Diversification in Africa: Why African Economies must Diversify

Product/Market Grid
Knowledge Center


New Topic

Anneke Zwart
Student (University), Netherlands

Diversification in Africa: Why African Economies must Diversify

Many African economies have not diversified. Rather they are highly dependent on the production and export of one specific type of commodity. For example, between 1992 and 1997 more than 85 percent of export earnings of Unganda came from exporting coffee. At the same time, Malawi obtained almost 60 percent of export earnings from exporting tobacco. These countries are said to be commodity dependent. The commodity collapse in the 1980s has shown us that there are high risks on being so dependent on only one or a few commodities:

1. Loss of purchasing power: the commodity collapse and the resulted decline in terms of trade made it relatively more expensive to imports goods. Furthermore, the income of exports relatively decreased. In other words, the commodity purchasing power of African countries dramatically fell because of deteriorating terms of trade.
2. Rising debt: The decline in terms of trade resulted in a significant increase in debt of the commodity dependent countries.

Therefore, economic diversification of African economies is needed. It can provide African economies with great opportunities to raise their resilience. Furthermore, diversification can contribute to reach and sustain long term economic growth and development.

- Potter, R.B., Binns, T., Elliot, J.A. and D. Smith (2008) “Geographies of Development: An Introduction to Development Studies” Pearson Eduction Limited
- OECD/United Nations (2011) “Economic Diversification in Africa: A Review of Selected Countries” OECD Publishing.
- UN ( 2003) “Economic Development in Africa: Trade Performance and Commodity Dependency” New York and Geneva.

Participate and leave a comment
Exchanging your ideas stimulates your personal and professional development. And you can help other people! More info.

Start a new forum topic


More on Product/Market Grid
Turbulence, Planning and Paralysis by Analysis
🔥Horizontal Diversification versus Product Development. What's the Difference?
Diversification in Africa: Why African Economies must Diversify
Strategies for Expanding a Business
Best Practices
Ansoff Matrix Applications
Diversification Types and Examples
How to Decide in Which Sector to Diversify?
How to Prioritize Business Growth Opportunities (Ansoff): The ICE Prioritization Tool
What is the Optimal Level of Diversification for Firm Performance?
Special Interest Group

Are you interested in Product/Market Grid? Sign up for free

Notify your students

Copy this into your study materials:

and add a hyperlink to:

Link to this discussion

Copy this HTML code to your web site:

Product/Market Grid
Knowledge Center

About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2021 12manage - The Executive Fast Track. V15.8 - Last updated: 17-6-2021. All names ™ of their owners.