Africa needs a paradigm shift

21 Nov, 2013 - 00:11 0 Views
Africa needs a paradigm shift

The Herald

TRAFFIC JAMCarter Mavhiza Business Correspondent
AFRICA has enjoyed decades of political independence which in some countries came as a result of armed struggle and in some as a result of concessions. Very few of the sovereign nations have fully emancipated themselves to be able to stand on their own economically without the support of their colonisers.

The major reason why there is continued economic dependence on former colonisers is the absence of a viable value addition drive in Africa.

The trade arrangement between Africa and the rest of the world is not driven by forces of demand and supply but rather it is one of the horse and the rider, with Africa being the former.

Africa has remained a net exporter of raw materials such as crude oil, cocoa, coffee, tobacco and many other primary production commodities which also include minerals and timber.

Africa and price determination
African has been relegated to being price takers when it comes to trade with European, American and Asian buyers.

The continent has not been able to determine the price of its commodities yet there are factors that make up the price such as the cost of labour (human or machine effort), cost of power or fuel, cost of administration and any other costs whether direct or indirect.

The foreign buyers have been exercising the right to price determination ignoring the fundamental economic costs of production that would have been factored in the production of the goods that they have been looting or plundering from the continent.

Failure to add value to its output has resulted in Africa paying a heavy price. Many if not all African economies have recorded astronomic balance of trade deficit in past years.

The metals and other materials for production of machinery and other capital goods are being shipped or siphoned daily to other continents which would in turn produce products that are priced beyond the reach of African consumers.

This equation means that Africa has been relegated to the role primitive suppliers who could not negotiate prices on the world market.

The world market fraud
Who are the major players on the world market and who fundamentally drives the cogs that turn the wheels of the market?

Who sets the framework for participation on the bullion market and who regulates prices of platinum, copper, uranium and other precious metals?

Surely, it is not Africans who are producers of the products or else they would have vastly benefited from the so called world arrangement.

The world market prices of minerals and other agricultural products that are mainly produced in Africa are ever falling or they are always on a free fall.

For example, the price of copper which drives the economy of Zambia, has not been favourable since 2008.

Another good example would be the fall in the price of cotton on the world market which has forced many Zimbabwean cotton farmers to opt for tobacco.

Is the world market sensitive to the labour factored in the production of the commodities that are sold on its platform?

Why should the depth of the buyer’s pocket determine the prices? Why are the producing firms not playing a leading role in the pricing of their commodities?

Why are products of secondary production (manufacturing and processing) produced by developed nations not subject to the world market?

Price mechanism exploitation
Apple and Samsung, the leading mobile phone and computer producing firms in the world, use raw materials from Africa, Thailand and the rest of the world which follows in the case of metals that Germany uses for the Mercedes-Benz, Volkswagen and BMWs.
The input prices for production of goods enjoyed by Samsung and Apple in so-called developed countries have their prices determined on the world market.

Why is it that the output price is not determined on the world market and producers have the liberty to set prices for their smartphones and latest computers?

Output from Africa’s primary production is subject to prices set on the world market which is always subject to a free fall as the buyers catch a cold or is always tilted in favour of the buyers.

Why are the prices of the world market ever falling at a time that Africa is receiving economic illumination and when other countries are facing recession in the eurozone?

Prices of metals on the world market continue to take a nosedive yet the prices of metal dominated products such as plant and machinery and vehicles continue to go up for new models that would have been made using cheap raw materials sourced using low prices set on the world market.

Is the world market not being manipulated? Who really is behind the world market? Africa surely needs to wake up from the cocoon of primitiveness on the pricing floors.

Elementary economics dictate that if the price of raw material goes down then the price of the end product should go down and the opposite is true.

Why do the prices of new products continue to go up in the wake of weakening world prices? Surely, is Africa economically independent of its erstwhile colonisers?

Value addition the Key
The key to economic emancipation and freedom is value addition. If there is freedom in the pricing of the output of secondary production then surely Africa will need to increase its manufacturing and processing capacities. Africa must manufacture mobile phones and vehicles in its backyard.

Productivity in secondary production will cut the umbilical code that is linking African states and their former colonisers who control the world market.

The old age adage, if you cannot beat them, join them applies. Let Africa roar and invest heavily in plant and machinery. We can indeed defeat the pointlessness of the world market and its exploitation machinations. The vampire that has been haunting us can be tamed.

Beyond concessions and the barrel of the gun we need to produce and be self-reliant.

The new paradigm
The new approach is not in seeking foreign direct investment in terms of coins and notes. The new                                                                     paradigm is trade arrangements in plant and machinery.

Let us abandon the propensity for overnight consumption and invest in manufacturing and processing.

We have been our own enemies by not investing in capital goods. The new approach or paradigm is to minimise on expenditure relating to consumer goods (clothing, cars and furniture) and create a haven for secondary production (manufacturing and processing using raw materials).

Imagine what will have happened if all the money that went into importing the cars that are congesting our roads had been invested in plant and machinery.

We are on the receiving end and we cannot make a choice to drive new cars. Are we not First World citizens who can enjoy buying new cars that we can produce or assemble in Africa?

The average African man wants to consume and pays no regard to investment the champions of the world market have capitalised on that weakness.

The other players in the global economy have ensured that Africa does not produce and wean itself from the yoke of dependence.

It is high time we unmask them and encourage our children and small businesses to strive for better things through a culture of saving.

Saving will translate into investment and in the long term we will place our economy deep into manufacturing and processing.

Products and marketing
We have for many years subjected ourselves to enjoying the taste and preferences of products tailor-made for other markets.

Most global producers of consumer goods have not taken the African market serious in their research and development.
We seem comfortable and not mindful in buying and consuming whatever the world has to offer.

Where is our African pride? We have lost our morality and ethics in preference for products that the market is dictating to us.

Our silence and lack of advocacy regarding our tastes and preferences have made us want to be globally accepted by adopting fashion trends from other quarters and driving vehicles that are manufactured by others.

We have a right to demand value for money yet we have allowed others to step on those rights. It is time for Africa to rise and be counted!

  • Carter Mavhiza is a graduate in Finance and Banking and a current ICSAZ student. Feedback [email protected] or 00263772580284

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