The recent fall in commodity prices has seen many African countries facing challenging headwinds resulting in a need for them to diversify their economies.
“Africa is at a crossroads because on [the] one hand commodity prices represent a very important component of its economy and growth and on the other hand the continent is facing low commodity prices,” Antonio Pedro from United Nations Economic Commission for Africa told CNBC Africa.
The Overseas Development Institute says many countries in Africa derive more than 90 per cent of their export earnings from commodities.
Pedro added that Africa needs to proceed with some ambitious projects unlike what other experts suggest.
“There are forces out there that are of the view that in the current environment ambitious projects which were being pursued during the era of high commodity prices should be put to rest. Our perspective is that it’s time to intensify the linkages between the extractive sector and the local economy and this means more value addition and more participation by local enterprises.”
Pedro said that countries like Angola have realised that they have to build a future beyond the oil sector.
“With the support of the AfDB they are now pursuing an oil diversification strategy. You have to use your resource base to diversify into other sectors as well as investing in human capital and infrastructure which is critical to creating other growth sectors,” he said.
Pedro said Africa should learn to live with commodity prices volatility because it is part and parcel of the industry.
“This is the time to pursue counter cyclical investments, but this requires targeted investment strategy approach so as to ensure whichever investor comes into the country localise value addition.”
He also called on the regional mining countries to follow through the African mining vision.
“The African mining vision is being used by many countries however the key consideration is the scale to which the vision and all elements are being implemented.”