African nations should leverage duty-free access to boost trade: Nirmala Sitharaman

28 Oct 2015


Union commerce minister Nirmala Sitharaman has called upon African nations to leverage duty-free tariff preferences offered by India to push their exports to this country.

Speaking at a seminar on `Focus Africa' organised by the EXIM Bank of India in New Delhi on Tuesday, Sitharaman highlighted that India has offered Duty Free Tariff Preferences (DFTP) scheme for LDCs, which provides duty-free market access on over 95 per cent of tariff lines. 

Not many countries have offered such overarching reduction in tariffs for LDCs, including those in Africa, the minister said. She advised the financial institutions and think-tanks in Africa and India to popularise the advantages of DFTP, among Indian and African business.

Indian business could look at Africa for their investments and in turn look at India for their market using the DFTP, she pointed out.

The commerce minister added that the government of India has been encouraging services cooperation with the African nations. Africa has the potential for development of tourism, healthcare, hospitality and ICT sectors.

India, she said, supported pan-Africa e-network, which has contributed significantly to Africa's skill development and healthcare delivery. The government is looking at the feasibility of providing cost-effective credit facilities to build capacities in other developing nations, particularly in Africa, the minister said.

During the day-long seminar, business and financial institutions deliberated on the potential for business cooperation between India and Africa.

Even as the continent attracts investors, it needs to make the transition from commodity exports to manufacturing, she pointed out.

Africa brings about tremendous opportunities to investors. According to the World Bank, five of the world's 10 fastest-growing countries by five-year GDP average are in that continent.

Africa as a whole has an annual output of around $2 trillion, which is comparable to total production in India or Russia.

While there's a plethora of opportunities for growth, the region is heavily skewed towards commodities, and hence suffers significantly from the vagaries of commodity price cycles.

Though exports from Africa increased at a compounded annual growth rate of 11 per cent from $213 billion in 2005 to $552 billion in 2014, it was solely commodity driven.

According to Unctad's Commodity Dependence Report 2014, out of 53 countries in Africa, 45 were commodity-dependent developing countries. This meant that more than 60 per cent of the country's merchandise exports value constitutes commodities.

Interestingly, in the last 10 years, exports have seen a consistent linear increase except during the 2009 global financial crisis, and again during 2013 and 2014, and in all these cases it was a result of the sharp fall in commodity prices.

In Nigeria, oil and gas accounts for 80 per cent of the state's revenue, and 95 per cent of its foreign exchange earnings.

Angola's exports are worth around 65 per cent of its GDP, and oil comprises 98 per cent of total exports.

Even South Africa, the most diverse and developed African economy, remains heavily resource-dependent.

Its gold industry has been in decline for the last couple of years as shafts plunge deeper, ore grades decline and costs climb, knocking it from the world's biggest producer to number five, according to the World Gold Council. In spite of this, precious minerals such as gold, platinum and diamond remained almost 14 per cent of its exports.

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