Twenty years ago, the Economist called Africa “the Hopeless Continent.” Today, prospective investors see Africa differently. Africa is on the rise and becoming a driving force in the global economy. But how do we ensure this growth is sustainable and benefits Africans? The answer lies in economic diversification.
Ec·o·nom·ic Di·ver·si·fi·ca·tion – 1. Internal Diversification: shifting the operational focus from the production of a single or limited line of products and services to a more diverse range that exceeds the initial product specialization. 2. External Diversification: having a variety of different trade partners to avoid relying solely on one or a few partners.
By investing in different sectors of the economy, increasing market access and trade, fostering growth industries such as tourism and agriculture, and developing a diverse set of skills that can compete against other countries both regionally and internationally we can ensure sustainable economic growth. First, we must ask how economic diversification fits into Africa’s socioeconomic landscape.
Economic diversification provides the safeguarding necessary for countries and businesses to withstand economic shocks, increase productivity and ultimately improve their competitiveness within the international trade sector. Some benefits of this technique are:
- Weaving an economic fabric that is more complex, more resilient, and more beneficial to all communities.
- Enhancing manufacturing productivity, driving Africa’s economic growth and structural transformation.
- A pathway to laying a more solid foundation to reduce dependency
- Entrepreneurs play a crucial role.
- Build on Africa’s comparative advantages; the right policy mix tailored to country-specific circumstances: build on a country’s endowments, including natural resources, and existing strengths and an enabling environment that allows the private sector to expand.
Challenges
Even if diversification has the potential to assist poorer countries to create jobs and foster economic development, the transition involved can prove to be a great challenge. In some countries, conflict is slowing or reversing progress on economic diversification. Investment into the region is increasingly being made by the same actors, chocking access to innovative alternative financing.
Why it matters
Unlocking Africa’s economic potential starts with creating an achievable agenda. Countless countries have already demonstrated the power of diversifying their economies through access to credit, modern infrastructure, and a knowledge-driven workforce. By boosting trade in manufactured goods across the continent as well, we can strengthen African farmers’ capacity for investment – ultimately leading us closer to forming globally competitive value chains.
In Côte d’Ivoire and Ghana, a shift is underway towards diversification in the cocoa sector. Botswana and Mali have been showcasing their expertise in natural resources, leading a path of progress to other export sectors. As knowledge is shared between countries, this unlocks new horizons for emerging businesses – creating an exciting journey into unknown possibilities.
