Africa has to come to terms with and accept the “new normal” of lower commodity prices and start diversifying economies in order to face this challenge, according to Jacqueline Chimhanzi, senior strategist at the Industrial Development Corporation (IDC).
“Why did we expect China to continue to grow and grow? It had to slow down at some point. It is painful for Africa, but it is the new normal,” she said at the recent GTR Africa Trade Finance Week in Cape Town.
“The concept of Africa Rising was about commodities. I warned about this in the past – about Africa Rising having been based was on chance, on China wanting our commodities.”
In her view it is, therefore, now the time to make matters on the continent about finding a way forward without China.
“Africa must diversify and industrialise. There is no reason why Africa cannot feed itself,” she emphasised.
Chris Sturgess, director of commodity derivatives at the JSE, said during a panel discussion that there has been a lot of talk in the past about the cycle of commodities. Now it has become a crisis.
“The strategy in Africa must be how to produce more food and open export. We in Africa must, however, stop just talking about increased production and actually start doing it,” he cautioned.
For Gift Simwaka, regional manager Southern Africa of the African Export-Import Bank, part of this strategy should be where Africa starts looking “inwards”. An example of this kind of approach would be, for instance, where African pension funds invest in infrastructure on the continent.
Guillaume Arditi, founding partner of Belvedere Advisory, concluded the panel discussion by saying that commodities are volatile and there have not been any changes in the drivers of the current low prices.
He anticipates the current average commodity prices will stay for a while.
“The big question is, however, if there is a chance for a number of African countries to move to diversify. Africa must use this window of opportunity to diversify now,” he cautioned.
Time to act.