Exogenous shocks and commodity dependence: how diversification can fuel the green economy in Africa: Policy Paper

Abstract

A diversified set of exported goods is one indicator that an economy has transitioned from concentration on a narrow basket of primary commodities to higher value and more resilient industries and services. This process of economic transformation is high on the African policy agenda and links closely with a shift to a green economy, harnessing renewable energy and producing new goods for the global green transition. From 2018 to 2020, Africa witnessed a notable decrease in its export concentration index, which could be a good sign of this transformation. The present policy paper provides an examination of whether this transformation was indeed the force behind the fall in export concentration. It acknowledges that the impact of the coronavirus disease (COVID-19) pandemic on some traditional exports, along with the rise in the value of gold exports, have driven many visible trade trends, which speak more to continued commodity dependence rather than transformation. These trends shed light on the many links between the region’s current state of dependence and the implementation of policies intended to spur green commodity-based value addition in upstream and downstream industries.