Heard the one about diversification?

For almost as long as we can remember, governments in emerging economies have been calling for diversification to boost value added, enlarge the skills base, spur growth and create jobs. Nigeria is no exception so we were curious to hear the progress of the diversification agenda in three Africa oil producers yesterday at the FT Africa summit in London. No two countries are the same of course but their progress (or not) will be of interest in a Nigerian context.

  • The Ghanaian government gave the most compelling account. Its president, Nana Akufo-Addo, noted that the global chocolate industry is worth US$100bn annually while Côte d’Ivoire and Ghana, which account for 65% of global cocoa output, generate just US$6bn from sales of the product.
  • As an example of the processing of raw materials, the president mentioned a deal whereby China is putting up US$2bn in finance for the infrastructure and is to be repaid in alumina from Ghana’s bauxite mines.
  • President Ali Bongo Ondimba of Gabon told the summit that following his election in 2009 his government banned the export of unprocessed logs. The country now boasts a special economic zone devoted to a wood cluster, in which 10,000 jobs have been created and the Singapore-based Olam, well-known in Nigeria, has a prominent role.
  • Diversification requires government funding, not least for the infrastructure, and the three governments have a story to tell about fiscal consolidation. Ghana’s expects a deficit this year equivalent to 4.5% of GDP or less than half 2016’s 9.3%. Among its achievements, it saved US$350m in 2017 in public procurement merely from a rigorous examination of contracts.
  • President Bongo said that his government had removed 6,000 ghost workers from the public payroll, and cut 40% of the posts in the presidency.
  • The governor of the Angolan central bank, José de Lima Massano, told delegates that the fiscal deficit this year would fall to about 1% of GDP from 7.0% in 2017. We can legitimately speculate about the abundance of low-hanging fruit in the form of advantages enjoyed by associates and family members of the previous dos Santos presidency.
  • Diversification also requires heavy investment in education. The Ghana government introduced free senior high school education for all in September 2017 while President Bongo looks to push investment in the sector up to 15% to 20% of GDP. The success of the governments’ agenda needs substantial funding, which we will scrutinize in a subsequent daily note.

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