NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

African Export Successes

... Rises and falls [in the African export revenues] are primarily attributable to changes in the quantity exported. Price changes only account for 10 percent of the changes ...

The exports of sub-Saharan African nations include some "big hits" – that is, exports that dominate national trade. These exports change over time in a way that can’t be easily explained by commodity prices or other global factors, according to recent research by William Easterly and Ariell Reshef. And, although the sub-Saharan nations use conventional measures to boost their export revenues, such as moving up the quality ladder, concentrating on comparative strengths, and liberalizing trade rules, part of their success is idiosyncratic: entrepreneurial persistence, luck, and cost shocks can lead to big hits, even where the anticipated probability of success was low.

In African Export Successes: Surprises, Stylized Facts, and Explanations (NBER Working Paper No. 16597), Easterly and Reshef note that in the 15-year period from 1994 to 2008, sub-Saharan Africa saw its per capita exports of goods rise an average of 13 percent per year. That average is less than China's export growth rate of 19 percent, but on a par with India, and far above Germany's 8 percent and the 4 percent rate for the United States. "Given the well known difficulties in exporting from Africa (let alone running business there), 13 percent annual growth rates of exports per capita are no small feat," the authors observe. "[I]n many dimensions African exporting is in line with the rest of the world."

Sub-Saharan Africa has a relatively low share of manufacturing exports and a much higher share of agriculture, food, fuel, ores, and metals. There is considerable variation within categories, however, with some nations able to export high-value food exclusively to Europe or to the United States. Export successes are rare, but when nations do get a big hit, sales of that good tend to skyrocket. For example, the average share of the top export from 37 African nations is 47.6 percent of all of that nation's exports. The second largest export, by comparison, accounts for only 13.7 percent of exports on average. This pattern is somewhat more extreme than that of non-African nations. The top export share among 130 non-African nations averages 27.5 percent, and the second strongest export averages 11.6 percent.

The big hits also vary widely over time. In Ghana, for example, coconuts, Brazil nuts, and cashew nuts were No. 67 on the list of top exports in 1996 but had climbed to No. 4 by 2008. Meanwhile, unwrought aluminum fell from No. 6 to No. 132 in that same 12-year period. In Ethiopia, fresh vegetable exports rose from No. 182 to No. 5, while buckwheat and other cereals fell from No. 6 to No. 229. These rises and falls are primarily attributable to changes in the quantity exported. Price changes only account for 10 percent of the changes in shares for the median country.

Foreign aid can boost exports, the authors find, but only if implemented carefully with producers and exporters in the country. For example, after the 1994 genocide in Rwanda, USAID funded two projects to educate local business people in agribusiness. Local officials convinced the agency to figure out which efforts could improve local incomes, and it hit upon specialty coffee. The aid projects helped to form grower coops, taught coffee-washing techniques, contacted potential buyers, and provided the initial capital to build coffee-washing stations. The result is that Rwanda has become a source for high-quality specialty coffee that is sold in the United States.

Persistent entrepreneurs, timing, and happenstance also play a role in export success. Gahaya Links, founded in 2003 by two sisters, now sells Rwandan woven baskets to Macy's and other U.S. retailers, despite the problems that typically plague handicrafts ventures in the developing world. A Canadian-trained chemical engineer in Tanzania entered the prawn business after a London-based acquaintance requested the product. The big breakthrough came, however, when he moved into catching white fish in Lake Victoria to supply a European market hungry for his product.

--Laurent Belsie

The Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.
 
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