African countries south of the Sahara are set to benefit from their engagement with emerging economies like China, India and Brazil as these powerful economies outsource some of their industrial activities.
There is increasing indication that emerging economies seek to outsource some of their industrial activities, particularly in light manufacturing, to developing nations. This would be a change of attitude from regarding developing countries, especially those in Africa, as sources of raw materials.
According to the latest International Monetary Fund global economic outlook report, the global rebalancing between advanced and emerging economies will play in the favour of developing nations as rapid industrial growth is anticipated in China and India. The other benefit of Sub-Sahara African (SSA) countries dealing with emerging economies is the availability of cheaper imports compared to the traditional partners such as Japan, West Europe and the US.
“This relationship would boost the economy of Sub-Saharan African producers, adding to low-cost manufactured imports that will benefit both consumers and producers,” said the report.
Such economic relationship will intensify trade and investment opportunities among the partners, leading to cheaper and less sophisticated technologies that may be catalysts to the level of developing countries progress.
Besides, the relationship will create intraregional integration which will help to engineer economic growth by creating economies of scale -increases in efficiency of production as the number of produced goods increases and improve allocation of factors of production within the region.
However, the world finance prefect warns that, such opportunity that developing countries (SSA’s) are to benefit from their partners, has some issues to address, including trade in raw material likely to be dominated by exports, inadequate management of natural resources which has up date recorded negative impacts like unsustainably rapid depletion of resources and high trade volatility.
Others are reallocation of factors of production, failing business and unemployment, citing that non-commodity sectors like manufacturing or food processing can be affected by lower cost imports from other countries like manufactured products from China, processed food from Brazil and currency appreciation from higher commodity export.
The report, still predict that economic advantage from the economic partnership may further boost commodity prices, and higher wages in manufacturing and services in the emerging partners (BIC) which will prompt them to outsource some of their activities in Sub-Saharan Africa.