Exporting provides the opportunity to expand production, boost employment, reduce unit costs, and increase incomes. It also enables a country to better exploit its comparative advantage to generate higher incomes, which can pay for the investments in skills, capital, and technology to enhance competitiveness over time. And the knowledge gained from exposure to export competition helps in raising productivity and innovating with new products. Indeed, exporting was a key to success for the East Asian countries. And although the global economic environment has changed, exporting can still be a viable and important part of Africa’s economic transformation (chapter 3).
A good indicator of a country’s export competitiveness is its share in world exports of goods and services and how that share moves over time. However, a small economy could be very competitive in exports and still have a small world share (Mauritius and Singapore). A way to overcome this is to divide world export shares by world GDP shares. This ratio is equivalent to the exports-to-GDP ratio of a country divided by the exports-to-GDP ratio of the world. If this measure is greater than 1, the country is exporting a greater share of its GDP than the world average, so it is in a sense more competitive in exporting. And a rising trend in the ratio indicates rising export competitiveness.
In Africa a large increase in the exports of extractives by a country may not indicate that the country’s economy is transforming, so extractives are removed from both exports and GDP in calculating the measure. Trends in this measure of export competitiveness show a large gap between the African countries and the comparators (see chart here). The share of nonextractive exports in nonextractive GDP rose between 1980 and 1985. It has since been on a downward trend, revealing that the region’s recent GDP growth has not been matched by corresponding growth in exports outside extractives.
Ranking African Countries on Export Competitiveness
When it comes to export competitiveness (the share of exports of goods and services in a country’s GDP relative to the corresponding share for the world),20 Mauritius, Côte d’Ivoire, Malawi, Kenya, Mozambique, Tanzania, and Ghana are in the top third, while Cameroon, Benin, Botswana, Nigeria, Rwanda, Burkina Faso, and Burundi are in the bottom third. Mozambique, Tanzania, Uganda, and Kenya improved their competitiveness rank the most between 2000 and 2010. Kenya made great strides in tea, coffee, horticulture, hides and skins, cement, tobacco, textiles, and fish. Medicinal and pharmaceutical products are also emerging as important opportunities for expanding export volumes and upgrading quality and value. Ghana, though still in the top third in competitiveness, experienced a steep fall in competitiveness between 2000 and 2010. Part of this fall reflects the 60% revaluation of the country’s GDP in 2006. With exports not similarly revalued upward, the share of exports in GDP fell steeply. Botswana’s steep fall reflects its struggle to develop exports outside diamonds, since extractives are excluded from the export competitiveness measure.