The President of the African Export-Import Bank (Afreximbank) Benedict Oramah while delivering an address at the “Africa Leaders Speak” Forum which took place at Harvard University’s Kennedy School in Cambridge, United States said that Industrialization and African Diaspora investment are key to raising Africa’s capital stock, which will trigger faster economic growth and development in the continent.
According to Oramah, academic research and empirical evidence showing the link between the rate of capital accumulation and economic performance indicates that developed economies were those with the highest capital stock. Africa’s low levels of capital accumulation was the result of African economies not capturing a good share of the value chain of agricultural commodities and natural resources.
He also noted that in the global cocoa sector, which generates $120 billion annually, African farmers, who delivered 77 percent of the cocoa supply, retained only three percent to eight percent of the value while a few foreign traders and chocolate manufacturers earned between 32 percent and 50 percent of the global cocoa value chain.
Similarly, in the oil sector, Africa received only three percent of the $3 trillion from the petroleum products market although it accounts for about 10 percent of crude oil reserves, and in other sectors like the gold sector, Africa accounts for 50 percent of the world’s deposits but received only 4 percent of the over $300 billion global gold earnings.
The President of Afreximbank also said that limited access to finance was another reason for Africa’s low capital accumulation, noting that foreign direct investments were very low and concentrated on a few sectors like the extractives industries. Other factors included insufficient levels of trade and project finance flows, with the trade finance gap and annual infrastructure finance gap standing at $120 billion and $93 billion respectively, and shallow domestic financial markets which were as a result of low savings and poorly capitalized banks.
“For Africa to break from the vicious cycle of low income, low savings, and low investment, it must move away from commodity dependence into the production of higher value-added goods, thereby accumulating capital along the value chain and increasing trade amongst African economies in order to gain comparative advantage and retain more value within the continent.
“The African Diaspora, with GDP estimated at over $500 billion, must be seen as a market for exports and for sourcing human and financial capital,” said Oramah.
The President reaffirmed Afreximbank’s commitment to fostering intra-African trade, promoting the industrialization of the continent and attracting more resources to complement existing trade finance flows into Africa. He stated that Afreximbank had the Afreximbank Market Asymmetry index which it uses to measure the distribution of revenues to various actors in the commodity value chain.
Other speakers at the Forum included former Nigerian President Olusegun Obasanjo, who delivered a presentation on “Agriculture and Agribusiness in Africa’s Development and the link between Security and Continental Integration”; Former Tanzanian President Jakaya Kikwete, who spoke on “The Role of Education and Technology” and Carlos Alberto Whanon de Carvalho Veiga, former Prime Minister of Cape Verde, who discussed “the Role of the Private Sector in Trade and Industry”.