African Commodities and the Perilous 'Destination' Model

The FT highlights an emerging "destination" model for the continent's commodity business. A mechanism that would reinforce the "resource curse":
For the trading houses, this is a big new opportunity that is upending their traditional business model. “Africa is fundamentally changing,” says Ketan Patel, managing director of Export Trading Group, a commodities trading house in Tanzania which counts Carlyle Group, the private equity firm, as major shareholder. By 2020, he explains, “Africa will be majority young and urban, with an expanding middle class and they will demand energy and food.

In the jargon of the industry, Africa has been an “origination” business since colonial times, providing raw materials for overseas consumers: gold from South Africa, coffee from Ethiopia, crude oil from Nigeria, cocoa from Ivory Coast and copper from Zambia. This business model is still crucial to the big trading houses and exporting Africa’s commodities has funnelled millions of dollars into the hands of foreign tycoons...[continue reading]
While a reader,Ejeviome Eloho Otobo begs to differ:
Anyone who is interested in the long-term growth and development of Africa must be deeply concerned by all three problems associated with the “destination” business address model. Subsidising commodities is not sustainable in the long term. Using oil resources – a depleting natural asset, the prices of which are increasingly uncertain in an era of shale oil and gas – to buy commodities does not seem to be prudent economic management. Africa needs to build its capacity to produce many of the commodities, including oil-refining capacity, and to let foreign investors invest into those enterprises. That will produce dividends for investors and create jobs and tax revenue for Africa...[continue reading]