Investment

eficiaries without apparel benefits have moved in theopposite direction (a 30 percent decrease in exports).A similar pattern exists for non-LDC non-oil-import-ing countries, albeit with a lesser degree of deviationbetween those countries with and without apparelbenefits. (Oil-exporting AGOA countries have in-creased their exports to the United States primarilyin crude oil during the same period; this presumablywould have happened without AGOA.) In fact, thepositive effect from the apparel benefit is the mostand perhaps only visible gain in African exports re-sulting from AGOA.3

AGOA’s apparel benefits have had such visible im-pacts because general tariff and quota barriers arerelatively high for these products in accordance withthe Multifiber Arrangement (MFA). Absent the quotasystem of the MFA regime, the boom in these prod-ucts in Africa triggered by AGOA would have beenmuch less pronounced, given that it has been drivenby the rapid influx of capital from Asian countries.Thus, it is the combination of AGOA and MFA—andnot AGOA alone—that has created a window of op-portunity for some African countries. And it is ques-tionable whether this window remains open andwhether the opportunity is in any way sustainable.Because many African countries—notably South Af-rica and Mauritius—had been exporting apparel andtextile products before the year 2000, Africa alreadyhad some industrial bases in the sector.

of beneficiaries but that, for most countries, AGOA’s overall impactis likely to amount to no more than one-tenth of 1 percent of

gross domestic product at present.

3Appendix G ranks countries by growth in export of garmentproducts (SITC 842–846), highlighting the countries eligible forAGOA’s apparel and textile benefits. Because AGOA wasintroduced in 2000, changes, if any, should be observed bycomparing the years before and after its introduction. As theappendix shows, changes have clearly occurred in some countriesafter 2000. For example, growth in apparel and textile exportsfrom Namibia, Tanzania, and Botswana shifted from negative topositive from 2000–01 to 2001–02; and Ethiopia, Kenya, andLesotho have registered high rates of positive changes from 1999to 2002.

Table 5.1Export Performance of AGOA Countries

U.S. share of Growth in Growth intotal exports total exports U.S. exports

(2002) (1999–2002) (1999–2002)LDCs withoutapparel benefits 6.4 2.6 -30.2

LDCs withapparel benefits 13.7 19.5 80.1

Non-LDC non-oilexporters withoutapparel benefits 8.2 15.4 -16.8

Non-LDC non-oilexporters withapparel benefits(liberal rules oforigin) 6.6 21.5 38.0

Non-LDC non-oilexporters withapparel benefits(restrictive rulesof origin) 13.0 11.1 30.9

Source: Brenton and Ikezuki (2004).

Most of the countries that have taken advantage ofthe AGOA apparel and textile benefits are located inSouthern and Eastern Africa. Presumably, this is insome way correlated to the rapid inflow of foreigndirect investment (FDI) from Asian economies suchas India, China, and Taiwan in response to AGOA’sintroduction. Geographic proximity, accessibility tohub ports (e.g., Durban), and language (that is,Anglophone) may have attracted Asian investmentmore to Southern and Eastern Africa than to Centraland Western Africa.

There are two caveats behind this growth of appareland textile exports in some African countries. One isthat the growing apparel and textile exports of Afri-can countries are still small in absolute terms as com-pared to the amounts exported by countries in otherregions (box 5.3). Apparel and textile industries inAfrica are in their infancy. Another caveat is that highgrowth in production does not necessarily imply anincrease in profitability. Compared to other regionssuch as Asia, production costs in Africa remain high


Box 5.3Big in Africa, Big in the World? Africa’s Apparel and Textile Exports

Although growing rapidly, the apparel and textile industries in African countries are still small compared to the top

producers in other regions. The following table clearly shows that Africa’s major apparel and textile exporters are in fact

not very prominent in a worldwide ranking. For apparel products, Tunisia and Morocco barely make the top 20. And

Mauritius, the leading exporter in Sub-Saharan Africa, ranks only 40th worldwide. China, Italy, Hong Kong, and Mexico

each export more apparel products than all 53 African countries taken together. Twenty-six countries—including 12

Asian countries (China, Hong Kong, Indonesia, Korea, Thailand, Malaysia, Taiwan, Philippines, Sri Lanka, and Pakistan)—

export more apparel than the entire Sub-Saharan African region. A similar pattern holds for textile products, for which

Africa’s share of exports is even less than for apparel products.

Top Apparel and Textile Exports (Annual Average 2000–02)

Apparel TextileAnnual average trade Share Annual average trade Share

Rank Country volume ($million) (%) Rank Country volume ($million) (%)1 China 54,606.34 25.92 1 China 17,907.43 12.222 Italy 11,670.74 5.54 2 Italy 11,719.69 7.993 Hong Kong 11,287.84 5.36 3 United States 10,756.49 7.344 Mexico 8,549.53 4.06 4 Taiwan 10,100.44 6.89

All Africa 8,440.44 4.01 5 Germany 9,997.06 6.825 Turkey 7,810.76 3.71 6 Korea 9,383.02 6.406 India 5,828.04 2.77 7 Japan 6,418.13 4.387 Germany 5,412.97 2.57 8 France 5,878.40 4.018 Bangladesh 5,082.75 2.41 9 India 5,590.09 3.819 United States 4,869.50 2.31 10 Belgium 4,770.41 3.2510 Indonesia 4,840.38 2.30 11 Pakistan 4,224.30 2.8811 Korea 4,598.75 2.18 12 United Kingdom 3,969.63 2.7112 France 4,475.86 2.12 13 Turkey 3,398.36 2.3213 Thailand 4,162.50 1.98 14 Netherlands 3,326.22 2.2714 Romania 3,372.78 1.60 15 Hong Kong 3,280.24 2.2415 Malaysia 3,128.53 1.48 16 Spain 2,869.28 1.9616 Taiwan 3,103.07 1.47 17 Indonesia 2,807.89 1.9217 Tunisia 2,899.00 1.38 18 Canada 2,262.98 1.5418 United Kingdom 2,797.47 1.33 19 Mexico 1,899.56 1.3019 Portugal 2,689.08 1.28 20 Free Zones 1,775.39 1.2120 Morocco 2,672.32 1.27 21 Thailand 1,743.54 1.1921 Philippines 2,656.08 1.26 22 Portugal 1,511.07 1.0322 Honduras 2,577.20 1.22 23 Switzerland 1,507.78 1.0323 Sri Lanka 2,559.55 1.21 All Africa 1,431.33 0.9824 Dominican Republic 2,389.85 1.13 24 Austria 1,413.09 0.9625 Pakistan 2,221.95 1.05 25 Czech Republic 1,295.05 0.8826 Netherlands 2,180.42 1.03 26 Malaysia 1,220.89 0.83

Sub-Saharan Africa 2,178.78 1.03 27 Brazil 828.50 0.5727 Belgium 2,056.40 0.98 28 Poland 735.41 0.5028 Poland 2,032.24 0.96 29 Denmark 730.96 0.50

30 Sweden 663.64 0.4540 Mauritius 922.37 0.44 31 Australia 626.41 0.43

32 Israel 616.31 0.4246 Egypt 689.64 0.33 Sub-Saharan Africa 614.92 0.42

33 Iran 506.94 0.3561 South Africa 385.80 0.18 34 Ireland 492.16 0.34

35 Egypt 482.52 0.3364 Madagascar 351.46 0.17

41 South Africa 356.51 0.2471 Lesotho 244.67 0.12

53 Tunisia 204.46 0.14World 210,703.78 100.00 World 146,595.39 100.00



due to low labor productivity and high logistical costs.Unilateral preferential measures such as AGOA couldprovide visible opportunities for African countries.Such measures alone do not make for a substantialtransformation of the economies and industries inAfrican countries.

5.4 Deeper Economic Integrationand Africa’s Proactive EffortsWhile the merits of unilateralpreferential tariff and quota treat-ments, which focus on the liber-alization of the movement ofgoods, are essentially subsumedunder GSPs, deeper bilateral andinterregional economic integra-tion initiatives—such as FTAs andeconomic partnership agree-ments—could potentially providenew and additional opportunitiesfor African countries to enhancetheir trade activities.

The EU already has FTAs withNorthern African countries andwith South Africa. The UnitedStates has initiated an FTA ne-gotiation with Southern AfricanCustoms Union (SACU) coun-tries. On a broader scale, the EUhas initiated discussions with Af-rican, Caribbean, and Pacificcountries to form economic part-nership agreements as a follow-up to the Cotonou Agreement.Similarly, the United States hastrade and investment frameworkagreements with the West Afri-can Economic and MonetaryUnion and the Common Marketfor Eastern and Southern Africa,as well as with the individualcountries of Nigeria, Ghana, andSouth Africa.

The expansions of scope and the depth of economicintegration provide multifaceted windows of oppor-tunity for African countries, encompassing not onlyfree movement of goods and services, but also otheraspects of market access and economic integration.These latter include investment and behind-the-bor-der issues such as standards and competition policies(box 5.4).

Box 5.4The Expanding Scope of Free Trade Agreements

As global trade barriers have become progressively liberalized, the focus of inter-

national trade agreements has shifted away from what is traditionally called “trade,”

or the exchange of physical goods. Since the 1990s, the scope of international

agreements has expanded significantly to include services (or “invisible trade”),

the cross-border movement of investment (FDI), and labor. This is a significant

change, since services represent about 20 percent of total world trade, and the

value of FDI in some cases exceeds export revenue. This expanded scope means

that FTAs facilitate much deeper economic integration than is suggested by the

term “free trade agreement.”

The move toward broader FTA scope and coverage is evident at all levels.● At the global level, WTO rules were broadened under the Uruguay Round

in 1994 to include the removal of barriers to services and reduce subsi-

dies; investment became part of the agenda somewhat later with the Doha

Round in 2001.● At the regional level, major agreements such as the EU Single Market Agree-

ment and the North American Free Trade Agreement provide for the re-

moval of barriers on investment, freer movement of personnel, and har-

monization or cross-recognition of policies and standards.● At the bilateral level, the free trade agreement between Australia and the

United States, concluded in February 2004, is a good example of the new

trend toward deeper integration. Each country has agreed to provide an

open and secure environment for investors from the other country. The

agreement also covers cross-border trade in services, financial services,

telecommunication, and competition policy, as well as government pro-

curement.

In the context of Africa, the members of the SACU (Botswana, Lesotho,

Namibia, South Africa, and Swaziland) entered into FTA negotiations with the

United States in June 2003, as a substantive follow-on to the South Africa-U.S.

Trade and Investment Framework Agreements. African countries are also, as mem-

bers of the Africa, Caribbean, and Pacific group, at an advanced stage of negotiation

for economic partnership agreements with the EU.


Regional integration initiatives within Africa play apotentially significant role in facilitating intraregionaleconomic integration, which is much needed to en-hance the production and trading capability of Afri-can countries, particularly of small and land-lockedcountries (see box 3.3).

It is clear that favorable inter- and intraregional traderegimes for deeper economic integration will helpAfrican countries tap into and develop their indus-trial potential. However, they alone do not guaranteethe full benefits of export expansion. These traderegimes must be supplemented and complementedby the proactive efforts of African economies to buildtheir local industrial capacities to respond to rapidlyincreasing external demands and provide a business-enabling environment, accompanied with a strongcommitment on the part of their governments.

5.5 Market Access and TariffEscalation in Asian CountriesWhile African countries need to take proactive mea-sures in order to realize the full benefits of preferen-tial schemes extended by some developed countries,the issue of market access is stilla significant concern to Africanproducers. As they look to ex-pand their Asian export oppor-tunities in terms of both volumeand value-added, they need toconsider Asia’s specific marketaccess conditions. These condi-tions are much more favorableto African exports than it mightappear at first glance. Nonethe-less, the scope for improving ac-cess—and thus expanding tradeand investment—remains sub-stantial. Asian countries couldassist in this effort by implement-ing such reforms as flattening tar-iff escalation and tariff peaks andby adopting new and

nonreciprocal duty-free arrangements for Africanexports.

Like the rest of the world, Asia’s tariff structure tendsto be more liberal and less restrictive as level of de-velopment (or per capita income) rises. (For a snap-shot of tariff rates, see table 5.2.) As India and Chinaare the largest countries in the region, with a totalpopulation of more than 2 billion, it might be as-sumed that their trade regimes determine marketaccess conditions for Asia as a whole. That percep-tion, however, is at some variance with reality:

● Most Asian countries have either relatively lowrates of protection or completely free trade. In-donesia and Malaysia, for example, have lowertariffs than most countries at their respective lev-els of development. Furthermore, the economiesof Hong Kong, Singapore, and Macao, whichtogether have a gross domestic product of $230billion, historically have applied no tariffs on im-ported goods. The low levels of protection in Asiaare augmented by a network of bilateral and re-gional free trade agreements that further expandtrade.

SITC Asiagroup China India Indonesia Japan Korea Malaysia Singapore average0 31.77 36.58 5.14 5.69 7.02 1.15 0.00 11.651 34.06 36.87 5.08 1.27 16.53 0.00 18.592 2.24 9.31 0.26 0.08 4.20 0.10 0.00 2.323 7.09 28.60 0.00 0.17 4.78 0.38 0.00 5.044 56.77 44.67 5.00 1.04 8.00 3.21 0.00 24.975 10.24 33.34 3.73 0.05 6.87 1.23 0.00 22.226 6.12 28.48 2.27 0.63 3.74 1.47 0.00 3.607 14.09 29.35 0.40 0.00 2.84 6.30 0.00 5.598 27.69 32.37 10.64 5.33 8.24 2.59 0.00 8.479 6.25 35.00 5.78 0.00 3.00 0.06 0.00 34.14

Table 5.2Average Applied Tariff Rates of Asian Countries on Imports from Africa, by SITCProduct Group (%)

Notes: Average applied MFN rates are weighted by imports from the 53 African countries toindividual Asian countries. All tariff rates used are for 2001, except for Korea, for which1999 rates are used. The Asia average is the average rates for the 12 Asian countriescovered by this study.Source: WITS analysis of UNCTAD TRAINS and UN Comtrade.


● Japan has relatively open markets in line withthose of the United States and EU. Restrictionson access to Japan mainly involve a few agricul-tural products, including rice, which enjoys largedomestic subsidies. Furthermore, Japan’seconomy accounts for two-thirds of Asia’s grossdomestic product. If the Asian market were tobe illustrated by a single country, Japan might bethe most representative.

This openness notwithstanding, Asia’s tariff structure,like that of all other countries in the world, consistsof many peaks and sharp escalations. Raw materialscan be imported by domestic industries at relativelylow tariff rates, but increasingly higher rates are im-posed on imported processed or finished products.This cascading pattern of tariff rates is especially pro-nounced in China, India, and Korea (table 5.3). Re-cent multilateral efforts to reduce tariffs on industrialproducts have cut the averagerates on industrial goods. But asignificant array of tariff peaksand escalations remains, espe-cially on sensitive, labor-intensivemanufacturing products such astextiles, garments, and footwear.

These escalations and peakshave major implications for trad-ing relations between Africa andAsia. For one thing, the marketsfor Africa’s manufactured prod-ucts are much more restrictedthan those for primary products.Trade in manufactured productsis thus constrained. More signifi-cantly, incentives for investing inAfrica’s processing facilities arethereby undermined. Foreignand local investors concentrateon traditional products, therebylimiting Africa’s prospects formoving up the technological lad-der.

Although trade and investment have grown rapidlybetween Africa and Asia, substantial opportunitiesremain. A win-win approach open to most Asiancountries would be to flatten tariff peaks and escala-tions; this could be accomplished by capping tariffsacross the board at 15 percent. Trade and invest-ment options would be significantly expanded as Asianinvestors relocated legacy industries to Africa whileretaining access to Asian markets. The more advancedAsian economies, including Japan, Korea, and themembers of the Association of Southeast Asian Na-tions, could consider nonreciprocal duty-free arrange-ments to boost investment and employment in Sub-Saharan Africa—an arrangement modeled on theEU’s Everything But Arms initiative and the U.S.African Growth and Opportunities Act. Consumersin Asia would benefit from the resulting expandedchoice and lower prices.

Table 5.3Examples of Tariff Escalation in Asian Countries (%)

Notes: Average applied MFN rates are weighted by imports from the 53 African countries toindividual Asian countries. All tariff rates used are for 2001, except for Korea, for which1999 rates are used. The Asia average is the average rates for the 12 Asian countriescovered by this study.Source: WITS analysis of UNCTAD TRAINS and UN Comtrade.

AsiaSITC Product China India Indonesia Japan Korea avg.263 Cotton 90.00 5.06 0.02 0.00 1.00 2.736513 Cotton yarn 9.12 20.00 5.00 2.88 8.00 8.43652 Cotton fabrics, woven 17.00 34.06 10.00 4.68 10.00 19.2184512 Jerseys, etc., of cotton 25.00 8.11 13.00 2.868462 Undergarments, knitted 21.76 35.00 10.02 13.00 8.29211 Raw hides/skins (except furs) 14.00 0.04 0.00 0.00 2.00 0.86212 Raw furskins611 Leather 11.44 25.00 1.28 0.96 5.00 9.22612 Manufactures of leather 23.26 35.00 5.00 6.18 8.00 2.86613 Tanned furskin 20.00 7.00 5.00 8.60222 Oil seeds 7.00 35.00 4.87 0.77 40.00 0.88423 Vegetable oil 74.92 44.94 0.00 8.00 42.590721 Cocoa beans 9.60 35.00 5.00 0.00 5.00 4.070722 Cocoa powder 19.00 35.00 15.7707111 Unroasted coffee 15.00 3.33 0.00 2.00 0.0607112 Roasted coffee 31.00 5.00 8.59 8.00 8.12333 Crude oil 0.00 0.00 5.00 3.98334 Oil products 8.82 35.00 1.96 2.12 5.72 3.45

45

CHAPTER 6

Implications of Africa-Asia Trade Relations for Africa’sOverall Trade Strategy

This chapter discusses the major implications of thegrowing trade relations between Africa and Asia.Specifically, it looks at how this trade relationshipwill contribute to:

● Overall export expansion for African countries.

● Market diversification for the primary commod-ity exports on which African countries rely.

● Product diversification in the manufacturing sector.

6.1 Overall Export ExpansionAfrica’s total trade values in nominal terms increasedby 3.7 percent annually over the period 1990–2001(see table 3-1). Exports from all Africa to Asia grewby 10.06 percent annually over the same period. Fig-ure 6.1 shows the change in the share of exportsfrom all Africa consumed by each trading partnergroup between the periods 1990–92 and 1999–2001. Based on the 1990–92 average, Asia ac-counted for 10 percent of total exports from Africa,which increased to 16 percent when calculated basedon the 1999–2001 average. The increase in Asia’srelative weight as Africa’s export partner remains evenwhen oil is excluded. All non-oil exports from Africato Asia amount to $13 billion (1999–2001 average),which is about 20 percent of Africa’s total non-oilexports and an increase from 15 percent in the early1990s.

Thus, Asia clearly contributes to the expansion ofAfrica’s exports in the aggregate. Asia’s increase in

share as a destination for African exports underscoresthe importance of understanding patterns of Africa-Asia trade within the overall export expansion of Af-rican countries. Setting aside the issue of terms oftrade, an increase in exports in terms of value is ba-sically an increase in export earnings, which shouldbe considered a viable first step toward promotingmore growth-oriented trade relations between the tworegions.

6.2 Market Diversification:Complementarity of Africa’sSupply and Asia’s DemandOverall export expansion brings an immediate ben-efit from foreign exchange earnings, but the next

6 910

1617

19

6452

4 5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

African exports,1990–92 average

African exports, 1999–2001 average

Africa

European Union

United States

Asia

Other

Figure 6.1Change in Share of African Exports by Trading Partner:1990–92 to 2999–2001

Note: All figures are based on partners’ import data.Source: UN Comtrade.

46 ● ● ● ● ● Chapter 6 – Implications of Africa-Asia Trade Relations for Africa’s Overall Trade Strategy

question is how such earnings from trade can be ex-panded in more structured ways. Analyzing the Asiancontribution to African countries’ overall export ex-pansion reveals that Asia contributes to Africa’s ex-port diversification in two important ways: in termsof destined markets (market diversification) and interms of products (product diversification). Trade incommodities should not be underestimated in build-ing export-led growth strategies as it still constitutesthe most solid foundation for production activities inAfrica and the core business of many countries. Eventhough their scope of value creation is limited com-pared to manufactured products, primary commod-ity sectors are large-scale industries in Africa in termsof employment. Because these characteristics are un-likely to change in the short run, no realistic trade-ledgrowth strategies can be defined without addressinghow to enhance earnings from commodity exports.

Market diversification is particularly relevant to pri-mary commodity exports, which are considered tobe the traditional exports of most African countries.Unfavorable decreases in the prices of their commodi-ties over the past decades have lessened the magni-tude of export earnings for primary commodity ex-porters in Africa; additionally, African countries haveexperienced difficulty in expanding their exports inreal terms because of stagnant demand in their exist-ing export destinations. By exploring—and exploit-ing—markets in Asian countries, where there is un-saturated rising demand for primary commodities, andby establishing new market relations with them, Afri-can exporters can find new opportunities to expandtheir exports of these products. This is clearly indi-cated in the complementarity score discussed in chap-ter 4, where strong complementarity between Africa’ssupply capacity and Asia’s demand exists for severalprimary commodities.

As discussed earlier, the expansion of Africa’s exportsto Asia during the 1990s was mainly driven by ex-ports of primary commodities (see table 4.3). It istherefore quite logical to form an export expansionstrategy for African countries that diversifies their des-

tined markets by targeting untapped demand for prod-ucts for which African countries already have well-established supply bases. There is no doubt that in-creased demand in terms of both number of tradepartners and volume of product required will bringenormous benefits to suppliers. Such an increase indemand will be forthcoming if African suppliers ef-fectively connect to emerging markets in Asia, in-cluding China and India.

There are two ways in which African exporters caneffectively meet rising demand in Asia. First, Africais an important supplier of raw materials and fuels toAsian industries. Endowed with rich natural resources,Africa supplies essential minerals and mining prod-ucts to growing manufacturing sectors in Asia, whichincreasingly demand raw materials and energy re-sources to support production. Second, Africa is animportant supplier of consumption goods such as foodto rising consumer populations in Asia. Asia is themost populated region in the world, and the averageincome level of its population is increasing more rapidlythan in other developing regions. Growing purchas-ing power in Asia provides a new set of opportuni-ties for African food producers to expand their exports.

Supplying raw materials and energyresources to manufacturing sectors in AsiaNatural resource–based products, such as mineralsand mining products, are relatively homogeneous onthe supply side due to their nature as endowed re-sources and have high substitutability on the demandside due to the presence of alternative resources andtechnological advancement. This difference betweensupply and demand makes the market mechanismmore demand-driven. Despite this characterization,exporters of such products can still implement pro-active strategies from the supply side by exploringnew markets with untapped potential, thereby broad-ening their customer base. This is an effective way tooffset negative impacts from more established traderelations with traditional customers in industrializedcountries.


This approach could be interpreted as a way to diver-sify the risk associated with economic fluctuationamong partner countries, but by diversifying the typesof customers, exporters could locate additional un-saturated demand for their products. Like incomelevel, production techniques and technology varyamong countries. What is obsolete in industrializedcountries is not necessarily obsolete in developingones. As Asia’s industrial sectors continue to grow,they will need a seamless supply of raw materials andenergy resources. African exporters can use this win-dow of opportunity to develop new Asian marketsfor their commodities. The Asian countries with ris-ing manufacturing sectors, such as China, India, Ko-rea, Taiwan, and members of the Association ofSoutheast Asian Nations (ASEAN), are increasinglyimporting industrial raw materials and energy re-sources, which provide potentials for African coun-tries to tap.

Figure 6.2 illustrates how an increase in an economy’sper capita gross domestic product (GDP) is associ-ated with an increase in oil imports among selectedAsian countries. Using the oil import data of Asian

0

1

2

3

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5

6

7

8

9

0 2 4 6 8 10 12

Per capita GDP (log)

Per capita oil imports (log)

China

India

Japan

Korea

Taiwan

ASEAN

Figure 6.2Per Capita Oil Imports and GDP of Asian Countries

Notes: Data are for 1980–2001. The ASEAN countries areIndonesia, Malaysia, the Philippines, Singapore, and Thailand.Sources: UN Comtrade, World Bank World DevelopmentIndicators, and IMF Commodity Price Statistics.

countries for the past 20 years, per capita oil im-ports (quantity) for individual countries in specific yearsare plotted against per capita real GDP, again forindividual countries in specific years. Taking into ac-count the different development stages of Asian coun-tries, the plots clearly show a positive correlation be-tween the two variables. An upward sloping concavecurve can be drawn based on the plots, which indi-cates that per capita oil imports are increasing at adecreasing rate with per capita real income. Importsare almost zero when a country is very poor. Butonce a country gains momentum from economicgrowth beyond some critical income level, oil importsrise very sharply (e.g., India and China). Consump-tion of imported oil continues to grow with industrial-ization (e.g., Korea, Taiwan, the ASEAN countries).As income level saturates, consumption growth is sta-bilized (e.g., Japan).

One widely accepted view is that countries shouldnot rely excessively on exports in these products be-cause of unpredictable price changes and the risk ofloss in export earnings. This concern, although valid,should not make countries shy away from opportuni-ties to attract foreign investment and expand exportsin these sectors. As the examples of Botswana (dia-monds) and South Africa (gold) clearly show, resource-rich countries can use their natural endowments as aviable first step toward increasing export earnings,attracting foreign investment, and effectively reallo-cating economic resources for other sectors in orderto diversify the structure of production and exports.Botswana and South Africa have successfully main-tained good governance and management policiesover their natural resources. It is also recognized thatproper governance in natural resource managementis critical to helping countries maintain political sta-bility and in facilitating efficient distribution of re-source-based income in the economy (box 6.1). Theyalso implement sound macroeconomic policies—suchas avoiding external debt and excessive public invest-ment during boom periods—which help their econo-mies reallocate export earnings from natural resourcesto strengthen production sectors.


Recent World Bank research on the causes of conflict and civil war finds that

those countries most likely to be blighted by conflict are those whose economies

depend heavily on natural resources. Proper governance in natural resource man-

agement is critical to helping such countries avoid political instability and in facili-

tating efficient reallocation of earnings from natural resources to longer term

development programs.

Current policies among various African countries suggest two key elements

in successful governance of natural resources:● Transparency of revenue information.● The involvement of international organizations, such as the World Bank

and the International Monetary Fund (IMF), in developing these policies.

Botswana is a primary example of how a government’s fairly open disclosure

policy of revenue information from natural resources (in this case, diamonds) has

supported stable governance over these resources, allowing the country to real-

locate its earnings from the natural resources to longer term development pro-

grams.

Angola borrowed heavily, and at a premium, over the last decades from the

international market, using future oil revenues as collateral. Its growing debt bur-

den caused the Angolan government to turn to the IMF and the World Bank. The

resulting oil diagnostic program entailed IMF monitoring of the Angolan

government’s oil revenues, improving transparency in the government’s oil devel-

opment policy.

The Chad-Cameroon Petroleum Development and Pipeline Project exempli-

fies the use of conditionality in attracting foreign investment on a natural resource

development project. One of the Majors has agreed to invest in the project, on

the condition that the Chad government sign an agreement with the World Bank

and IMF arranging for a large portion of the government’s oil revenues to go to

priority development projects. Consequently, the government passed a law that

requires 10 percent of revenue to be invested in a future generations fund, and

dedicates 80 percent to health, education, and vital infrastructure.

Source: Bannon and Collier (2003).

Box 6.1Governance in Natural Resource Management

Supplying food and other consumptiongoods to Asia’s rising consumer populationsAgricultural, fishery, and other food-related commodi-ties have characteristics of high homogeneity com-pared to manufactured products. Thus, exporters ofsuch commodities face constraints in expanding theirexports in the saturated markets of industrialized coun-tries. Food-related commodity producers could still

explore the possibility of expand-ing exports in such markets bydifferentiating the product char-acteristics, exporting products atmore processed levels, or devel-oping production processes ca-tering to emerging tastes in high-income countries (for example,organic foods). However, thescope of such differentiation isoften limited in the short run be-cause of the established structureof the industry organization.Many exporters also lack suffi-cient capacity to develop moredifferentiated products.

As in the case of natural resourcecommodities, establishing newtrade relations with Asia—thereby diversifying their des-tined markets—is an effectiveway for African exporters offood-related commodities to ex-pand exports. Food products areusually characterized as productswith low income elasticity—meaning that the demand for theproducts increases at a muchslower rate than does income.Low income elasticity is oftenconsidered the main reason forthe stagnant demand for the pri-mary commodities exported byAfrican countries. As mentionedearlier, consumers in Asia’s de-veloping countries are rapidly in-

creasing their purchasing power. Building new traderelations with such countries can help African export-ers overcome the constraint of low income elasticity.In fact, given the low income elasticity of food de-mand, expanding trade with new partners in Asiawill have more significant consequences than expand-ing sales within existing saturated markets. Figure 6.3


shows how Asian countries—particularly India andthe five ASEAN members—are already increasingtheir imports of food from Africa.

The agricultural commodities that appear in the listof major African exports are either nonessential orexotic. Nonessential agricultural commodities such ascoffee and cocoa, or exotic commodities such as fruitsand nuts, tend to be more elastic with regard to in-come than essential food items such as cereals. De-mand for such products rises with income. And itrises more rapidly when the absolute level of incomeis relatively low. Using the example of coffee, box6.2 discusses in more detail how Asian countries pro-vide potential market opportunities for African ex-porters. Potentials exist not only in countries such asJapan, where people with a higher level of incomethan other Asian countries consume more coffee percapita, but also in countries such as China and India,where demand for coffee is rising faster.

6.3 Product Diversification inManufacturing SectorsAnother important aspect of Asia’s partnership withAfrica is related to the more traditional concept of

diversification, namely diversifying the line of exportproducts away from concentrated exports in primarycommodities. Asia contributes to Africa’s product di-versification in the export structure by supplying nec-essary materials and capital goods for growing manu-facturing sectors. Africa’s total export earnings frommanufacturing products doubled during the 1990s to$31 billion (1999–2001 average). Europe and theUnited States have been significant markets forAfrica’s manufactured products. Currently, the Euro-pean Union (EU) accounts for about 65 percent oftotal African manufacturing exports, and the UnitedStates accounts for about 12 percent. Although theEU share is dominant, African exports to the UnitedStates grew by 236 percent during the 1990s. Asmentioned earlier, the EU and the United States nowprovide enhanced market access opportunities toAfrican countries through preferential measures, in-cluding the African Growth Opportunities Act (AGOA)and the Everything But Arms initiative. Although thesemeasures cover a wide range of eligible products,exporters generally look to basic, labor-intensive,manufactured products such as textiles and apparelin exploiting these opportunities.

Africa’s exports of manufactured products to Asia arein no way comparable in size to its exports to Europeor the United States. Nonetheless, Asia is emergingas an important partner in Africa’s quest for productdiversification in two ways. The first and most impor-tant way is that Asia is helping bring Africa to theglobal supply-chain mechanism in manufacturingproducts. Asian countries are important suppliers ofnecessary inputs for Africa’s manufacturing sectors,particularly the textile and apparel sectors. Table 6.1identifies major exports from Asia to Africa; it sum-marizes the more detailed table of major African im-ports from Asia at the four-digit Standard Interna-tional Trade Classification (SITC) level included asappendix I. From the table, it is clear that the rawand intermediate materials of textile and garmentproducts figure prominently among Africa’s majorimports from Asia. China, Taiwan, India, Pakistan,and Korea provide a significant amount of various

0

200

400

600

800

1,000

1,200

1,400

1,600

Value of food imports from Africa (million $)

1989

1990

1991

1992

1993

1994

1996

1997

1998

1999

2000

1995

2001

ChinaIndia

Japan

KoreaTaiwan

ASEAN 5

Figure 6.3Trends in Asia’s Food Imports from All Africa



Coffee is one of the major agricultural commodities Africa exports to the world. It is a nonessential food item and has

more income-elastic demand than essential food items, so demand rises as income rises. Moreover, coffee’s income

elasticity decreases with level of income. In other words, the marginal increase in demand for coffee with an increase in

income is larger when the absolute level of income is lower. To illustrate this point, annual per capita coffee imports by

Asian countries from 1980 to 2001 were plotted against the levels of per capita income of corresponding countries in

the corresponding years in the figure below. The figure clearly shows the pattern of decreasing income elasticity:

demand for coffee increases as countries become richer, with a caveat that growth of coffee demand is “faster” when

level of income is low. (The slope of the curve in the figure represents income elasticity of demand for coffee imports.)

Coffee imports by Japan are in a mature phase, in the

sense that coffee has low income elasticity. However, Japa-

nese imports—as well as increases in these imports—

are of significantly higher amounts in absolute terms than

are imports to the rest of Asia. India and China have im-

ported much less, but their demand is increasing more

rapidly as their incomes increase. Countries such as Ko-

rea, Taiwan, and the ASEAN countries lie in between. The

export expansion strategy for coffee exporters would

target both the lower income segment of consumers,

where demand increases rapidly, and the higher income

segment, where the demand increase is not rapid but

comes at a higher order.

On average, other agricultural and food products have

lower income elasticity than coffee. This means that the

income elasticity decreases faster (its curve is flatter than

for coffee). An export strategy for food products other than coffee targeted at the higher segment of consumers would

not yield as much expansion as would coffee. However, an expansion strategy targeted at the lower segment of consum-

ers remains effective, and the marginal increase in aggregate demand for such exports is significant.

Box 6.2Per Capita Coffee Imports of Asian Countries

02468

1012141618

0 2 4 6 8 10 12

Per capita GDP (log)

Per capita coffee imports (log)

China

India

Japan

Korea

Taiwan

ASEAN

Income Elasticity of Coffee Imports for Asian Countries

Notes: Data are for 1980–2001. The ASEAN countries areIndonesia, Malaysia, the Philippines, Singapore, and Thailand.Sources: UN Comtrade, World Bank World DevelopmentIndicators, and IMF Commodity Price Statistics.

fabrics to Africa. Also, Asia exports motor vehicleparts and telecommunications equipment to Africato be assembled at plants owned by Japanese orKorean enterprises.

These industries are generally characterized as glo-bal supply-chain industries and are often managedby multinational corporations. Global supply-chainindustries have emerged in step with the rapid inno-vations in communications technology that are tak-ing place at the global scale and integrating the worldeconomy. These industries have effectively investedin locations where they can process their products

most cost effectively using inputs from home or fromthe third countries and where they have better ac-cess to large consumer markets, usually in developedcountries (intermediary or indirect trade). In manycases, they are located in developing countries wherethe local industries receive generous preferential treat-ments from developed countries in accessing theirmarkets. Countries such as Mauritius, Madagascar,and Lesotho actively attract foreign investment inthose industries by establishing industrial zones tar-geted for foreign direct investment (FDI) and promot-ing export-oriented, private sector development


Product Exporters ImportersAutomobilePassenger cars Japan (55), Korea (41) South Africa (25), Egypt (16), Libya (12), Algeria (12),(2nd, 4.5%) Morocco, Kenya, Nigeria, Tanzania, Mauritius, Sudan,

Zimbabwe, Angola, Ghana, TunisiaTransportation vehicles Japan (84), Korea, China, Thailand, India Egypt (21), South Africa (19), Morocco, Tunisia, Kenya,(4th, 3.5%) Algeria, Libya, Mauritius, Ethiopia, Zimbabwe, Nigeria,

Tanzania, Sudan, Ghana, Uganda, Cote d’Ivoire, GabonAutomobile parts Japan (59), Korea (13), Taiwan (11), Thailand, India, South Africa (65), Egypt (14), Nigeria, Libya, Algeria,(5th, 3.0%) China, Singapore Kenya, Morocco, Ghana, TunisiaPublic service pas- Japan (72), Korea (20), India, Indonesia Algeria (22), Egypt (19), Nigeria (15), Tanzania, Sudan,senger vehicles (buses, Ethiopia, Madagascar, Mauritius, Tunisia, Ghana, Gabon,etc.) (15th, 1.0%) Angola, Morocco, Kenya, South Africa, Zambia,

Mozambique, LibyaInternal combustion Japan (91), Thailand South Africa (88), Egypt, Nigeria, Ghana piston engines(16th, 0.9%)Tires for buses and Japan (53), Korea (22), China (12), India, Thailand, Egypt (22), Algeria (13), South Africa, Nigeria,lorries (17th, 0.9%) Singapore Ethiopia, Ghana, Cote d’Ivoire, Morocco, Kenya,

Sudan, Cameroon, Tanzania, Djibouti, Madagascar,Libya, Tunisia, Mali

AutomobilePassenger cars France (20), Germany (19), Japan (17), Korea (12), South Africa (25), Algeria (13), Egypt (11), Tunisia,(2nd, 2.9%) Belgium, Spain, UK, JS, Netherlands, Italy, Morocco, Libya, Nigeria, Ghana, Cote d’Ivoire, Kenya,

South Africa, Turkey, Brazil, Austria Angola, Benin, Mauritius, Zimbabwe, Tanzania, CameroonAutomobile parts Germany (17), Japan (16), France (12), Italy, UK, South Africa (44), Egypt (10), Algeria, Morocco,(4th, 2.2%) United States, Oman, Spain, Korea, Taiwan, Belgium, Nigeria, Tunisia, Libya, Tanzania, Kenya, Zambia,

South Africa, Sweden, Thailand, Turkey Zimbabwe, GhanaTransportation vehicles Japan (37), France (13), Germany, South Africa, South Africa (16), Egypt (14), Algeria (10), Tunisia,(6th, 1.6%) United States, UK, Spain, Korea, Belgium, Italy, Morocco, Nigeria, Kenya, Zimbabwe, Ethiopia, Ghana,

Netherlands, China Libya, Mozambique, Angola, Tanzania, Mauritius,Cameroon, Cote d’Ivoire, Zambia, Malawi, Sudan, Gabon

Cotton-textileCotton fabrics China (39), India (30), Pakistan (13), Hong Kong, South Africa (13), Benin (13), Mauritius (11), Egypt (11),(6th, 2.5%) Taiwan, Thailand, Indonesia, Malaysia, Korea Nigeria, Gambia, Cote d’Ivoire, Kenya, Togo, Tanzania,

Ghana, Morocco, Niger, Mauritania, Senegal, Rep. ofCongo, Lesotho, Zimbabwe, Malawi

Capital goods and appliancesConstruction & mining France (13), Japan (13), United States (11), Germany, South Africa (23), Egypt (17), Tunisia, Nigeria, Morocco,machinery (19th, 0.7%) UK, Belgium, Italy, South Africa, Austria, China, Brazil, Algeria, Ghana, Libya, Cote d’Ivoire, Ethiopia, Sudan,

Korea, Finland, Netherlands, Sweden, Spain Angola, Zimbabwe, Cameroon, Tanzania, ZambiaConstruction & mining Japan (61), China (16), Korea (12), Singapore, South Africa (27), Egypt (23), Sudan, Tunisia, Algeria,machinery (20th, 0.7%) Malaysia, Indonesia, Thailand Kenya, Zambia, Ghana, Gabon, Morocco, Tanzania,

Nigeria, Liberia, Djibouti, Cote d’Ivoire, Eritrea, Senegal

Agricultural and fisheryRice (3rd, 3.8%) Thailand (52), India (17), China (16), Pakistan, Taiwan Nigeria, South Africa, Cote d’Ivoire, Senegal, Togo,

Kenya, Libya, Benin, Ghana, Somalia, Mauritius,Tanzania, Madagascar, Guinea, Rep. of Congo

OtherOrganic acids (5th, 3.3%) Morocco (53), Tunisia (25), South Africa (12), India (94), China, Indonesia

SenegalShips (17th, 1.0%) Liberia (72), South Africa (26) Singapore (62), India (28), Korea, Pakistan

Table 6.1Top 20 Major African Imports from Asia: 1999–2001 Annual Average



through the establishment of export processing zones.As a result, these countries have achieved high growthin the production and export of textile and apparelproducts (box 6.3).

Figure 6.4 illustrates how Africa’s imports from Asiaare integrated with Africa’s manufacturing exports

by plotting value increases in manufacturing exportsfrom individual African countries to the EU and UnitedStates during the 1990s and value increases in theirimports from Asia. On average, an African countrywith a large increase in manufacturing exports to theEU and United States has also experienced a simi-larly large increase in imports from Asia, irrespective

Box 6.3Growing Mauritius’s Apparel Exports

In Sub-Saharan Africa, few countries have attained a high standard of living. Mauritius is the notable exception. Between

1973 and 1999, Mauritius’s real GDP averaged 5.9 percent annual growth, compared to 2.4 percent for Sub-Saharan

Africa as a whole. The average income of Mauritanians has more than tripled over the three decades, while that of

Africans as a whole increased only 32 percent. The biggest contributor to Mauritius’s strong growth is the textile and

apparel industries. This sector accounts for the lion’s share of the country’s exports—65 percent of all its exports in

1999. Three possible explanations underlie the impressive growth of Mauritius’s apparel exports.● Strategic trade policy to set up an export processing zone. Mauritius has experienced remarkable success in expand-

ing its manufacturing industry and export base since the early 1980s. After having failed to pursue a policy of

import substitution in the years immediately following independence, the government focused on promoting

exports and creating an export processing zone. Mauritius’s openness to FDI, facilitated by the creation of an

export processing zone, attracted investment from India and China and, later, from Europe, especially in the

textile industry. Investors have various incentives, such as import duty exemptions and zero taxation of divi-

dends, if they locate their subsidiaries in Mauritius. In addition, investors are not required to establish joint

ventures with the Mauritius government, as they are in other African countries.● Strong domestic institutions. Strong domestic consultation mechanisms have contributed to the growth of Mauritius’s

apparel industry to a significant extent. In the early 1980s, a macroeconomic adjustment policy was set forth by

three different governments of varying ideological beliefs. Adjustment literally preconditioned a national consen-

sus among different opinions, which accordingly necessitated workable consultation mechanisms. Further, a

Mauritanian culture of transparency and participatory politics approved an early economic warning and feed-

back system, allowing emerging economic problems to be dealt with at an early stage.● Ethnic diversity. Unlike any other country in Sub-Saharan Africa, Mauritius has a culturally and ethnically diverse

population. In Mauritius, descendants of indentured workers from India make up about 60 percent of the popu-

lation, with the remainder comprised of black Americans, Creoles (native to the region), Chinese, and Europeans.

This diversity has enabled the country to maintain economic ties with the roots of its diverse ethnic groups and

attract investments from them. For instance, the Chinese community has attracted investment from Hong Kong

entrepreneurs looking for overseas locations for their textile operations to avoid the quotas imposed in their

own country.

Such a mix of factors, especially this last, is not easily replicated by other African countries. However, the example

of Mauritius vividly shows that good governance and appropriate economic policies, which have been regarded as

important conditions for development, are ideal factors for achieving export gains as well.

Sources: Subramanian (2001), and Basu and Srinivasan (2002).


Exports to European Union

Increase in Africa's imports from Asia (million $, log)

Exports to United States

-2

0

2

4

6

8

10

0 2 4 6 8 10Incr

ease

in m

anuf

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orts

(m

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-8-6-4-202468

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2 4 6 8 100

Incr

ease

in m

anuf

actu

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ex

port

s (m

illio

n $,

log)

Increase in Africa's imports from Asia (million $, log)

Figure 6.4Africa’s Manufacturing Exports to the European Union and United States

Notes: Data points are for African countries with positive increases in imports from Asia andmanufacturing exports to the EU and United States. Increases represent absolute increasesfrom the early 1990s (1989–91 average) to the late 1990s (1999–2001 or 1998–2000average).Source: UN Comtrade.

of the size of domestic markets. In the case of textileand apparel products, the positive linkage betweenAsian inputs is especially apparent because manyAfrican countries now rely on Chinese and Taiwan-

ese investors to build garmentfactories to export their productsto the EU and the United States(box 6.4).

The second way that Asia con-tributes to Africa’s product diver-sification is in its role in provid-ing important capital goods forthe manufacturing sectors. Table6.1 lists several products fromthe SITC 7 group—passengermotorcars, motor vehicles fortransportation, mass transit pas-senger motor vehicles, and con-struction and mining machinery.With the exception of ships,

which serve flag-of-convenience fleets in Liberia, theseproducts are exported to Africa to support thecontinent’s manufacturing activities in production,transportation, and communication. Although Africaimports finished products such as passenger cars and

Box 6.4AGOA Textile Benefits and Textile Yarns and Fabrics from Asia

The introduction of AGOA has prompted a number of foreign investors to invest in the apparel sector of Sub-Saharan

African countries; many of these investors are Asian. In Namibia, for example, a Malaysian-based firm has invested over

$200 million in a textile and garment manufacturing plant,

generating over 4,200 jobs. In Mauritius, a Chinese firm

has begun construction of a $60 million cotton yarn spin-

ning mill, and an Indian firm has started building a spinning

mill, to take advantage of AGOA’s textile and apparel ben-

efits. In Swaziland, there are currently 20 Taiwanese in-

vestment companies; only 3 of these were operating there

prior to AGOA’s passage. Taiwanese entrepreneurs have

also invested large amounts in South Africa and Lesotho.

The figure to the right plots AGOA textile benefi-

ciary countries according to their volumes of garment

exports to the United States and the Asian share of total

imports of raw materials—i.e., textile yarn and fabrics

(SITC 65). In general, countries with high volumes of gar-

ment exports tend to rely more on imports of fabric from

Asian countries.

0

2

4

6

8

10

12

14

0 0.5 1 1.5Asian share of total imports of

textile yarn and fabrics

Cur

rent

app

arel

exp

orts

to

Uni

ted

Stat

es (

thou

sand

$, l

og)

AGOA Apparel and Textiles Beneficiaries and FabricYarn Importers

Notes: Data are based on 1990–2001 averages and are forindividual African countries eligible for apparel and textilebenefits under AGOA.Source: UN Comtrade.


trucks, it also imports components of those productsand complementary products such as tires.

An import substitution strategy was once popularamong developing countries to help grow their manu-facturing sectors. Countries invested in various manu-facturing sectors and supported various industries,inviting foreign capital to expand domestic produc-tion capacity markets—which were often accompa-nied with high tariff protections. Such policies fre-quently resulted in inefficient rent-seeking behaviorsby the protected industries. As countries began toimplement more liberalized trade policies, those in-dustries have found themselves unable to competeagainst more cost-competitive foreign imports in thedomestic market.

As shown in table 3.2, which lists Africa’s top ex-ports to its major trade partners, no trace of pastimport substitution strategies undertaken by Africancountries exporting to the EU or United States canbe detected. Moreover, many African countries donot have sufficiently large domestic markets to sup-port import substitution strategies. As shown in fig-ure 6.4 and the figure in box 6.4, Africa’s strategyfor product diversification is more prominent in glo-bal supply-chain industries such as textile and apparelthan in inward-looking import substitution industries.Asia plays an integral role in Africa’s development inglobal supply-chain industries by providing interme-diate materials as well as capital and skills.

55

CHAPTER 7

Integration of Trade and Investment Relations betweenAfrica and Asia

As mentioned in the previous chapter, Asian exportsto Africa related to Africa’s own manufacturing ex-ports are often accompanied by direct investmentfrom Asian firms. These corporations have madethese investments as a means of strategically diversi-fying their production channels in global supply chainsand exploiting the preferential market access mea-sures given by some industrialized countries. Asia’sforeign direct investment (FDI) in Africa exemplifieshow trade and investment activities become integratedand their strategies seamlessly aligned. This chapterdiscusses three types of Asian investment to Africabased on how trade and investment can be integrated,analyzed some current investment cases of Asian firmsin Africa, and identifies measures to facilitate furtherintegration of trade and investment in the context ofAfrica-Asia relationship.

7.1 A Framework for Discussion:Three Investment ModelsA useful way to analyze how trade and investmentare integrated in the business relations between Af-rica and Asia is to categorize investments in accor-dance with the various markets targeted by Asianbusinesses in selling their products and services. Theseinvestment models are listed below and further de-scribed in the following subsections and boxes.

● Type 1—targets the Asian market (home countries).

● Type 2—targets the African market (local hostcountries and regional and subregional markets).

● Type 3—targets the global market, including theEuropean and North American markets.

Type 1 – Asian marketType 1 investment is targeted at producing goodsto be sold in the investors’ own countries in Asia.Typical examples of such investment include natu-ral resource extractive industries for mineral andmining products, as well as agricultural and foodprocessing projects such as fish cannery plants. In-vestment in extractive industries is large scale, of-ten initiated by governmental agreements followedby private sector engagement, and frequently in-cludes some degree of technology transfer. Al-though Asian firms have invested in such projectsin the past, unpredictable changes in local govern-ments’ policies and macro-instability have oftenhampered the flow of investment of this kind inAfrica. Potential investors are trading houses, re-source suppliers, and plant construction companies.Korean investment in Angola is a typical type 1investment case study, involving substantial amountsof investment for a processing plant (box 7.1). Of-ficial development assistance (ODA) loans and ex-port credit are powerful policy instruments to sup-port this “ investment-cum-trade project.”Investment projects for food and agro-based prod-uct processing require smaller—but still substan-tial—amounts of investment as compared to min-ing and energy resource projects.


Samsung. With the economic reforms under way in Angola, foreign investors have found increasing business opportuni-

ties in the country’s energy, mining, telecommunications, manufacturing, agriculture, and fishing industries. Angola’s cur-

rent ranking as third in the world for new oil discoveries and Sub-Saharan Africa’s second largest oil producer will also

accelerate new business ventures. Angola is now Korea’s second largest trading partner in Africa and its seventh largest

supplier of crude oil. In 2000, Korea imported $654 million in oil from Angola and exported $17 million in cars and auto

parts. In 2000, Samsung won a $4.4 billion contract in Angola to build a 200,000-barrel-a-day oil refinery and offshore

exploration platforms. The contract was facilitated by a bilateral agreement between the Multilateral Investment Guar-

antee Agency and the Korea Export Insurance Corporation, by which both agencies will cooperate in re- and coinsuring

projects in order to share risks and increase the availability of insurance for Korean investors. The agreement stemmed

from Samsung’s desire to seek such coverage and risk-sharing for its intended resource-based projects in Central and

West Africa.

Mozal. Mozal, one of the largest aluminum smelters in the world, is located near Maputo, the capital of Mozambique. It

was constructed in two phases with approximately $2 billion in funding and $1.1 billion in nonrecourse project funding

from international enterprises. Shareholders in the enterprise are BHP Billiton (47 percent owner, and the smelter

operator), Mitsubishi Corporation of Japan (25 percent), the Industrial Development Corporation of South Africa (24

percent), and the government of Mozambique (4 percent). Phase 1 was the first major project to be implemented in

Mozambique in the past 50 years and took 31 months to complete after its approval in May 1998. Mozal 1 began

production in June 2000 and reached its full output rate the following year. The investment of $1.34 billion in Mozal 1

boosted the country’s economy as well as the economies of Mozambique’s major trading partners—South Africa,

Swaziland, and Australia. Phase 2, an expansion project, took 26 months to complete. In August 2003, the first metal was

produced six months ahead of schedule and at a final cost of $665 million, some $195 million under the original budget.

The expansion has doubled the smelter’s capacity to 506,000 tons of primary aluminum per annum.

Box 7.1Type 1 Investment Case Studies: Samsung (Korea) in Angola and Mozal (Japan and Others) in Mozambique

Type 2 – African marketType 2 investment is targeted at Africa’s domesticmarkets. Examples include investments by Japanesefirms in home electronic appliance and textile plantsfrom the 1960s to 1980s. These investments wereaimed at supplying these products to Africa’s localmarkets, which were protected by high tariffs undergovernments’ import substitution policies. The invest-ments were often arranged in conjunction with theseimport substitution policies. More recently, however,regional economic integration and local governments’import liberalization have eliminated the competitiveadvantage of such investments vis-à-vis goods impor-tation. Consequently, accessing even more competi-tive global markets has been out of reach for thoseprotected industries in most cases. In various ways,

such investment has been bound by the constraintsof small local markets and high transaction costs.Because of the small size of the domestic market, themass production business model commonly used inindustrialized countries is not suitable.

However, there are cases in which small and medium-sized production is feasible—possibly through locallicensing and franchising, as in the case of the Japa-nese chemical company described in box 7.2. As thiscase shows, type 2 investment does not necessarilytake the form of direct investment. If the concept ofinvestment is broadened to include other types ofbusiness partnerships, type 2 investment has a fewpotentially useful tools for business development inpartnerships between Asian and African entrepre-


neurs. These tools include local licensing and fran-chising of domestic or regional sales of Asian prod-ucts and services in African countries, as well as jointventures between African and Asian firms in conduct-ing construction work.

Type 3 – Global marketType 3 investment is targeted at third countries, es-pecially those in other industrialized regions such asthe European Union (EU) and United States. Invest-ment of this type is often conducted by multinationalcorporations based on global supply chains. Type 3investment can be further subdivided based on othercharacteristics:

● There are footloose industries in the textile andapparel sectors or in the services sector (e.g., dataservices and telemarketing outsourced to Africa)that are largely motivated by the low labor costsin Africa and the existing trade policies in thirdcountries where their products and services aredestined. The Taiwanese enterprise investmentin Swaziland and Lesotho is one such example(box 7.3). The size of investment is limited, butsuch investment has effectively generated employ-ment for local economies.

● A second, more forward-looking, type of invest-ment is genuinely attracted to the potential pro-ductivity increase within Africa. To seize on fu-ture potential in the region—as well as exploitexisting favorable trade regimes—major automo-bile companies, for example, have establishedplants in South Africa, which is rapidly becom-ing an important economic hub in Africa.

7.2 Recent Patterns of Asia’sInvestment in Africa and Tradeand Investment Inter-LinkagesThis section provides an overview of recent patternsof investment from individual Asian countries to Af-rica and discusses how trade and investment are inte-grated in relations between Africa and those Asiancountries according to the framework presentedabove. FDI data are even more limited in scope andcoverage than are data on international trade. Whileaggregate flows and stocks of FDI are reportable atthe national level as macroeconomic variables, thesectoral composition and origin-destination informa-

The World Health Organization and a group of major

multinational companies have begun production in

Africa of a new kind of insect-repellent plastic that

disease experts said could have a major impact on

slowing the spread of malaria…

Experiments by a Japanese company, Sumitomo

Chemical, resulted in a plastic polymer known as

Olyset that incorporates insecticide in the material’s

crystal structure. In a net, Olyset offers numerous

advantages over conventional counterparts. In addi-

tion to oozing insecticide for up to five years, the

material lasts longer than conventional netting. If the

density of houses using the nets is high enough, the

repellant properties of the nets can shield entire vil-

lages from insects…

Recognizing a small market for profits from sell-

ing the material but great public health benefits,

Sumitomo agreed to transfer the technology to Af-

rica. Led by the World Health Organization and coor-

dinated with UNICEF, ExxonMobil and a Tanzanian

mosquito-net maker, an alliance was created to pro-

duce and distribute the technology to the African

markets most in need of the protection… The arrange-

ment followed the thrust of a new policy by the UN

health agency to seek private sector links supporting

public health projects. “We try to focus the private

sector on niche markets that would normally be of

little financial interest,” said David Alnwick, a World

Health Organization malaria expert. “By transferring

the technology to a local company they can adapt to

the local market and open the potentially huge im-

pact on public health.”

Source: Excerpted from Crampton (2003).

Box 7.2Type 2 Case Study: Sumitomo Chemical (Japan) inTanzania

58 ● ● ● ● ● Chapter 7 – Integration of Trade and Investment Relations between Africa and Asia

tion on FDI are not readily available for many non-Organisation for Economic Cooperation and Devel-opment (OECD) countries. Several countries reporttheir FDI statistics in their own format, which makesit difficult to conduct a consolidated analysis of pat-terns of FDI flows between Asia and Africa. To avoidthese data limitations while presenting a clear pic-ture of investment relations between Asia and Af-rica—or, more precisely, of Asia’s investment in Af-rica—this analysis uses data for Japan, Korea, China,and Taiwan only. That is, this section looks at na-tional firms’ investment patterns in Africa based ondata obtained from official sources in these four coun-tries.

Overall characteristicsOn average, Japan leads the other three Asian coun-tries studied here in total value of FDI outflows toAfrica in the 1990s. Even without its sizable invest-ment in Liberia due to the flag-of-convenience prac-tice, the annual average value of Japanese FDI inAfrica was, for the most part, larger over the decadethan that of the other countries. As shown in figure7.1, however, Chinese FDI to Africa recorded an as-

1These periods (1991–97 and 1998–2002) were used so as tocapture trade characteristics before and after the Asian financialcrisis that occurred in the summer of 1997.

0

20

40

60

80

100

120

140

Japan Korea China Taiwan

1990–97 1998–2002

Million $

Figure 7.1Value of FDI Flow to Africa from Four Asian Economies

Sources: Ministry of Finance of Japan, Export-Import Bank ofKorea, Ministry of Commerce of People’s Republic of China,and Ministry of Economic Affairs of Taiwan.

tonishing growth in the late 1990s, with its annualaverage value surpassing that of Japanese FDI after1998. For all four countries, annual average FDI val-ues increased after 1998 as compared to the period1990–97.1

Tex-Ray. Tex-Ray is an important apparel company in Taipei, which has of late been focusing on research and development

of cotton products. Sales subsidiaries have been established in Los Angeles and New York, and a raw material procure-

ment company was recently founded in China, in addition to a number of production factories abroad. Tex-Ray founded

three factories in Swaziland in 2001 and 2002. The products of these factories are exported to the United States. Tex-

Ray’s main reason for investing in Swaziland was to obtain benefits under the African Growth and Opportunity Act

(AGOA). Since local procurement of raw materials will become compulsory under AGOA after October 2004, the firm

decided to set up a spinning factory in Swaziland as well. These products are sold domestically and will be sold to Tex-

Ray’s factory in South Africa as well.

Toyota. The recent emergence of South Africa as an important automobile assembly location has triggered major Japa-

nese car manufacturers such as Toyota to increase their investment in South Africa. Toyota established a subsidiary plant

in South Africa in 1962, which has long been the company’s main assembly plant for cars and trucks to be sold in South

Africa and elsewhere in Africa. Recently, the firm’s headquarters signaled a growing interest in its South African opera-

tions by increasing its share holding of its subsidiary plant from 35.7 to 74.9 percent. Moreover, Toyota plans to use its

South African production hub to expand its sales to the European market as well as to the African market.

Box 7.3Type 3 Case Studies: Tex-Ray (Taiwan) in Swaziland and Toyota (Japan) in South Africa


1990–97 1998–2002

0

10

20

30

40

50

60


Number of cases

Figure 7.2Number of FDI Investment Cases in Africa by FourAsian Economies


0

5

10

15

20

25


Million $ per case

1990–97 1998–2002


Figure 7.3Average Size of FDI Investment in Africa by Four AsianEconomies to Africa

In terms of number (as opposed to value) of invest-ments, China has dominated throughout the 1990s(figure 7.2). The surge of Chinese investment is promi-nent after 1998, recording close to 50 investmentcases a year. The other three countries are rathersimilar in terms of their numbers of investments.

Tables 7.1 to 7.7 present the sectoral and/or hostcountry composition of FDI of four Asian countriesto Africa either in flow or cumulative stock values.the tables show that a significant amount of FDI wentinto mining industries or resource development (27.5percent from China, and 22.8 percent from Korea).Interestingly, Japan’s investment in Africa’s miningindustries was rather limited in scale in the 1990s ascompared to the 1970s, when over 30 percent ofthe country’s investment supported these industries.Careful analysis of the experiences of Asian invest-ment in mining industries (type 1) is necessary to drawlessons from both successful and unsuccessful cases.

Global supply-chain investment (type 3) is made in amore dramatic way. In the case of Japan, large ma-jor manufacturing investments started to flow toAfrica’s transportation product sector in the 1990s.Most of this investment went to South Africa, wherea major Japanese automobile manufacturer (Toyota)started assembling cars, some of which are now ex-ported from there to the European market. Koreandata do not reveal much about how its manufactur-ing investment is divided by sectors. However, Korea’sinvestment in the telecommunications sector has defi-nitely generated assembly of telecommunications

Figure 7.3 looks at the average size of investment forthe four Asian countries. In general, Chinese andTaiwanese FDI are relatively small in scale, as thesecountries are active in light industries such as textileand apparel products. Japanese FDI became muchlarger in scale in the late 1990s, reflecting thatcountry’s investment in heavier manufacturing sec-tors such as automobile and natural resource process-ing.

Asian FDI to Africa by investment typeIn terms of its sectoral and host country composi-tion, Asian investment to Africa clearly shows inter-linkages with Africa’s various trade relations. In thecontext of Africa-Asia trade relations, natural re-source–based investment (type 1) and global supply-chain investment (type 3) are critically linked to a strat-egy for Africa’s market and product diversification ofits exports.


equipment (e.g., mobile telephones) in countries suchas South Africa and Ghana. China and Taiwan put alarge part of their investment in the textile and ap-parel sectors in South Africa, Lesotho, Swaziland,and Mauritius.

Although it is hard to capture the totality of type 2investment, investors pursing this strategy are likelyto be found in Asian countries where small and me-dium-sized enterprises are active, such as Korea andTaiwan. Investment in the service or retail sector isan example of type 2 investments; local licensing andfranchising examples are clearly presented in the dis-cussion on corporate-level investment strategies.

The following subsections look at each of the four se-lected Asian countries to discuss overall trends of invest-ment flows to Africa and how the three types of in-vestment can be observed in their investment patternsin terms of sectoral and host country composition.

Of the four selected Asian economies, outward di-rect investment data for African countries at thesectoral level are available only for Japan and Korea.China has country and sector outward investmentdata, but these are not broken down by specific coun-try and sector. Taiwan has by-country outward invest-ment data for a limited number of African countries,but with no sectoral breakdown. Despite these datalimitations, the evidence supports the framework ofthe three channels of trade and investment linkagesset forth above.

JapanAs shown in table 7.1, currentJapanese direct investment toAfrica is concentrated in twocountries, Liberia and South Af-rica (together accounting for 93percent of Japan’s total AfricanFDI value for 1991–2002). How-ever, because most direct invest-ment to Liberia has been madeto obtain flag-of-convenience

ships, Japan’s substantial direct investment is con-centrated almost exclusively in South Africa.

By sector, too, Japanese direct investment to Africais relatively concentrated (table 7.2). Within the manu-facturing sector, transportation machinery boasts thehighest rate of investment. Although Japanese directinvestment to South Africa is concentrated on thetransportation industry—mainly automobile assemblyand related parts manufacturing—it extends to otherindustries as well, such as mining, metal manufactur-ing (ferrous and nonferrous), and various trading in-dustries. Among other industries and countries towhich Japan’s FDI has been delivered during the1990s, food manufacturing (Tanzania), service(Mauritius), and chemical and metal manufacturing(Egypt) are notable.

The historical comparison of the sectoral compositionof Japanese FDI to Africa presented in table 7.2 showshow Japanese FDI’s sectoral focus has shifted overthe past three decades. Transportation has been domi-nant in all three decades due to the unchanged flag-of-convenience practice in Liberia. On the other hand,mining investment, which had more than a 30 percentshare in the 1970s, shrunk to only 1 percent in the1990s. Among other reasons, political instability in manyresource-rich African countries in the 1980s, and weakgovernance and a lack of transparency in the regula-tory regime during the period, seems to have dis-couraged many Japanese firms from continued in-volvement with Africa’s mining and mineral resources.

Rank 1971–80 1981–90 1991–20021 Liberia (57.9%) Liberia (92.3%) Liberia (74.9%)2 Zaire (16.9%) Zambia (2.2%) South Africa (18.2%)3 Nigeria (10.5%) Egypt (1.1%) Tanzania (2.7%)4 Niger (5.4%) Gabon (0.9%) Mauritius (1.1%)5 Gabon (2.3%) Zaire (0.9%) Egypt (0.9%)

Table 7.1Top Five African Countries Receiving Japanese FDI: 1971–2002

Note: Figures in parentheses indicate countries’ share in total cumulative investment in eachperiod.Source: Ministry of Finance of Japan.


Sector 1971–80 1981–90 1991–02Manufacturing 5.3 3.1 20.2

Food 0.2 0.0 2.6Textile 1.6 0.0 0.1Lumber & pulp 0.0 0.0 0.0Chemical 1.0 0.2 0.5Metal 1.3 2.5 2.0Machinery 0.0 0.0 0.2Electrical 0.2 0.1 0.1Transport 0.4 0.2 11.6Other 0.4 0.0 3.1

Nonmanufacturing 94.5 96.9 79.7Farming & forestry 0.4 0.0 2.2Fishery 3.6 1.1 1.1Mining 30.5 2.5 1.2Construction 1.5 0.1 0.2Trade 0.1 0.3 1.2Finance & insurance 0.0 0.8 4.5Service 1.6 16.1 1.4Transportation 56.6 73.8 67.4Real estate 0.0 1.6 0.0Other 0.0 0.6 0.6

Total 100.0 100.0 100.0

Table 7.2Japanese Investment in Africa by Industrial Sector (%)

Note: Data are shares of total cumulative investment in eachperiod.Source: Ministry of Finance of Japan.

Investment in the automobile industry showed a sig-nificant increase in the 1990s, due to the ending ofapartheid in South Africa. Trade statistics report ona similar phenomenon, with Japanese exports ofautomobiles and automobile parts to South Africa con-stituting a major African import. Although automo-bile imports have been targeted at Africa’s domesticmarkets (type 2), South Africa now hosts automobileassembly plants of leading car manufacturers, includ-ing Japanese firms. With increasing Japanese invest-ment in the automobile sector, imports of automo-bile parts are now linked with automobiles assembledto be shipped to both the global market (type 3) aswell as domestic and regional markets.

Although not as prominent as the transport sector,the food sector and the farming and forestry sectorgained in their shares of total Japanese FDI flow to

Africa during the 1990s. These increases may belinked to Africa’s exports of food and agricultural prod-ucts (e.g., to Japan and other Asian countries, whichare another set of examples of type 1 investment).

A unique element of Japanese FDI is found in thetrade industry, which captures the activities of generaltrading companies (Sogo Shosha), facilitating exter-nal exports and imports of domestic firms in Japan.

KoreaAlthough there are no readily available data for his-torical comparison of the composition of Korean FDIto Africa, reasonably detailed information on coun-try/sector allocation is available (table 7.3). The ma-jor FDI destination countries for Korea are Algeriaand Sudan—which together account for over $100million in cumulative investment—followed by SouthAfrica, Morocco, Gabon, and Ghana. The major sec-tors for investment are diversified, to some extent, inthe hotel and restaurant, manufacturing, mining, andretail and trade areas. Different countries receive in-vestments in these sectors: Algeria (mining, hotel andrestaurant, trade and retail), Sudan (manufacturing,trade and retail, hotel and restaurant), South Africa(manufacturing, trade and retail), and Morocco (manu-facturing, hotel and restaurant).

Manufacturing is the industry for which Korean com-panies have most actively provided FDI to Africa. Asshown in table 7.4, this investment involves variousbusinesses including textile and apparel, leather andfootwear, wood and furniture, petroleum and chemi-cal products (including medical implements and phar-macies), electrical and electronic appliances, food,metals, motors, and automobile tires. There are clearlinkages between trade and investment in productstargeted to the Asian market (type 1) and to the glo-bal market (type 3). Although the data do not revealmuch about how Korea’s manufacturing investmentis divided across these sectors, the telecommunica-tions sector has definitely been a beneficiary, evi-denced by the assembly of telecommunications equip-


ment (e.g., mobile telephones) in countries such asSouth Africa and Ghana.

Korea expects to make further investments in vari-ous labor-intensive industries in African countries

No. ofCountry projects Manufacturing subsectorGhana 5 Food, wood, nonmetal, electronics,

motorsSouth Africa 8 Textile, leather (2), petroleum,

metals, machine, electronicsMorocco 2 Textile, electronicsMauritius 2 Electronics, motorsSenegal 2 OthersSudan 4 Textile (2), leather, petroleumSwaziland 1 ElectronicsAngola 1 OthersEgypt 4 Textile, electronics, motors (2)Central Africa 1 OthersCameroon 1 NonmetallicKenya 2 Textile, petroleumCote d’Ivoire 1 Basic metalsD.R. of Congo 2 Others (2)Tanzania 3 Textiles (2), metalsTogo 1 TextilesTunisia 2 Petroleum, othersTotal 42

Table 7.4Korea’s Current FDI in Africa for Manufacturing

Source: Export-Import Bank of Korea (2003).

(Government of Korea 2002). The service industry isanother focus of Korean investment; this includeshotels and restaurants, casinos, trading, departmentstores, and photo studios. Such businesses are typi-cal examples of type 2 investment, and offer the pos-sibility of local franchising and licensing. In particu-lar, photo studios are said to be a most successfulbusiness, affording the opportunity for local licensingof Korean equipment.

Like Japan, Korea has active trading companies fa-cilitating the external exports and imports of domes-tic firms.

ChinaThe country composition of China’s direct investmentin Africa is highly diversified. Even the two largestcountries in terms of cumulative investment, Zambiaand South Africa, account for only 18.5 percent and15.3 percent shares, respectively, of total ChineseFDI in Africa (table 7.5). Most of this diversified di-rect investment was made during the 1990s, at arate of growth surpassing other Asian countries tra-ditionally active in Africa.

By sector, manufacturing and resource developmentaccount for a large percentage of China’s investment

Manu- Con- Trade Trans- Finance Hotel & RealAgri- factur- struc- & porta- Tele- & ins- restau- estate

Country Total culture Mining ing tion retail tion com urance rant services OtherGhana 1,857 0 24 860 0 650 0 20 0 42 261 0Gabon 9,089 0 0 0 0 9,089 0 0 0 0 0 0Nigeria 22,676 0 0 526 542 1,806 0 19,802 0 0 0 0S. Africa 76,084 25 322 20,127 100 55,196 0 0 0 0 314 0Liberia 260 0 0 0 0 10 250 0 0 0 0 0Morocco 53,166 1,348 1,050 23,993 0 2,665 0 0 0 24,110 0 0Sudan 148,321 0 0 91,050 0 33,271 0 0 0 24,000 0 0Algeria 214,623 0 18,714 0 0 16,191 0 0 0 179,718 0 0Angola 125 105 0 20 0 0 0 0 0 0 0 0Rep. of Congo 742 0 0 242 0 0 0 0 0 0 500 0

Source: Export-Import Bank of Korea (2003).

Table 7.3Korea’s Major Country and Industry Investments in Africa: 1968–2002 (thousand $)


Table 7.6Chinese FDI in Africa, by Industry: 1979–2000

No. of Amount investedIndustry projects ($ million)Service 200 (40.1%) 124.50 (18.3%)Manufacturing 230 (46.1%) 315.27 (46.3%)Machinery 20 (4.0%) 16.06 (2.4%)Electric appliances 36 (7.2%) 25.40 (3.7%)Light industries 82 (16.4%) 86.54 (12.7%)Spinning and weaving 58 (11.6%) 101.60 (14.9%)Others 34 (6.8%) 85.67 (12.6%)Agriculture 22 (4.4%) 48.13 (7.1%)Resource development 44 (8.8%) 187.60 (27.5%)Other 3 (0.6%) 5.85 (0.9%)Total 499 681.35

Notes: Figures in parentheses indicate sectors’ shares of total.Source: Ministry of Commerce, People’s Republic of China.

No. of InvestmentCountry investments amount (thousand $)Zambia 17 (3.8%) 134,126 (18.5%)

South Africa 83 (18.5%) 110,849 (15.3%)

Mali 5 (1.1%) 58,122 (8.0%)

Tanzania 14 (3.1%) 39,483 (5.4%)

Zimbabwe 11 (2.5%) 33,257 (4.6%)

Nigeria 33 (7.4%) 31,144 (4.3%)

Egypt 17 (3.8%) 30,635 (4.2%)

D. R. of Congo 7 (1.6%) 24,242 (3.3%)

Ghana 17 (3.8%) 19,212 (2.6%)

Kenya 21 (4.7%) 18,475 (2.5%)

Gabon 11 (2.5%) 17,045 (2.3%)

Benin 4 (0.9%) 16,723 (2.3%)

Mauritius 20 (4.5%) 16,657 (2.3%)

Cote d’Ivoire 13 (2.9%) 16,033 (2.2%)

Cameroon 15 (3.3%) 15,851 (2.2%)

Niger 3 (0.7%) 14,964 (2.1%)

Mozambique 6 (1.3%) 14,638 (2.0%)

Guinea 5 (1.1%) 11,827 (1.6%)

Sudan 9 (2.0%) 11,675 (1.6%)

Eq. Guinea 4 (0.9%) 11,315 (1.6%)

Africa total 448 726,532

Table 7.5Top 20 African Countries Receiving Chinese FDI:Cumulative Value to 2001

Notes: Figures in parentheses indicate countries’ shares oftotal. Africa total consists of 49 countries.Source: Ministry of Commerce, People’s Republic of China.

TaiwanTaiwan’s direct investment in Africa has mostly con-centrated on Liberia (due to the flag-of-conveniencepractice), and, to a much lesser degree, South Af-rica. Since the end of the 1990s, however, a diversi-fying tendency seems to be emerging. Excluding in-vestments in Liberia, Taiwanese companies areincreasingly investing in spinning, apparel, and trade(table 7.7). Like Chinese investment in these sectors,this investment has been motivated by trade quotasimposed by the EU and United States. It is linked tothe growing export of garment products by such Af-rican countries as South Africa, Lesotho, Swaziland,and Mauritius to the global market (type 3) and to theEU and United States. Again as with China, invest-ment in these sectors corresponds to a significantamount of fabric imports from Taiwan.

Although Taiwan’s investment in Africa is limited toa small set of countries, its investment in the gar-ment sector has a clear regional focus, i.e., SouthernAfrica. As discussed later in this chapter, some Tai-wanese firms have started diversifying their invest-ment at the subregional level to take advantage ofthe relatively integrated subregional economy.

in Africa. Within manufacturing, light industry (notspecified) and spinning and weaving are the maintargets of investment (table 7.6), clearly illustratinghow investment is linked to trade patterns in Africa.Specifically, investment in these sectors is associatedwith the import of textile materials (e.g., cotton fab-rics) from China to African countries with a growingapparel sector. Investment in these sectors is linkedto the growing African exports of garment productsto the global market (Type 3), most notably to theEU and United States.

Chinese investment related to resource developmentis mostly for exports to Asia of mineral and agricul-tural primary commodities (type 1).


7.3 Investment Strategy of AsianFirms in AfricaAs part of this study on Africa-Asia trade and invest-ment relations, a few cases of actual Asian enter-prises investing in Africa have been collected for analy-sis. This section discusses these cases from thefollowing points of view:

● Market orientation or identification of targetedmarkets for the products and services.

● Local characteristics in terms of resource avail-ability.

● Local investment climate and the presence ofbusiness networks.

● Local support mechanisms to facilitate investment.

Strong market orientation: targeted marketand market linkagesMany Asian firms investing in Africa seem to have aclear market orientation in their business strategies,targeting specific markets in which they seek to sell

their products or services. Thisis perhaps the most easily observ-able aspect of the inter-linkagebetween trade and investment.Again in accordance with theframework introduced earlier,these targeted markets are cat-egorized as either the Asian mar-ket (type 1 investment), the Afri-can market (type 2 investment),or the global market (type 3 in-vestment).

Type 1 (Asian market)A few Asian firms invest in Af-rica to export their products backto their home countries. Since in-vestment is made in those sec-tors that produce products de-

manded (at least potentially) at home, the types ofsectors or products attracting investment are quitespecific and often reflect the availability of a specificendowment on the part of the host country. In thecase of investment for Asia-bound products, the in-vesting firms are mostly in agricultural, mineral andmining, and other primary commodities-processingbusinesses.

Notable examples of agricultural commodity invest-ment are found among such Japanese agriculturalfirms as Maruha and Kenya Nut. Maruha has estab-lished joint enterprises in Madagascar andMozambique for shrimp cultivation, catering to thedemand in Japan, where traditionally popular sea-food has become more expensive to be sourced do-mestically. Shrimp exports account for 3 and 6 per-cent of total trade in Madagascar and Mozambique,respectively. Since 1974, Kenya Nut has been oper-ating in Kenya to collect and process macadamia nuts.In both cases, the firms have gradually expanded theirmarkets to include the EU and United States in addi-tion to their home market in Japan and other Asiancountries.

Source: Ministry of Economic Affairs, Taiwan.

Table 7.7Taiwan’s FDI in Africa, by Major Country and Industry: Cumulative Value toDecember 2002

No. of Invest-investment amt.

Country ments ($ million) IndustrySouth Africa 620 1,500 Spinning, plastic processing, shoes, trade and

distributionLesotho 30 600 Spinning and apparelSwaziland 20 45 Apparel, restaurant, entertainment and mold

manufacturingMauritius 8 20 Hotel, apparel, shoes, food processing and pottery

manufacturingCote d’Ivoire 9 11 Steel, restaurant, trade and vegetablesGhana 12 8 Steel, car part import, farm and tradeSenegal 4 3 Battery, fishery and tradeMalawi 9 23 Apparel, lumber processing, metal goods and tradeAfrica total 712 2,209


Korean investment in Angola is a typical example ofAsian investment in oil resources; such undertakingsrequire a substantial amount of investment for pro-cessing plants. Samsung is actively involved in oilexploration and processing in Angola (box 7.1). Mozalis another example of this type of investment; herean aluminum smelter has been established by an in-ternational consortium of Japanese, British, and SouthAfrican firms (box 7.4). Other examples includePetronas (Malaysia), which has acquired Engen, amajor South African oil refining company; its oil re-fineries have a production capacity of 5,250 kilotonsper year, and the venture has offices in 25 Africancountries.

Chinese investment in the natural resources sectorreflects government-led activities operated by state-owned enterprises. Such investments include oil de-veloping and mining in Cote d’Ivoire and Sudan, andfisheries in Gabon, Ghana, and Morocco.

Type 2 (African market)This type of investment is usually motivated by thehigh tariffs imposed by countries against foreign prod-ucts; to avoid these tariffs, foreign investors try to setup a local production and distribution basis. As noted,recent import liberalization by African governmentshave made this form of investment less attractive thanit was previously. For example, some Japanese elec-tronic firms such as Matsushita Electric, Cote d’Ivoire,and Sanyo Electric in Kenya were forced out of themarket by a growing wave of cheaper imported prod-ucts—some of which were imported through a blackmarket.

Many foreign investors see relatively less profit-mak-ing opportunities to penetrate African markets; theirlimited size makes it difficult for investors to recovertheir initial setup cost. This is particularly true formanufacturers of consumer goods. However, someAsian firms have taken advantage of regional inte-gration to expand marketing opportunities within Af-rica. Matsushita Electric, Tanzania, is an example ofa company’s successfully strengthening competitive-ness and utilizing regional economic integration toexpand its market.

Strong local networks give firms an advantage forthis type of investment. MK International (Korea), amedium-sized engineering and trading firm, has sixsubsidiary companies in six African countries (Senegal,Ghana, Nigeria, Malawi, Namibia, and Madagascar);all are backed by top management’s wide acquain-tances within African diplomatic circles.

Local licensing and franchising in retailing and otherservice-related industries can be considered anotherform of investment targeting the African domesticand regional markets. One illustrative example is thelocal production licensing of mosquito nets grantedby Sumitomo Chemical of Japan (box 7.2). Anotherexample is Korean-run photographic studios licensedto use Korean photo development machinery; theseare considered one of the most successful types ofbusiness for self-employed Koreans in Africa. Related

As a project to establish one of the largest aluminum

smelters in the world, the foreign investments in Mozal

have led to improved economic and social benefits in

Mozambique, due to linkages with various resources

and environments. The factors that led to Mozal’s suc-

cess include a competitive and inexpensive power

supply based on the intraregional power grid connect-

ing Mozambique with its neighboring countries in sup-

ply of electricity, efficient labor, a good supply of raw

materials, and investment incentives. The project fit

well within the framework of Mozambique’s economic

transition which it undertook in the early 1990s. Mozal

has doubled Mozambique’s exports, providing for in

excess of $400 million in foreign exchange earnings

per annum and adding more than 7 percent to the

gross domestic product. Moreover, a goal of Mozal is

to recruit staff directly from the local community. At

its peak, it is anticipated that 65 percent of the Mozal

labor force will be Mozambican.

Box 7.4Mozal’s Contribution to the Mozambican Economy


type 2 investment includes merger and acquisition,such as that practiced by UB Group of India; thislargest Indian investor in South Africa initially invested$20 million in a local-owned brewery.

Indian and Chinese firms are also major contractorsin African public sector works commissioned by bothnational governments of African countries as well asinternational organizations.

Type 3 (global market)This type of investment, which uses Africa as an in-termediate production point or gateway to the thirdcountries or the global market, has been increasingrapidly in recent years. The preferential market ac-cess provided by some industrialized countries to Af-rican countries through such mechanisms as AGOA,the Everything But Arms initiative, country General-ized System of Preference schemes, and free tradeagreements are some of the strongest factors thatpropel this type of investment. While textile and ap-parel industries dominate this investment category, asimilar pattern is observed in automobile assembly.

The main business focus of Taiwanese firms in Africaare the apparel and textile industries, which can beclassified as labor intensive. Because they receive pref-erential treatment under AGOA and from some coun-tries in the EU, these firms are mainly exporting theirproducts to the United States and EU, and are im-porting raw materials from Taiwan or a third countryinstead of procuring them locally.

The case of the Tex-Ray Industrial Company, brieflydescribed in box 7.3, is one example of Taiwaneseinvestment in Africa made in response to AGOA (box7.5). The firm established three factories in Swazilandto produce its award-winning ultra mercerized cottoncolor yarn. The main reason for investing in Swazilandwas to obtain benefits under AGOA. Since increasedlocal procurement of raw materials is required underAGOA after October 2004, Tex-Ray decided to es-tablish a spinning factory in Swaziland as well. Its

products are sold domestically and will be sold to Tex-Ray’s factory in South Africa.

Other Asian countries are making significant invest-ments in Africa’s apparel industries. Recent Chineseinvestment in Cote d’Ivoire, Mauritius, Rwanda, andSwaziland are recognized as major AGOA-relatedinvestments. Several Singapore-based companieswith textile manufacturing capabilities have investedin South Africa, Lesotho, and Cambodia. Their manu-facturing facilities in Africa are purely export-driven,targeting the U.S. and EU markets.

Although limited to a small number of firms in SouthAfrica, automobile assembly is emerging as anotherexample of type 3 investment. Toyota of Japan, forexample, established its subsidiary plants in SouthAfrica in 1962 (box 7.1). While these plants havebeen producing automobiles for South Africa andneighboring countries, Toyota has announced its planto use its South African production hub to expand itssales to the European market as well as to the Afri-can market—thereby taking advantage of the EU-Southern African Customs Union (SACU) free tradeagreement and a possible future U.S.-SACU tradeagreement, as well as growing industrial clusters inSouth Africa.

The auto assembly industry can include some dynamicfeatures at the subregional level. Hyundai, for ex-ample, once benefited from the cost-saving combi-nation of certain institutional features of trade regimesin Southern Africa. When the Korean firm enteredthe market in 1993, it adopted semi-knocked down(SKD) assembly in Botswana, by virtue of which thecompany was paying only 21 percent import duty.SKD covers the fitting of items such as engines, tires,and headlights to an already built car, thus cuttingassembly costs. The vehicles were imported throughMaputo, Mozambique, as a complete car, strippeddown to comply with the then-existing SKD require-ments and exported to Botswana for reassembly. Thevehicles were then exported to South Africa with nofurther duties through SACU. Financial problems


Box 7.5Tex-Ray Industrial (Taiwan) and AGOA

In recent years, Tex-Ray Industrial has founded three factories in Swaziland—two

garment factories and a spinning factory—to obtain benefits under AGOA.● Proton Investment Swaziland, Ltd., and Tex-Ray Investment Swaziland, Ltd.,

were founded in 2001 and 2002, respectively. Among the employees, there

6 six Taiwanese executive officers and 56 employees from China. The gar-

ments produced by these factories are exported to the United States.● The spinning factory Taitex Investment Swaziland, Ltd., was established in

2002. It employs 3 Taiwanese executive officers and 19 employees from

China. Its products are sold domestically and will be sold to Tex-Ray’s

factory in South Africa as well.

As of 2002, there were 60 Taiwanese companies operating in Swaziland. Most

of these are in the textile industry and have organized a union, with the president

of Tex-Ray as chairman. The union can negotiate with the government of Swaziland

on behalf of the country’s textile industry.

With an average monthly salary of $120, labor unions are requesting annual

wage increases. This may result in a loss of cost competitiveness. The local ex-

change rate is unstable, which has a serious impact on the export competitiveness

of Swaziland’s products. For example, in 2002, an exchange rate appreciation oc-

curred where US$1 was initially equivalent to 12.0 Lilangeni, but increased to 7.5

Lilangeni. Swaziland also has a severe lack of middle management and skilled labor.

According to a Tex-Ray officer, it takes three months to train new workers, which

has a negative effect on production efficiency and cost effectiveness. More signifi-

cantly, despite the existence of its spinning factory, most of Tex-Ray’s raw materials

must be imported from other countries and Tex-Ray’s local companies will no

longer be favored by AGOA after 2004.

Tex-Ray has indicated that the government needs to increase its leadership

with regard to labor unions and that an intervention by government may be nec-

essary to bring things under control. It has used the example of Mexico and its

subsidizing scheme for labor training as a possible model for the Swaziland gov-

ernment.

The textile industry of Swaziland is strongly influenced by American prefer-

ential treatment. Tex-Ray’s factories in Swaziland must continue to undertake raw

material production so that they can be favored by AGOA in the future. Tex-Ray

has established its own labor union in each factory and has forbidden its employ-

ees to participate in national unions in order to avoid conflicts and time-consum-

ing negotiations.

forced Hyundai to close its Botswana plant in 2000,with significant effects on that country’s economy,which relies on the automobile as its second largestexport after diamonds.

Another notable trend for type3 investments, which may needmore attention, is the recent ten-dency for of type 1 investmentcompanies, such as Kenya Nutsand Mozal, to broaden their ex-port markets to include thirdcountry markets such as the EUand United States.

Local availability ofproduction resourcesIn general, local resource avail-ability always plays a critical rolein firms’ investment decision-making, regardless of whetherthe investment is domestic oroverseas. This certainly appliesin the case of Asian firms’ invest-ments in Africa.

Investments in natural resource–related ventures certainly reflecta direct linkage between re-sources and investment. ManyAsian companies, attracted byAfrican countries’ rich naturalresources, invest in thecontinent’s mining and mineralsectors as well as agricultural andfishery sectors to obtain the rawmaterials demanded by manufac-turers and consumers in theirhome countries.

While endowment of natural re-sources is an attractive factorwhich is primarily associated withtype 1 investment, other produc-tion factors, such as labor re-

sources, have significance for all three types of in-vestment. Many Asian firms are attracted to Africafor its low-cost labor resources. For example, whileAsian firms in textile and apparel industries are gen-


erally attracted to Africa due to the preferential mar-ket access African countries have to the U.S. or EUmarket, many also view the low labor costs in Af-rica—as compared to the rising labor costs in Asia—as another aspect of their preference for operatingin Africa. According to a questionnaire survey con-ducted by the Overseas Chinese Affairs Commissiontargeted at 50 Taiwanese firms operating in Africa,the availability of low-cost labor is one of the mainfactors compelling firms to either initiate or expandtheir operations in some African countries.

Local business conditionsA Singapore-based textile manufacturer operating inboth South Africa and Lesotho selected South Africaas an investment site due to its comparatively betterinfrastructure, similar legal system (both are formerBritish colonies), and English language capability. Thefirm, however, withdrew from its investment inLesotho due to labor-related disputes. As this exampleshows, there are two aspects to local business condi-tions that are critical for Asian investors, in particularsmall- and medium-scale investors. One aspect is asound investment climate, which includes the avail-ability of proper infrastructure, and stability and pre-dictability in government regulations. Another aspectis the presence of network externalities such as acommon language and legal system or the presenceof effective business networks.

Infrastructure and regulationsMost African countries do not have a high profilewith regard to the availability of proper infrastructureand stability, and predictability of government regu-lations—conditions on which foreign investment flowsto their countries depend. According to a survey con-ducted by the Federation of Malaysian Manufactur-ers, the key problems faced by Malaysian firms hav-ing business transactions with African countries are aweak financial system, a lack of legislature and infra-structure, a lack of security, high logistics costs, anddifficulty in identifying potential buyers.

Several Asian firms that have been hosted by Africancountries have been provided with already-establishedfactory shells. The experiences of Asian firms housedin industrial estates in Lesotho, however, reveal prob-lems in stable supply and access to utilities (water,electricity) and telecommunication—a major disincen-tive to potential investors. Some firms reported thatthey often had to attend to these problems by them-selves. Additionally, the government’s minimumwage-setting process, which does not follow any par-ticular structure, made it difficult to set operational plans.

The availability of ready-to-move-into factory space,which can be obtained by lease, is often attractive tosmall- and medium-scale investors. However, the in-vestors’ lack of commitment in terms of a capital in-vestment for plant facilities makes the host countriesvery vulnerable to the potential withdrawal of theseinvestors due to problems in infrastructure and regu-latory conditions, and necessitates that these govern-ments make stronger efforts to improve conditions.

Larger scale investment cases show that there aresome ways to overcome infrastructure issues. Forexample, with regional economic integration withneighboring countries, energy supplies can be sourcedbeyond the border. The example of Mozal (box 7.4)reveals the fact that some resources, traditionally con-sidered to be sourced locally, can be brought in fromneighboring countries. Specifically, Mozal receives asupply of low-cost electricity from South Africa’s Elec-trical Supply Commission.

Business networkWhile common languages and similar legal systemsplay some role in linking Asian and African businesses,the presence of business and human networks workvery effectively in attracting some Asian entrepreneursto Africa. Local networks also play a significant role,particularly in the case of small- and medium-scaleinvestment. The success of MK International is largelydependent on human networks within Africa. Theexistence of a local business network seems to allevi-ate the high setup costs associated with FDI.


In addition, ethnic networks have proven to be highlyeffective in mobilizing investment and building busi-ness relations across the world. For example, amongselected Asian countries, India has the largest num-ber of residents in Africa; these are particularly con-centrated in Eastern and Southern Africa, reflectingthe British colonial network. South Africa, for ex-ample, has about 1.2 million Indian residents. India’smajor export destinations in Africa—South Africa,Mauritius, Kenya, and Nigeria—are all countries withlarge Indian populations.

Similarly, overseas Chinese and Taiwanese popula-tions have a substantial presence in the Africaneconomy, though to a lesser extent than the Indianpopulation. They are predominantly located in SouthAfrica, Mauritius, and Madagascar. First-generationTaiwanese living in South Africa mostly operated gro-cery stores, restaurants, and laundries; the secondand later generations, which have acquired a higherlevel of education, have entered more professionalpractices such as medicine, accountancy, and archi-tecture. The Taiwanese immigrant population inLesotho is a key player in that country’s foreign busi-ness communities and has made a significant contri-bution to the overall economy.

In the case of Japan, trade and investment activitieshave been mostly driven by private firms. Althoughthe country does not have an ethnic business net-work as strong as other groups’, Japanese businessrelations are unique in the sense that general tradingcompanies (Sogo Shosha) play a catalytic role. Al-though the networking function among Japanesesubsidiaries and residents in Africa (116 subsidiariesand 5,770 residents in 2002) is not explicitly recog-nized, a large array of Sogo Shosha subsidiary com-panies across the world function as catalysts for in-vestment activities by coordinating worldwide supplyof goods, services, and information.

Investment facilitation mechanismIn some cases, the formation of consortia facilitatesinvestment in Africa. Several companies organize con-

sortia to share risk, information, and know-how inmaking investments. Mitsubishi Corporation’s invest-ment decision in Mozal was partly due to an interna-tional alliance and the intensive support of variousfinancial institutions. UTAS Asia is a small-scale con-sortium, organized with at the initiative of the Asia-Africa Investment and Technology Promotion Cen-tre and the joint contributions of some 20 companiesand investors in Malaysia. The consortium has beeninvolved in a project to establish an information tech-nology college at Zimbabwe University, the assemblyof TVs and DVDs, and the establishment of a cottonginning factory also in Zimbabwe.

Various types of government policies affect patternsof foreign investment. This discussion is limited togovernment provision of support and incentivemechanisms, on the part of both the home and hostcountry governments.

Many firms cite the presence of preferential fiscalincentives given by host countries as one of the posi-tive factors affecting their investment in Africa. How-ever, many firms are instead motivated by the prefer-ential policy schemes provided by the third countries,such as those the United States and EU grant to Af-rican countries.

Home country incentives are unusual. But in somecases, the government does provide such assistance.For example, in one case of a large-scale investmentin natural resources, the investor’s government backedthe investment from an energy security perspective.Sometimes, too, the government itself invests, whichis the case with Chinese investment.

7.4 Effective DevelopmentAssistance for Asian Investmentin AfricaAlthough the primary player in trade and investmentis obviously the private sector, the government anddonors in general have roles to fulfill in establishingan appropriate environment within which the private


sector can enhance its viable activities. Creating aneffective synergy between private business activitiesand donors’ development assistance is critically im-portant in working to further trade and investmentrelations between Africa and Asia.

Asian governments have made various types of pub-lic support available to their domestic firms in invest-ing in Africa. Table 7.8 lists various trade and invest-ment promotion programs in Asian countries as theyrelate to promoting trade and investment activitieswith African countries. Most countries have used fis-cal instruments or financial support such as doubletax deductions and export credits to promote incen-tives for trade and investment.

Table 7.8Primary Trade and Investment Promotion Policies ofAsian Countries

Country Trade/investment promotion policyJapan Duty- and quota-free access to lesser

developed country products, export creditand insurance, trade fair, missions

Korea Duty drawback, tax incentives, export creditand insurance, trade fair, missions

China Chinese Trade and Investment DevelopmentCenters in 11 African countries; credit facilityfor private corporations and special fundscheme for joint ventures

Taiwan Financial support for Taiwanese enterprises’investment in African countries withdiplomatic relations

Singapore Double tax deduction for costs for expandingoverseas market and investment, internationalexhibition program, various tax incentiveschemes

Malaysia Double tax deduction for export promotion,export credit refinancing, market develop-ment grant

India “Focus Africa Program” to increase interac-tions with seven major African partners forjoint trade committee, joint business councils,and export promotion; Export-Import Bankprovides equity, loans, and guarantees tosupport Indian direct investment abroad

Source: Interviews by PADECO-UFJ.

ODA programs are considered to be effective instru-ments in generating incentives and attentions amongdomestic firms for opportunities in trading with andinvesting in African countries. Table 7.9 exhibits ODAprograms that have been conducted by Asian gov-ernments. It is clear from the table how technicalcooperation, in general, has played a central role inAsian ODA to Africa.

With regard to Africa-Asia trade and investment rela-tions, strategic use of ODA and other governmentalsupport and facilitation mechanisms could be particu-larly effective where private-based activities are notyet forthcoming. Public entities such as Asian andAfrican governments as well as international organi-zations have important roles to play in this regard.

Country ODA programJapan ODA to Africa accounts for 10 percent of all

Japanese ODA; grants, technical assistance,and loans

Korea Technical assistance training and experts;ODA loans are tied to Korean enterprises,which share 11 percent of the entire loan

China Agreements for economic and technicalcooperation with 53 African countries; nearly800 projects, including various constructionprojects, were completed by 2000

Taiwan Agricultural technical assistance and grantsfor countries with or likely to have diplomaticrelations; finance and investment for specificprojects

Singapore Technical assistance development trainingprogram, particularly for export development(Singapore Cooperation Program)

Malaysia Economic, technical, scientific, and culturalcooperation agreement with 20 Africancountries

India Special Commonwealth African AssistancePlan provides technical assistance to 34African countries

Table 7.9Primary ODA Programs of Asian Countries

Source: Interviews by PADECO-UFJ.


Donors’ support of technology transferTechnology transfer has had vast implications in mak-ing international business relations more sustainableand conducive to the long-term development of theprivate sector in developing countries. A significantamount of technology transfer has taken place purelyat the individual firm level through companies’ FDIactivities. It is well known that the numerous Japa-nese electrical and electronic manufacturers that setup local plants in Southeast Asian countries such asSingapore, Malaysia, and Thailand in the 1970s havegreatly contributed to building the industrial and tech-nical skills and knowledge of local employees. Andthe Malaysian auto manufacturer Proton developedits models through technical cooperation withMitsubishi Motors.

Despite the intuitive recognition of a high magnitudeof technology transfer taking place, actual flow is dif-ficult to measure beyond anecdotal evidence. It is alsotrue that private investment is motivated by profit-making interests and strategies, while donor govern-ments’ technical assistance programs are more tar-geted toward the needs of developing countries ingrowing their industries. Some governments spon-sor public technical training programs to build entre-preneurial and technical skills in the private sector ofdeveloping countries. Strategic use of such technicaltraining programs is an effective way to foster busi-ness exchanges between Asia and Africa. To suchends, a few governmental agencies in donor coun-tries have been organizing technical training programsfor industrial skills and knowledge building for engi-neers and entrepreneurs from developing countries.

In Japan, agencies such as the Japan InternationalCooperation Agency, the Japan External Trade Or-ganization, the Japan Overseas Development Cor-poration, and the Association for Overseas Techni-cal Scholarship (AOTS) are actively engaged in suchactivities. AOTS has conducted a large number ofindustrial technical and management training pro-grams both in Japan and overseas for private busi-nesses in developing countries. The contents of these

programs range from general business management,such as productivity management, to highly special-ized skill training such as the maintenance of sewingmachines (box 7.6).

The contents of the various AOTS training programsreveal their relevance to the evolving pattern and struc-ture of international trade. For example, a numberof training activities have been organized on the main-tenance of sewing machines (in Bangladesh, China,Pakistan, and Vietnam), reflecting the growth of tex-tile and apparel industries in other Asian countriesfrom which Japan import products. A training pro-gram on Buddhist religious products perhaps reflectsrising production costs in Japan and the need forimported products. A large number of automobile-related training programs have been organized invarious countries, reflecting strong interest in Japa-nese automobile technologies and the need of Japa-nese manufacturers to secure trained human resourcesin maintenance and repair in order to expand theirmarkets abroad. In terms of programs given for Afri-can trainees specifically, over one-third of 4,000 train-ees since 1959 have been trained in the automobile-related area. In contrast, only a few African trainees(165) and countries have participated in the textilearea.

While AOTS provides technical training in industrialskills and knowledge, Japan International Coopera-tion Agency provides more policy-related skills andknowledge. The Korean International CooperationAgency provides similar programs to a number ofdeveloping countries.

South-South technology transfer betweenAsia and AfricaA significant amount of Japanese technology trans-fer has occurred between Japan to other Asian in-dustries either through publicly provided technicalassistance or direct business transactions via FDI. Simi-larly, the technical knowledge and skills that have beenacquired by Asian countries could be imparted to


Box 7.6The AOTS Regular Training Programs

The AOTS Regular Training Programs involve two types of

training. One is technical training, in which participants attend

a general orientation course and move on to specialized tech-

nical training to acquire specific skills in host companies. The

second type of training is management training, which aims to

provide the knowledge and skills in business management,

production management, etc., needed by managers in devel-

oping countries. The strength of AOTS training lies in the fact

that both the host and developing country companies are

able to articulate and share common, clear goals; and partici-

pants, while learning Japanese technology and managerial skills,

can observe how they are actually practiced within Japanese

society.

AOTS Trainees, by Industry: 1959–2001

No. ofIndustry trainees Share (%)Manufacturing

Electric & electronic 19,173 20.8Transportation equipment 19,210 20.8Machinery 11,498 12.5Chemical 5,474 5.9Metallurgical 4,158 4.5Textile 3,112 3.4Food 1,062 1.2Other manufacturing 1,140 1.2

Agriculture, fisheries & mining 969 1.0Construction 3,700 4.0Other 22,804 24.7

AOTS Trainees, by Region/Country: 1959–2001

No. of No. ofRegion/country trainees Region/country traineesAsia 74,871 Madagascar 26Middle East 2,981 Malawi 36Africa 3,957 Mali 6

Algeria 147 Mauritania 12Angola 12 Mauritius 85Benin 3 Morocco 27Burkina Faso 4 Mozambique 13Burundi 6 Niger 22Cameroon 91 Nigeria 476Canary Islands 8 Réunion* 11Central Africa 5 Rwanda 17Comoros 2 Senegal 28Rep. of Congo 5 Seychelles 5D.R. of Congo 22 Sierra Leone 7Cote d’Ivoire 22 Somalia 14Djibouti 6 South Africa 100Egypt 1,140 Sudan 122Eritrea 2 Tanzania 315Ethiopia 162 Togo 17Gabon 5 Tunisia 28Gambia 2 Uganda 55Ghana 355 Zambia 108Guinea 15 Zimbabwe 59Kenya 217 Latin America 7,722Liberia 38 Oceania 520Libya* 99 Europe 2,249

*Trainees no longer accepted from this country.

African countries as well. This South-South aspect oftechnology transfer has been considered very effective.

The Malaysian government has actively promotedSouth-South cooperation in the 1990s as part of aneffort to enhance trade and joint ventures betweenMalaysia and developing countries in Africa and otherregions in the world. The implementing arm is theMalaysian South-South Corporation Berhad(MASSCORP), established in 1992 as a consortiumcomprised of 85 Malaysian shareholders.MASSCORP participates in business missions to othercountries together with the Malaysian government. It

also organizes its own fact-finding missions to a fewcountries. Once a potential investment area is identi-fied as viable, MASSCORP carries out the project—sometimes with equity participation—in conjunctionwith a delegation of its shareholders with relevanttechnical and management expertise.

In this way, some Malaysian firms have formed part-nerships for investing in Africa in order to share risksas well as information and know-how. Although on asmaller scale than the MASSCORP consortium, UTASAsia was actively organized at the initiative of theAsia-Africa Investment and Technology Promotion


Centre under the United Nations Industrial Develop-ment Organization and a joint contribution of about20 firms and investors in Malaysia. This consortiumhas been involved, as mentioned earlier, in a projectto establish an information technology college jointlywith the University of Zimbabwe and to promote trans-fer of Asian technology to Africa, functioning as a“one-stop center” for Africa-Asia business.

A few initiatives have been taken in the context ofimproving agricultural productivity in Africa. Dissemi-nation of New Rice for Africa, a hybrid type of ricethat combines the strong characteristics of both Asianand African rice types to yield high productivity, is aprime example of such initiatives. There are also anumber of private-led projects. In Nigeria, a local stategovernment has initiated a partnership arrangementwith Thai and Chinese firms for cassava and rice pro-cessing factories (box 7.7).

Roles of international organizationsInternational organizations have a significant role toplay in strengthening the host country governmentsin Africa as they improve the investment climate. Forexample, the Lesotho National Development Corpo-ration, assisted by the World Bank, contributed sig-nificantly to the success of Lesotho’s FDI program.One Taiwanese firm benefited from its worker train-ing grant fund. Most of these grants were used totrain locally recruited employees for managerial andsupervisory positions.

Many large-scale investment projects by Asian com-panies, often in extractive industries, are accompa-nied by the involvement of international organizations,such as the World Bank and International MonetaryFund, in the expectation that these organizations willbring stability and accountability to the host countrygovernments as well as the business environment.

Further integration of ODA with trade andinvestmentAlthough various development assistance and otherpublic support schemes are considered to be effec-

Box 7.7Thai and Chinese Investment in Cassava and RiceProcessing in Nigeria

The Government of Ondo State has signed a memo-

randum of understanding with Thailand and China for

the establishment of rice processing and cassava fac-

tories. The projects are estimated to cost over $60

million… The chief of staff to the governor said that

the state government had initiated a partnership ar-

rangement with S.W. Multi-Tech Starch Company Lim-

ited, Thailand, and that the company will visit the state

in August this year. Also, another company, Bayoke

Group of Companies, Thailand has agreed to visit the

state for on-the-spot assessment before August this

year for the cassava processing factory. On the rice

processing factory, Pathum Rice Mill and Granary

Pathum-Thani, Thailand, had indicated interest in

partnering with the state while Burshood Limited,

China, had agreed in principle to partner with the state

in the establishment of the rice plantation and rice

mills. Approval to the agreement will be obtained by

the end of this month. The delegation equally suc-

ceeded in initiating a partnership arrangement with

Nanning Heavy Machinery plant in China (the manu-

facturer of equipment for rice milling, sugar refining,

starch manufacturing) for the establishment of a sugar

factory and sugar cane plantation in the state. The

approval of the regional government for this, accord-

ing to the chief of staff, is expected by the end of this

month.

Source: Excerpt from Vanguard (Lagos) July 13, 2004.

tive, only a small portion of ODA disbursements aredirected toward the trade sector. And, as shown infigure 7.4, even that small proportion has declinedsignificantly. ODA to Africa has shifted from economicprograms to social programs and to policies support-ing poverty reduction strategies. Beginning in 1999,international development institutions shifted theirfocus from corrective macroeconomic policies andmarket distortion remedies to poverty reduction poli-cies and strategies for low-income countries. In Af-


1990 2001

Economic allocation Social allocation

Figure 7.5Africa: Social versus Economic Allocation of ODA:1990 and 2001

Source: OECD database.

0.0

0.1

0.2

0.3

0.4

0.5

0.6

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Share of ODA (%)

Figure 7.4Share of African ODA from DAC Donors Directed atTrade and Tourism

Source: OECD database.

rica, there has been a clear shift from the allocationof ODA directed at economic sectors to social sec-tors (figure 7.5).

While the significance of social development cannotbe overstated, economic development must not beneglected either. Development assistance, regardlessof whether it is provided by traditional bilateral do-nors, South-South partners, or international organi-zations, has a significant role to play in piloting andcomplementing private investment flows to Africa.And in this context, the role of donors in providing

technical assistance for industrial development is ofparticular importance in building a stronger supplycapacity in Africa and fostering stronger business re-lations between Africa and Asia. Private investmentalone does not and cannot address all the needs ofdeveloping countries. ODA can leverage private in-vestment, just as private investment, through its eco-nomic growth effects, substantiates the goals of ODA.

Under the existing conditions of trade and investment,it is difficult for Africa to receive full benefits fromeconomic globalization and the multilateral trade sys-tem. All sectors face serious challenges in Africa, andpoverty reduction is a fundamental goal that cannotbe bypassed in any sector. Thus, Africa’s trade andinvestment must be integrated with a comprehensiveapproach based on a common strategy aimed at eco-nomic growth and poverty reduction. Some examplesof specific assistance programs needed in the shortrun include technical assistance and policy support tostrengthen competitiveness and promote exports ofthe agricultural products that are the main exportproducts of the region. In the long run, crucial assis-tance must be focused on initiatives in the region tosolve fundamental problems in promoting trade andinvestment. Such long-term perspectives include as-sistance in developing domestic industry developmentpolicies for building viable industries engaged in tradeand investment, along with assistance for basic hu-man resources development through production tech-nology development.

Recent development: The IntegratedFramework for Trade-Related TechnicalAssistanceIn the context of these downturns in trade-relatedassistance to Africa, it must be noted that interna-tional donors have increased their efforts in provid-ing trade-related technical cooperation to least devel-oped countries (LDCs); specifically, several Africancountries are included under the auspices of the Inte-grated Framework (IF) for Trade-Related TechnicalAssistance to LDCs. Under this framework, six mul-


tilateral institutions—the International Monetary Fund,International Trade Centre, United Nations Confer-ence on Trade and Development, United NationsDevelopment Programme, World Bank, and WorldTrade Organization—lend their distinct competenciesto deliver greater development dividends to LDCs inthe multilateral trading system.

Building on the principles of country ownership andpartnership, the IF has two objectives: (1) to “main-stream” (integrate) trade into national developmentplans such as the Poverty Reduction Strategy Papersof LDCs, and (2) to assist in the coordinated deliveryof trade-related technical assistance in response toneeds identified by LDCs. IF implementation com-prises three broad stages:

● Preparatory activities, which typically include anofficial request from the country to participate inthe IF process; a technical review of the request;establishment of a national IF steering commit-tee; and, to the extent possible, identification ofa lead donor.

● Diagnostic phase, which results in the elabora-tion of a diagnostic trade integration study (DTIS).

● Follow-up activities, which begin with the trans-lation of the diagnostic phase’s findings into theelaboration and validation of an action plan toserve as the basis for trade-related technical as-sistance delivery.

To date, DTISs have been completed in seven Afri-can countries. Based on the findings of the DTISs, anaction matrix is developed in consultation with allstakeholders. The action matrix, which spells out aset of policy recommendations and priority technicalassistance needs, is discussed by all stakeholders dur-ing a national workshop. Following validation of theaction matrix, trade policy priorities are incorporatedinto the country’s Poverty Reduction Strategy Paper,and the priority technical assistance needs are fedinto donors’ financing fora, notably through imple-mentation meetings.

The DTIS provides a solid comprehensive frameworkfor assessing potentials, needs, and constraints ofAfrican countries in strengthening their trade-relatedcapacity. The studies conducted thus far for Africancountries, however, tend to fall short of incorporat-ing consideration of the growing trend toward inter-regional trade between Africa and Asia or in assess-ing future potential as well as needs and constraintsof African countries in accessing markets in Asia.Future studies could incorporate more rigorous as-sessment of the aspects entailed in facilitating Africa’strade relations with nontraditional markets such asAsian countries. Such aspects include weaknesses inthe African transportation network with Asian coun-tries, as well as technical standards and sanitary andphytosanitary standards of Asian countries affectingAfrican producers.

77

CHAPTER 8

Key Findings, Future Directions, and Next Steps

This chapter summarizes key findings from the analy-ses presented in this report. It then sets forth a seriesof policy recommendations for promoting more tradeand investment between Africa and Asia.

8.1 Summary of Africa’s Export/Import StructureAfrica’s export structure can be characterized as fol-lows:

● High dependency on the European Union (EU)market, which was the destination of 52 percentof total African exports in 2000; exports to Asiahave been increasing in recent years.

● Primary commodities dominate Africa’s exports,accounting for roughly more than two-thirds ofthe area’s total world exports. Although crudeoil makes up the largest share of African exports,other mineral and mining products, as well as agri-cultural and fishery products, are also prominent.

● Some African countries have become more domi-nant in recent years as exporters of manufac-tured products, most notably in textiles and ap-parel.

● Africa’s Southern and Northern subregions havegrowing industrial sectors, whose products rangebeyond textiles and apparel. South Africa, inparticular, has become an important regional in-dustrial hub, with increased exports of automo-biles to the rest of the world.

Key characteristics of Africa’s import structure includethe following:

● In contrast to its export structure, Africa’s im-port structure is less concentrated in terms of thecountries to which it imports.

● Among African countries’ major imports, prod-ucts that support the manufacturing and miningindustries—such as transportation and commu-nication equipment—tend to dominate. Theseproducts serve as an indispensable means of link-ing African countries with the rest of the world.

● Clear supply linkages have emerged in both thetextile-apparel sector and the automobile sector,where African countries’ production of exportedproducts is based on intermediate inputs and partsimported from abroad.

● Food items are significant imports of Africancountries.

8.2 Summary of Key FindingsKey findings that provide useful information in devel-oping Africa-Asia trade and investment relations aresummarized below.

Finding 1Africa’s exports to Asia grew both in relative and ab-solute terms during the 1990s. Currently, 16 per-cent of Africa’s export earnings are derived from salesto Asia. Moreover, the rate of increase in export val-

78 ● ● ● ● ● Chapter 8 – Key Findings, Future Directions, and Next Steps

ues to Asia (10 percent per year) has been higherthan comparable rates of export value to the EU andUnited States. Asia has therefore emerged as an im-portant partner in Africa’s trade and development.

Finding 2Asia’s developing economies import more from Af-rica than they did in past decades. In Asia, importsfrom Africa outpaced imports from other regions.Countries such as India, China, and Taiwan have sig-nificantly increased their overall African imports.

Finding 3Africa’s exports to Asia are mainly driven by primarycommodities and related products linked to either in-dustrial growth or emerging consumer populationsin Asia. Oil and oil-related products account for alarge share of these exports, but other primary com-modities such as agricultural and fishery products andminerals and crude materials are also increasinglyexported to Asia.

● African exports to Asia of mineral fuels and otherraw materials have experienced strong growthas a result of the rising manufacturing sectors inAsia, particularly in China, India, Korea, Taiwan,and among members of the Association of South-east Asian Nations. Although only a limited num-ber of countries are endowed with mineral andmining resources, a wide range of non-oil-pro-ducing countries also benefit from the export ofother raw materials and their processing (e.g.,cotton, wood, and leather).

● The growth in African exports of food and agri-cultural commodities to Asia can be explained bythe large populations with rising income levels inAsian countries. Nonessential foods such as cof-fee, cocoa, tea, and nuts will find stronger growthmarkets in Asia than in the saturated markets ofdeveloped countries.

● Sub-Saharan Africa’s share of exports, exclud-ing exports from South Africa and exports of oil,is around 17 percent of total African exports toAsia. Albeit at a smaller scale, this segment ofAfrica’s exports—which is mostly agriculturalcommodities—has shown a similar growth pat-tern to that of minerals and mining products.These agricultural commodities tend to havedominant shares in each non-oil-exporting coun-try. Thus, the significance of commodity demandsin Asia is also relevant to Sub-Saharan Africacountries which are not necessarily strong in oiland other mineral exports.

Finding 4Asia could become a strategic target in diversifyingthe markets of African products. Demand from Asianmarkets has a potentially good fit with the existingsupply base of traditional primary commodities inAfrica. The scope of value-added processing in Af-rica is still limited, but by recognizing this linkage anddeveloping consumer relations with Asian countries,African producers/exporters could significantly ben-efit from expansion of traditional primary commodi-ties, which are Africa’s stagnated core business.

Finding 5Asia can contribute to Africa’s quest for product di-versification in its export structure. South Africa hasrecently shown strong growth in manufacturing ex-ports to Asian countries. While only a few Africancountries export manufactured goods to Asia, a widerrange of countries have benefited from manufactur-ing-related imports from Asia. Asian countries areproviding essential inputs to Africa’s growing manu-facturing sector, most notably its textile and apparelsectors. There is a positive relationship betweenAfrica’s growth in manufacturing exports to the EUand United States and growth in imports from Asia.


Finding 6Some developed countries have pursued various pref-erential trade initiatives with Africa, such as tariff-free and quota-free access. Notably, the textile ben-efits provided under the African Growth andOpportunities Act (AGOA), combined with the quotasystem of the Multifiber Arrangement (MFA), havetriggered visible changes in the apparel exports ofsome African countries. Still, it should be noted thatthese preferential measures are often time-bound andredundant with existing Generalized Systems of Pref-erence. While continuation and expansion of well-targeted preferential treatment is desirable for manyAfrican countries, these measures alone do not guar-antee the full benefits of sustainable export expan-sion: The response of African countries is critical.Successful African exporters must work proactivelyto improve their business environment both in termsof governance and infrastructure, and strengthen theirsupply-response capacity to seize on just such oppor-tunities arising from the external environment as pref-erential trade agreements. Successful countries tendto have consolidated and carefully targeted initiativesfor providing an enabling environment for potentialindustries.

Finding 7Tariff rates for processed commodities tend to stayhigher than rates for raw materials, which typically isa discouraging factor for the value-added activities inraw material–producing countries. In Asia, this issueof tariff escalation on resource-based products is gen-erally more visible within low- and middle-incomecountries where higher growth of raw material de-mand has been observed. With the expansion of glo-bal trade, and with more layers in supply chains, tar-iff escalation has become an issue not only inNorth-South trade but in South-South trade as well.

Finding 8Foreign direct investment by several Asian countriesin Africa has demonstrated that relations between

Asian investors and host countries in Africa are deeplymotivated by trade relations between the two regions.Asian investment in Africa takes three forms:

● Investment targeted to products to be sold inAsia. This typically involves natural resources andprocessed raw materials (e.g., food), both of whichare in high demand by Asian manufacturers andconsumers. Macro-instabilities in African hostcountries have often hampered this kind of in-vestment in the past, but, driven by growing de-mand from Asia, there are signs that such invest-ment may gain momentum.

● Investment targeted to Africa’s domestic mar-kets. Such investment has been constrained bythe small size of local markets and the high trans-action costs resulting from a lack of efficient in-frastructure. In the absence of effective regionalintegration and infrastructure services, the pros-pects of such investment are limited.

● Investment targeted to the global market, typi-cally the third countries. This type of invest-ment effectively integrates production activitiesin Africa with global supply chains. Investmentin less developed countries tends to focus on thetextile and apparel sectors or the service sector,motivated largely by the low labor costs and/orfavorable trade regimes provided by the hostcountry. The notable development in countriessuch as South Africa has attracted more sophis-ticated manufacturing and service investment;such investment is genuinely attracted to the po-tential productivity increase in these countries.

Finding 9Compared with the synergies that emerged amongAsian countries in the course of trade expansion,intraregional dynamism in Africa is still weak. Afri-can countries could better benefit from export op-portunities by improving the intraregional mobility ofgoods and services. Improvement of the regional


transportation and telecommunication systems mustbe addressed to enhance the supply-response capac-ity of African countries.

8.3 Future Directions for Africa-Asia Trade and InvestmentBased on these findings, it is clear that there is asignificant potential for expanding trade relations be-tween Africa and Asia. To realize the full benefits ofsuch trade expansion, initiatives must be promotedstrengthened in the following three directions:

● Strengthen the knowledge base on Africa-Asiatrade and investment relations.

● Ensure the existence of an appropriate institu-tional framework for strategic dialogue betweenthe two regions.

● Promote an understanding of the critical elementsof an enabling environment for business activi-ties and refocus development assistance to fostereconomic growth.

Direction 1The knowledge base on Africa-Asia trade and invest-ment relations needs to be strengthened to facilitatethe discovery of market opportunities between Af-rica and Asia and to better understand how the mar-ket works between the two regions.

Such a knowledge base can be strengthened by en-suring relevant data reporting and gathering and byaccumulating a series of in-depth analytical studiesbased on such data. The studies are expected (1) toidentify existing potentials to expand trade and in-vestment relations between the two regions, (2) toidentify the geographical and manmade constraintsand other impediments to promoting trade and in-vestment activities, and (3) to promote better under-standing of global supply chains and the way to im-prove connection to them. The World Bank shouldcontinue its efforts to contribute to the analytical work

in these areas in cooperation with other organiza-tions.

Direction 2An institutional arrangement will be needed to en-hance the strategic dialogue between African andAsian countries and to raise awareness about emerg-ing business opportunities among businesses in thetwo regions. Building on the current Tokyo Interna-tional Conference on Africa Development (TICAD)framework, such an arrangement should enablebroad-based, consolidated policy dialogues to takeplace among African and Asian countries—by boththeir governments and their businesses.

There are many countries and economies in the tworegions. Fragmented and spontaneous talks betweenindividual African and Asian countries are often com-plicated and inefficient in promoting effective policydialogues. Continuous and ongoing dialogues mustbe maintained in order to exchange market viewsand information, and overcome any existing nega-tive perceptions. Such dialogues will better enableindividual African and Asian countries to take newhigh-level policy actions to promote trade and invest-ment relations on an individual basis.

An institutional arrangement for such dialogues is aneffective channel for allowing African countries toimprove their external relations with their economicpartners in Asia and sow the seeds for more proac-tive policy interactions in actual trade relations. Sucha forum can also identify necessary support mecha-nisms for African industries to develop a strongersupply-response capacity.

We are convinced that Asia could be a substantialsource of opportunity for African countries. However,the relative weight of African countries in the Asianmarket is still limited. While exports to Asia accountfor 16 percent of total African exports, they are lessthan 2 percent of total imports by Asian countries.This imbalance between Africa and Asia in terms of


relative size in each market may lead to asymmetri-cal mutual expectations. For this reason, an institu-tional arrangement is critical for drawing sufficientattention from the Asian business side to opportuni-ties in African countries which would be underesti-mated otherwise.

Direction 3African countries and international donors shouldrenew their commitment to an enabling environmentfor cross-border business activities, which are essen-tial engines for economic growth. At the same time,coordination and consolidation of efforts dedicatedto production capacity building within Africa is criti-cally important for African countries to be able torespond to international business opportunities. Suchdomestic conditions, as well as this cross-border en-vironment, are essential for ensuring the economicgrowth that is critical to African countries’ ability toachieve the Millennium Development Goals.

International donors have various policy instrumentsavailable to help African countries foster an enablingenvironment for business activities and facilitate ac-tive business exchanges among countries throughtrade and investment (see box 6.1). Bilateral as wellas multilateral official development assistance plays acritical role in fostering an enabling environment,particularly with regard to such areas as infrastruc-ture services in transportation and telecommunica-tion. Export credit and insurance schemes, and in-vestment guarantee systems, are all effective toolsfor international donors to use in supporting the pri-vate sector in building trade and investment channelsbetween African countries and other regions. In thisregard, an international forum such as TICAD helpsfocus the international community on the need tosupport African countries in building an enabling busi-ness environment in their domestic economies, andin designing and coordinating effective public sup-port schemes to facilitate improved business transac-tions between African countries and other regions.

8.4 Next StepsConventionally, Africa’s trade and investment pro-motion policies have been discussed in terms of thenecessity for a development agenda for Africa’s coun-tries, focusing on measures to enable developmentof certain types of production/export capacity (prod-uct out approach). This study, however, bases its rec-ommendations in terms of product types, in recogni-tion of the fact that business interests increasinglydevelop from the identification of products and tar-geted markets, which often exist only outside theAfrican countries (market in approach). Sourcing ofsuch products and selection of investment locationscan take place only after businesses are convinced ofdemand potential.

In this context, the report outlines the following nextsteps for public and private players according to threegroups of products, each categorized by its main tar-geted markets as explained in the key findings:

1. Goods and services for Asian markets (e.g., natu-ral resources, agricultural, and other primary com-modities).

2. Goods and services for the global market (e.g.,textile and apparel products, automobiles andtheir parts, exported to the EU, United States,Asia, and elsewhere).

3. Goods and services for African markets (e.g., foodand agricultural products, goods and services inrelation to privatization projects in Africa, fran-chising and licensing opportunities).

Asian market groupAs summarized in the key findings, Africa’s exportsto Asia are driven by primary commodities and re-lated products linked to either industrial growth oremerging consumer populations in Asia. The poten-tial products in this market are natural resources andagricultural and other commodities. The scope fornontraditional exports, especially of manufactured


products, is limited in the immediate future exceptfrom South Africa.

African countries already have a solid supply basisfor these commodities. By building on this existingcapacity, trade and investment relations in these prod-ucts have growth potential in terms of both quantityand quality. With revealed demand and revenue po-tential in Asian currencies, it is relatively easy for Asiancompanies to develop businesses in these commodi-ties in African countries. Four measures can be takento further this goal: lowered transaction costs, par-ticipation in trading and marketing, value-added fromprocessing, and good governance in commoditytrades.

Lowered transaction costsAfrican commodity exports to Asia could accelerateon their current trends if transaction costs can be re-duced. Since commodity trading has a relatively smallmargin, improving logistics entailed in quality andcosts is critical. Desirable actions include improvingthe physical infrastructure, but of no less importanceis the institutional arrangement of African countriesto realize higher efficiencies in business facilitationservices. Also, one reason for high transaction costsis a lack of investment/trade finance accessible byAsians. This could be improved with support frominternational donors.

Participation in trading and marketingAfricans have been producing commodities but havenot been actively involved in the trading of these prod-ucts. For Africans to claim a larger margin in com-modity chains, African sellers need to participate moreactively in trading and marketing their products tonew markets. Credible African private merchants arenot well known to their Asian counterparts. Africangovernments and international donors could helpnarrow the business information gap between Africaand Asia at this early development stage. Strength-ening of business networks and of mechanisms forcredit enhancement are desirable.

Commodity processingNot much has been accomplished in processing ca-pacity development. Due to its bulky nature, com-modity processing requires a significant investmentand economies of scale. In addition, high standardsof quality are imposed by importing partners. This isan area where foreign investment could alleviate alack of financial and technical resources. A stablebusiness environment is of paramount importance inconvincing foreign partners to invest. Also, Asianbusinesses would have more motivation to invest inAfrica if the tariff escalation that exists in many Asiancountries were reviewed. Donors can also help moti-vate potential investors through guarantee programsand capacity-building support. The effectiveness ofinternational consortia in involving Asian partners,as observed in Africa’s mining and extractive sectors,can be replicated and expanded to other commodi-ties including agriculture and fisheries.

Good governanceGood governance in the extractive commodity busi-ness is increasingly important. Traditionally, high eco-nomic rents associated with the extractive sector havebeen a source of conflicts and political instability.Governments should have a stronger capacity in trans-parent extractive commodity management. At thesame time, private investors should honor certaincodes of conduct to maintain good corporate citizen-ship in African countries. Several very large-scaleextractive projects in Africa, operating within an in-ternational framework and involving Asian partners,promote good practices and transparency. Again, asimilar approach can be taken with agricultural andfishery commodities.

Global market groupAsian firms are, as noted in this report, expandingtheir manufacturing production in the apparel andtextile sectors. Revenue from this type of investmentultimately relies upon market demand in developedcountries such as the EU and United States. From anAsian perspective, these investments seek to neutral-


ize trade-related frictions with the U.S. and EU mar-kets and to circumvent the trade restrictions imposedby these countries. From an African perspective, thefavorable access granted by the U.S. and EU mar-kets under preferential treatments is a an incentiveto develop a nontraditional manufacturing sectorwithin a trade environment which is intentionally cre-ated by policies with certain time limitation. In gen-eral, production costs are higher in Africa for mostAsian investors because of higher labor and logisticsexpenses. Strong concerns have been raised aboutthe impact of the MFA’s expiration in 2005, whichhas established a quota on Asian textile exports,thereby motivating them to shift their production lo-cation.

The apparel and textile sectors highlight a challengeboth African and Asian players face—a challenge thatcould be turned into an opportunity for many Afri-can countries, if efficient production capacity couldbe reached before the sunset of the various specialincentive schemes. What is critical at this juncture isa time-sensitive response by each player in Africaand Asia. The private sector continues to shift itsposition in the absence of a generalized reform thattakes a long-term perspective. Therefore, it is neces-sary to thoroughly examine the potential scope ofAfrican countries’ development in the apparel andtextile sectors in the context of their global supplychains, and establish the necessary conditions to re-alize such development—particularly in terms of cre-ating an enabling business environment and strength-ening efficient logistics systems. Specifically, measuresneed to be taken to; (1) develop industrial linkagesboth locally and intraregionally, (2) improve local andintraregional logistics, (3) build capacity and improveproductivity, and (4) provide a favorable market ac-cess environment.

Develop industrial linkagesThe private sector in Africa needs to identify oppor-tunities to develop backward and forward linkages inthe apparel and textile industries, both in the local

and intraregional contexts. Along the chain of pro-duction from raw cotton, to textile, to garment, Afri-can countries already have some experience in cre-ating an intraregional supply chain network. As morestringent rules of origin may be applied in the future,industries must be able to source their inputs locallyor intraregionally. Although Asian firms have been adriving force in the rapidly growing garment industryin some African countries, harnessing stable localsources of supply is one of the most essential condi-tions for rooting their investments more firmly in Af-rican countries.

Improve logisticsImprovement of local and intraregional logistics sys-tems is an integral part of creating an enabling envi-ronment for developing the linkages cited above, assource origins and product destinations have becomemore diversified in the textile and apparel industries.To respond quickly and efficiently to the continuousmarket development of both inputs and outputs atthe global level, effective systems of connectivity withmarkets outside the region—and, more importantly,within the region—are vital. Exploiting emerging re-gional hubs could be an effective strategy in buildingsuch systems. The African government, in coopera-tion with the private sector and international donors,needs to place a high priority on improving local andintraregional logistics systems—including infrastruc-ture—making this Africa’s primary public-private ini-tiative.

Build capacityAsian businesses have largely been attracted to Afri-can countries for the preferential market access op-portunities these afford their products’ final destina-tions. While Africa’s labor costs are low compared tothose in Asia, labor productivity also remains low inAfrica. To make for more sustainable, value-addingemployment locally over the long run, the industrialcapacity of Africa’s labor force in the various sectorsmust be rigorously strengthened, both in terms of tech-


nical and managerial skills, through effective programsof the African government and initiatives by the Afri-can private sector. Indigenous knowledge should beharnessed with, and strongly complemented by, ex-ternal knowledge. There is a significant opportunityin this regard to promote the sharing of Asian expe-riences with African countries. International donors,including Asian governments, could extend match-ing grants to the private sector to develop and imple-ment programs to promote such capacity buildingwithin the sectors.

Enhance market accessContinued international support is needed to enhancemarket access opportunities for African countries inoverseas markets. Moreover, this support must be ap-plied during the transition period before AGOA imple-ments more rigid rules of origin and during the MFAphaseout. Countries could consider providing tenta-tive preferential market access measures to Africantextile and apparel products to mitigate the poten-tially serious after-effects of the MFA phaseout forAfrican countries.

African market groupPrior to World Trade Organization (WTO) accession,African countries instituted high tariffs to protect theirdomestic industries and thereby foster their domesticproduction capacity—a strategy commonly known asimport substitution industrialization. During this pe-riod, several Japanese firms invested in Africa to pro-duce consumer goods, such as electrical appliances,tires, batteries, and local textile materials includingsynthetic fiber, to avoid high tariff barriers. As Afri-can countries have implemented their structural ad-justment programs have joined the WTO, they havelowered their protective industrial tariffs and madeother structural adjustments to their production pro-cesses; consequently, locally produced products havelost market share due to a lack of competitivenessagainst mass-produced imports from rising industri-alizing nations in other parts of the world. For Afri-

can countries to maintain local manufacturing of con-sumer products, their production scale needs to beexpanded, which in turn requires a more integratedmarket at the regional level. Even though their com-petitiveness will not increase overnight, African busi-nesses may be able to identify opportunities as licensedagent distributors of imported products. At the sametime, capital-intensive service industries, typically ininfrastructure, represent another industrial categoryfor which the local markets of African countries couldattract foreign investment.

The product and trading opportunities that can befostered—and the measures that can be taken to re-alize such opportunities—must be realistically identi-fied and assessed. Potential locations for non-resource-based manufacturing in Africa are rather limited nowand in the immediate future. Assuming the availabil-ity of a more integrated market, products that uselocal resources and have growth potential includefood, agriculture, agricultural supplies, and construc-tion materials. Another source of potential could befound in local services, which range from the fran-chise and licensing of existing industries and distribu-tion networks to infrastructure services such as portoperation, land and air transportation, power and tele-communication systems, and trading and finance. Itmust be noted in this context that, traditionally,parastatals have been the main player in these do-mestic market-oriented products and services. Boththe local and international private sector must be moreactively involved if the efficiency and profitability ofthese markets are to be improved.

Revenues from the above-described products rely ondemand from African consumers; this makes theseproducts particularly vulnerable to the size constraintsof Africa’s individual domestic markets. Where for-eign investment is involved, it is also subject to for-eign exchange risks. Therefore, this area is the onein which it is most difficult for Asian businesses tocommit their investment resources and take invest-ment risks.


A general strategy to enhance investment activitiesin such products and services must therefore be an-chored on three foundations: (1) seeking alternativecredible and mutually beneficial business arrangementssuch as licensing and franchising, (2) building an inte-grated regional market, and (3) building intraregionalnetworks for logistics and business.

Alternative business arrangementsAs mentioned earlier, Asian investors do not have astrong incentive to invest hard currency for vulner-able African revenues. If African businesses securesome investment capital, they could negotiate withAsian businesses to obtain their products as well asindustrial and managerial know-how from Asian busi-nesses through alternative business arrangements suchas licensing and franchising. These opportunities couldbe a first step toward fostering credible and mutuallybeneficial business relationships, along with trade inactual products. Such arrangements allay Asian busi-nesses’ concerns about taking financial risks; theyenable African businesses a means of acquiring prod-uct knowledge and skills in exchange for marketingefforts. However, for this arrangement to be possible,African governments should pay particular attentionto securing a local system for protecting industrialknow-how and intellectual property rights.

Regional integrationThe, African market has to improve its attractivenessin order to induce more investment. African coun-tries should renew their commitments to implement-ing realistic and substantive regional integrationschemes. Market integration should not necessarilyundermine the political independence of African coun-tries. In this regard, Asian countries could share theirexperiences of a de facto regional integration that is

initially led by private industry, with official free trademeasures following. Regional integration may entailsome adversity for local vested interests, but it is none-theless important to realize that protection of vestedinterests could be still more costly in the long run.Regional integration in Africa needs to place a highpriority on building efficient intraregional transporta-tion and other logistics systems for promoting moredynamic commercial flows both at the subregionaland regional levels. International donors, particularlyinternational organizations, should strengthen theirsupport of the efforts made by African countries inthis regard. Regional integration in Africa must betrade-creating rather than trade-diverting. Particularlyrelevant to foreign investment is that internal inte-gration must be complemented by external opennessand connectivity in order to receive skills and knowl-edge along with investment, and to channel productsand services to other regions.

Intraregional networksBuilding intraregional networks for logistics and busi-nesses is essential. Too limited intraregional trade andhigh transportation costs have discouraged the growthof local businesses in Africa. Unless these issues areadequately addressed, it will be difficult to scale upinvestment activities. Regional networks of businessesneed to be enhanced through local business initia-tive. Inter-firm networking is a proven tool for foster-ing the development of small- and medium-scale en-terprises—which are the most likely major players incatering to local and regional markets. An effectivestrategy for lowering the current high transaction costsbetween African countries would be to foster tradingcompanies within Africa; this would create more ac-tive intraregional commercial flows while presentingadditional business opportunities to the African pri-vate sector.


Given these future directions for Africa-Asia trade and investment, the following set of concrete initiatives are proposed

to foster trade and investment relations between the two regions; these could easily be implemented within the

TICAD-NEPAD (New Partnership for Africa’s Development) framework. These initiatives must be consistent with, and

supportive of, the trade and investment development efforts and policies of such global framework entities as the World

Trade Organization.● TICAD-NEPAD Business Council. Establish a TICAD-NEPAD Business Council to meet periodically to facilitate

information exchange and policy dialogue between African and Asian policymakers and business leaders, and to

coordinate individual countries’ efforts in engaging in active business relations between the two regions.● Africa-Asia Business Development Benchmarks. TICAD and NEPAD could establish Africa-Asia business bench-

marks that TICAD countries could use to assess and monitor their levels of participation in fostering private

sector business relations between Africa and Asia. Development and periodic monitoring of this set of indices

would also help in strengthening the statistical databases of African economies and industries.● Africa Business Directory. A directory/database of African businesses and domestic, bilateral, and multilateral insti-

tutions supporting business activities in Africa could be published and maintained under TICAD-NEPAD aus-

pices. Such a directory would provide Asian businesses with more comprehensive information regarding the

actual business people and corporations in Africa who already have been or potentially will become successful

business partners for Asian businesses.● Industry Capacity Building. The TICAD-NEPAD framework could launch a partnership policy initiative to coordi-

nate and consolidate existing and future efforts at providing support to foster capacity building in Africa’s busi-

ness development. This initiative could focus on certain promising sectors that play a key role in Africa-Asia trade

and investment, such as textiles and apparel, natural resource-based industries, and food products.● Schemes for Africa-Asia Trade and Investment Support. The TICAD-NEPAD framework could consider various new

initiatives to support trade and investment activities between Africa and Asia, particularly with regard to financ-

ing and interregional transportation. This primarily translates into a need for efficient and reliable systems of

logistics and payment settlement to facilitate business transactions by private firms.

Box 8.1Suggestions for Future TICAD-NEPAD Initiatives

87

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89

Appendices

91

Subregions

Africa Algeria, Benin, Cameroon, Egypt, Ghana, Kenya, Madagascar, Malawi, Mauritius, Morocco, Nigeria, Senegal, SouthAfrica, Togo, Tunisia, and Zimbabwe

European Union Austria, Belgium, Denmark, Germany, Finland, France, Ireland, Italy, Greece, Luxembourg, Netherlands, Portugal,Spain, Sweden, and the United Kingdom

United States United States

Asia China, Hong Kong, Malaysia, India, Indonesia, Japan, Korea, Pakistan, Philippines, Singapore, Taiwan, and Thailand

Others Argentina, Australia, Barbados, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Cyprus, Ecuador, El Salvador,Guatemala, Honduras, Iceland, Jordan, Malta, Mexico, New Zealand, Nicaragua, Norway, Oman, Panama,Paraguay, Peru, Poland, Romania, Saudi Arabia, St. Lucia, Trinidad and Tobago, Turkey, Uruguay, and Venezuela

World All of the above

Trade Partners

Northern Africa Algeria, Egypt, Libya, Morocco and Tunisia

Eastern Africa Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tanzania,and Uganda

Western Africa Benin, Burkina Faso, Cape Verde, Cote d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania,Niger, Nigeria, Senegal, Sierra Leone, and Togo

Central Africa Burundi, Cameroon, Central African Republic, Chad, Democratic Republic of Congo, Republic of Congo,Equatorial Guinea, Gabon, and Sao Tome and Principe

Southern Africa Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Zambia, and Zimbabwe

Note: Countries were selected for inclusion here based on their data availability in the UN Comtrade for the entire period from 1989to 2001 in the SITC Rev. 2 classification.

APPENDIX A

Africa’s Subregions and Trade Partners

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94 ● ● ● ● ● Appendix B – Africa’s Top 20 Exports to the World

Rank SITC product code and description1 3330: Petroleum oils & crude oils obtained from bituminous minerals2 3413: Petroleum gases and other gaseous hydrocarbons3 6672: Diamonds, unworked cut/otherwise worked not mounted/set4 9710: Gold, nonmonetary5 6812: Platinum and other metals of the platinum group6 3341: Motor spirit and other light oils7 0721: Cocoa beans, whole or broken, raw or roasted8 3344: Fuel oils, n.e.s.9 3222: Other coal, whether/not pulverized, not agglomerated10 8423: Trousers, breeches etc. of textile fabrics11 2631: Cotton (other than linters), not carded or combed12 0711: Coffee, whether or not roasted or freed of caffeine13 6716: Ferro-alloys14 8439: Other outer garments of textile fabrics15 0360: Crustaceans and mollusks, fresh, chilled, frozen etc.16 3345: Lubricating petroleum oils & other heavy petroleum oils17 2472: Sawlogs and veneer logs, of non coniferous species18 6841: Aluminum and aluminum alloys, unwrought19 8462: Under garments, knitted of cotton20 5222: Inorganic acids and oxygen compounds of nonmetals

95

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Maj

or w

orld

exp

orte

rs

(% s

hare

in e

ach

prod

uct)

Maj

or A

fric

an im

port

ers

(% s

hare

in e

ach

prod

uct)

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port

s by

SIT

C p

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ct,

valu

e, %

sha

re o

f all

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ican

exp

orts

PB ● ● ● ● ● Appendix C – Africa’s Top 20 Imports from the World

Rank SITC product code and description1 7932: Ships, boats and other vessels2 7810: Passenger motor cars, for transport of passengers & goods3 5417: Medicaments (including veterinary medicaments)4 7849: Other parts & accessories of motor vehicles5 0412: Other wheat (including spelt) and meslin, unmilled6 7821: Motor vehicles for transport of goods/materials7 6522: Cotton fabrics, woven, bleached, mercerized, dyed, printed8 3330: Petroleum oils & crude oils obtained from bituminous minerals9 7721: Electrical appliances such as switches, relays, fuses, plugs, etc.10 7924: Aircraft exceeding an unladen weight of 15000 kg11 7643: Radiotelegraphic & radiotelephonic transmitters12 7649: Parts of apparatus of division 76—13 7284: Machinery & appliances for specialized particular industries14 0422: Rice semi-milled or wholly milled, broken rice15 0612: Refined sugars and other products of refined beet/cane16 0224: Milk & cream, preserved, concentrated or sweetened17 7641: Electric line telephonic & telegraphic apparatus18 7239: Parts of the machinery of 723.41 to 723.4619 7234: Construction and mining machinery, n.e.s.20 0440: Maize (corn), unmilled

97

APPENDIX D

Trade Complementarity Score

Xik Mjk

Trade complementarity between a pair of countriesis traditionally measured by the TradeComplementarity Index. Using this index, tradecomplementarity between country i’s exports andcountry j’s imports is defined as:

Cij = 100 � �k

(�Mjk � Xik�*½)

where Xik is country i’s total exports of product k,and Mjk is country j’s total imports of product k. Theindex is zero when no product exported by one coun-try is imported by the other; the index is 100 whenthe export-import shares match exactly.

This report uses a different measure—a tradecomplementarity score—to capture a similar aspectof trade relations between pairs of countries. We de-fine a trade complementarity score between an ex-porter country i and an importer country j (�ij) as:

�ij � �k log(RCAik * RCAMjk )

where

RCAik �

and

RCAMjk �

Xik/�k

Xik

�k

Xik /�i �

k Xik

Mjk/�k

Mjk

�k

Mjk /�j �

k Mjk

This alternative measure captures how a country’sexport structure is measured against the world aver-age, using the traditional concept of revealed com-parative advantage (RCA) à la Bela Belassa. Themeasure is weighted by the product’s share in thecountry’s total exports (Xik). In this way, it effectivelyhighlights those products on which a country is sig-nificantly dependent for its exports (relative to theworld average) and which account for a large shareof the country’s total exports. On the other hand, if acountry has a below-average dependence on a prod-uct or if a product does not represent a large share ofthat country’s total exports, the product does notcontribute much to this measurement. An analogousfeature is embedded in the measurement of the im-porting country, using RCAM (the import analogueof RCA) and Mjk (import share) as the weighting fac-tor. Log transformation is used to smooth out ex-treme figures.

The alternative measure used in this report thus takesinto account the import-export complementarity inthe trade structures of two countries relative to therest of the world. In addition, the complementarity isweighted by product shares in each country’s exports/imports.

99

APPE

NDI

X E

Inte

rnat

iona

l Tra

de R

egim

es f

or

Afr

ican

Co

untr

ies

Uni

ted

Stat

esEu

rope

an U

nion

Japa

nA

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aA

GO

AC

oto-

LDC

Cou

ntry

WTO

LDC

AG

OA

bene

f.no

uEB

AFT

Apr

ef. t

ar.

SAD

CC

OM

ESA

SAC

UEA

CEC

CA

SC

EMA

CC

MA

ECO

WA

SW

AEM

UA

lger

ia

✓

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t✓

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aM

oroc

co✓

✓

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sia

✓✓

Com

oros

✓

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outi

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✓

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ea

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opia

✓

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ya✓

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agas

car

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s✓

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helle

s

✓

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alia

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✓

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n

✓✓

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✓

Tanz

ania

✓✓

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✓✓

✓

Uga

nda

✓✓

✓✓

✓✓

✓✓

✓

Buru

ndi

✓✓

✓✓

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✓

Cam

eroo

n✓

✓✓

✓✓

✓

Cen

t. A

f. R

ep.

✓✓

✓✓

✓✓

✓✓

Cha

d✓

✓✓

✓✓

✓✓

✓

Con

go, D

.R.

✓✓

✓✓

✓✓

✓✓

✓

Con

go, R

ep.

✓✓

✓✓

✓

Eq. G

uine

a✓

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✓

Gab

on✓

✓✓

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S. To

me

& P

rin.

✓

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✓

Northern Africa Eastern Africa Central Africa

100

WTO

= W

orld

Tra

de O

rgan

izat

ion

mem

ber;

LDC

= D

esig

nate

d a

leas

t de

velo

ped

coun

try

by t

he U

N; A

GO

A =

Afr

ican

Gro

wth

and

Opp

ortu

nity

Act

; AG

OA

ben

ef: =

Ben

efits

und

erA

GO

A; E

BA =

Eve

ryth

ing

But A

rms

initi

ativ

e; F

TA =

Fre

e tr

ade

agre

emen

t; LD

C p

ref.

taf.

= L

DC

pre

fere

ntia

l tar

iffs;

SAD

C =

Sou

ther

n A

fric

an D

evel

opm

ent

Com

mun

ity; C

OM

ESA

=C

omm

on M

arke

t fo

r Ea

ster

n an

d So

uthe

rn A

fric

an S

tate

s; SA

CU

= S

outh

ern

Afr

ican

Cus

tom

s U

nion

; EA

C =

Eas

t Afr

ican

Com

mun

ity; E

CC

AS

= E

cono

mic

Com

mun

ity o

f Cen

tral

Afr

ican

Stat

es; C

EMA

C =

Eco

nom

ic a

nd M

onet

ary

Com

mun

ity o

f Cen

tral

Afr

ica;

CM

A =

Com

mon

Mon

etar

y A

rea;

ECO

WA

S =

Eco

nom

ic C

omm

unity

of W

est A

fric

an S

tate

s; W

AEM

U =

Wes

tA

fric

an E

cono

mic

and

Mon

etar

y U

nion

.Uni

ted

Stat

esEu

rope

an U

nion

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nA

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aA

GO

AC

oto-

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AG

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ar.

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CC

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CEC

CA

SC

EMA

CC

MA

ECO

WA

SW

AEM

UBe

nin

✓✓

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✓

Burk

ina

Faso

✓✓

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Cap

e Ve

rde

✓

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✓✓

✓✓

Cot

e d’

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re✓

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✓

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bia

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Gha

na✓

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nea

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✓

Gui

nea-

Biss

au✓

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ria

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i✓

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rita

nia

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er✓

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eria

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gal

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✓✓

✓✓

✓✓

✓

Sier

ra L

eone

✓✓

✓✓

✓✓

✓✓

Togo

✓✓

✓✓

✓

✓

✓

Ang

ola

✓✓

✓✓

✓✓

✓✓

✓

Bots

wan

a✓

✓

✓✓

✓✓

Leso

tho

✓✓

✓✓

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✓✓

✓✓

Mal

awi

✓✓

✓✓

✓✓

✓✓

✓

Moz

ambi

que

✓✓

✓✓

✓✓

✓✓

Nam

ibia

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✓✓

Sout

h A

fric

a✓

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✓

Swaz

iland

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bia

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✓✓

✓

Zim

babw

e✓

✓✓

✓

Southern AfricaWestern Africa

101

Avg annual change Everything Free(%) in total EU Cotonou But Arms Trade

Rank Country export value Agreement initiative Agreement1 Niger 113.19 ✓ ✓

2 Eritrea 39.61 ✓ ✓

3 Equatorial Guinea 33.73 ✓ ✓

4 Botswana 29.27 ✓

5 Seychelles 22.64 ✓

6 Tanzania 20.69 ✓ ✓

7 Rwanda 18.89 ✓ ✓

8 Burkina Faso 18.29 ✓ ✓

9 Zambia 14.73 ✓ ✓

10 Republic of Congo 14.00 ✓

11 Sao Tome and Principe 11.86 ✓ ✓

12 Ghana 10.98 ✓

13 Ethiopia 9.14 ✓ ✓

14 Namibia 8.58 ✓

15 Morocco 8.05 ✓

16 South Africa 6.80 ✓ ✓

17 Tunisia 5.87 ✓

18 Sudan 5.40 ✓ ✓

19 Kenya 3.59 ✓

20 Mozambique 2.19 ✓ ✓

21 Mauritania 1.90 ✓ ✓

22 Algeria 1.57 ✓

23 Guinea 1.51 ✓ ✓

24 Mauritius 0.84 ✓

25 Madagascar 0.76 ✓ ✓

26 Angola 0.50 ✓ ✓

27 Egypt -0.01 ✓

28 Cape Verde -0.25 ✓ ✓

29 Cameroon -0.38 ✓

30 Benin -0.67 ✓ ✓

31 Zimbabwe -1.03 ✓

32 Chad -1.58 ✓ ✓

33 Central African Republic -1.92 ✓ ✓

34 Liberia -2.37 ✓ ✓

35 Dem. Republic of Congo -2.37 ✓ ✓

36 Senegal -3.62 ✓ ✓

37 Cote d’Ivoire -3.63 ✓

38 Malawi -3.83 ✓ ✓

(continued)

APPENDIX F

African Countries’ Exports to and Trade Arrangementswith the European Union

102 ● ● ● ● ● Appendix F – African Countries’ Exports to and Trade Agreements with the European Union

Avg annual change Everything Freein total EU Cotonou But Arms Trade

Rank Country export value Agreement initiative Agreement39 Nigeria -4.34 ✓

40 Uganda -4.75 ✓ ✓

41 Djibouti -7.42 ✓ ✓

42 Guinea-Bissau -7.52 ✓ ✓

43 Libya -7.8844 Sierra Leone -8.70 ✓ ✓

45 Togo -10.27 ✓ ✓

46 Gambia -13.42 ✓ ✓

47 Comoros -14.49 ✓ ✓

48 Gabon -15.73 ✓

49 Burundi -20.49 ✓ ✓

50 Somalia -22.34 ✓ ✓

51 Mali -22.54 ✓ ✓

52 Lesotho -27.33 ✓ ✓

53 Swaziland -73.42 ✓

Notes: Share figures are based on 1999–2001 averages. All figures are based on partners’import data.Source: UN Comtrade.

103

APPENDIX G

Growth in African Apparel Exports to the United States,by Countries’ AGOA Status

(continued)

Rank by Change as % of total apparel2001–02 exports to United Stateschange Country 2001–02 2000–01 1999–20001 Namibia 6664.5 -40.7 N/A2 Burkina Faso 2402.1 -67.9 706.93 Tanzania 1921.5 -82.5 -98.54 Liberia 360.1 -36.2 -6.75 Ethiopia 197.6 7036.9 98.16 Mozambique 174.7 N/A N/A7 Botswana 137.3 -70.2 N/A8 Kenya 82.1 48.1 11.09 Swaziland 77.1 50.7 N/A10 Mali 51.5 -1.8 -63.511 Lesotho 43.6 52.7 N/A12 Cote d’Ivoire 34.1 75.0 -6.613 Cape Verde 29.7 32.2 13854.814 Tunisia 27.7 -1.8 34.715 Togo 11.9 -45.0 -72.516 Mauritius 0.8 -2.7 5.517 South Africa -1.9 22.3 -40.618 Malawi -1.9 52.3 417.519 Guinea -6.7 -78.1 847.520 Egypt -13.9 -5.2 23.021 Morocco -25.3 1.1 5.722 Ghana -39.7 -28.4 -88.823 Gambia -42.5 -48.6 175.124 Zimbabwe -48.4 -23.8 6.225 Madagascar -52.6 63.0 137.126 Senegal -64.4 -22.6 39.127 Sierra Leone -65.1 460.4 83.628 Niger -65.4 44.1 29.629 Cameroon -80.4 109.5 -70.930 Nigeria -90.5 134.6 6.631 Mauritania -94.1 147.3 -87.132 Somalia -94.9 673.6 -66.533 Uganda -97.8 N/A N/A

Benin N/A 337.0 N/ADem. Rep. of Congo N/A -10.1 N/AZambia N/A -13.5 41674.9Burundi N/A -94.8 N/AEritrea N/A -99.2 9947.7Central African Republic N/A N/A N/AGabon N/A N/A N/A

104 ● ● ● ● ● Appendix G – Growth in African Apparel Exports to the United States, by Countries’ AGOA Status

N/A = not availableNotes: Shaded rows represent countries eligible for AGOA’s apparel and textile benefits.Apparel exports are here defined as SITC 842–846. Share figures are based on 1999–2001averages. All figures are based on partners’ import data.Source: UN Comtrade.

Rank by Change as % of total apparel2001–02 exports to United Stateschange Country 2001–02 2000–01 1999–2000

Seychelles N/A N/A -86.4Sudan N/A N/A N/AAlgeria N/A N/A N/AAngola N/A N/A N/AChad N/A N/A N/AComoros N/A N/A N/ARepublic of Congo N/A N/A N/ADjibouti N/A N/A N/AEquatorial Guinea N/A N/A N/AGuinea-Bissau N/A N/A N/ALibya N/A N/A N/ARwanda N/A N/A N/ASao Tome & Principe N/A N/A N/A

105

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106 ● ● ● ● ● Appendix H – Africa’s Top 20 Exports to Asia

Rank SITC product code and description1 3330: Petroleum oils & crude oils obtained from bituminous minerals2 9710: Gold, nonmonetary3 6812: Platinum and other metals of the platinum group4 2631: Cotton (other than linters), not carded or combed5 5222: Inorganic acids and oxygen compounds of nonmetals6 6841: Aluminum and aluminum alloys, unwrought7 6716: Ferro-alloys8 2472: Sawlogs and veneer logs, of non coniferous species9 0360: Crustaceans and mollusks, fresh, chilled, frozen etc.10 3222: Other coal, whether/not pulverized, not agglomerated11 6821: Copper and copper alloys, refined or not, unwrought12 2815: Iron ore and concentrates, not agglomerated13 6672: Diamonds, unworked cut/otherwise worked not mounted/set14 3341: Motor spirit and other light oils15 0577: Edible nuts, exluding nuts used for the extraction of oil16 2460: Pulpwood, including chips and wood waste17 7932: Ships, boats and other vessels18 0741: Tea19 2516: Chemical wood pulp, dissolving grades20 1212: Tobacco, wholly or partly stripped

Notes: Major exports were selected based on shares in Africa’s total exports to Asia. Sharefigures are based on 1998–2000 averages. All figures are based on partners’ import data.

107

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108 ● ● ● ● ● Appendix I – Africa’s Top 20 Imports from Asia

Rank SITC product code and description1 7932: Ships, boats and other vessels2 7810: Passenger motor cars, for transport of passengers & goods3 0422: Rice semi-milled or wholly milled, broken rice4 7821: Motor vehicles for transport of goods/materials5 7849: Other parts & accessories of motor vehicles6 6522: Cotton fabrics, woven, bleached, mercerized, dyed, printed7 6531: Fabrics, woven of continuous synthetic textile materials8 4242: Palm oil9 8510: Footwear10 5417: Medicaments (including veterinary medicaments)11 3344: Fuel oils, n.e.s.12 7611: Television receivers, color13 6534: Fabrics, woven, of discontinuous synthetic fibers14 7781: Batteries and accumulators and parts15 7831: Public service type passengermotor vehicles, etc.16 7132: Internal combustion piston engines for propelling vehicles17 6252: Tires, pneumatic, new, of a kind used on buses, lorries18 7649: Parts of apparatus of division 76—19 6552: Knitted/crocheted fabrics of fibers other than synthetic20 7234: Construction and mining machinery, n.e.s.

Note: Major imports were selected based on shares in Africa’s total imports from Asia. Sharefigures are based on 1998–2000 averages. All figures are based on partners’ import data.

the world bank study on africa asia trade and investment relations

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