Internal Trade in Africa – The Key to Economic Growth and Development: Africa is a vast and diverse continent with a population of over 1.2 billion people. It is also a continent with a long history of trade and commerce. In recent years, there has been a growing focus on developing internal trade within Africa. This is seen as a key to economic growth and development on the continent.
Internal Trade in Africa – The Key to Economic Growth and Development
There are a number of reasons why internal trade is important for Africa. First, it can help to reduce poverty. When people are able to trade their goods and services within their own countries, they can earn more money and improve their standard of living. Second, internal trade can help to create jobs. When there is more trade, there is a need for more people to produce and transport goods and services. Third, internal trade can help to boost economic growth. When people are able to buy and sell goods and services within their own countries, they are more likely to spend money and invest in businesses.
There are a number of challenges to developing internal trade in African continent. One challenge is the lack of infrastructure. Many African countries have poor roads, railways, and ports. This makes it difficult and expensive to transport goods and services. Another challenge is the lack of trade agreements. Many African countries have different trade policies, which makes it difficult for businesses to trade across borders. Added to this, the low rate of penetration of Internet in Africa.
Leaders countries in Africa
Despite these challenges, there are a number of countries in Africa that are making progress in developing internal trade. Some of the leading countries in internal trade in Africa include:
South Africa: South Africa is the largest economy in Africa and has a well-developed infrastructure. The country has a number of free trade agreements with other African countries.
Nigeria: Nigeria is the most populous country in Africa and has a large domestic market. The country is also a major producer of oil and gas, which provides a source of income for the government to invest in infrastructure and trade.
Kenya: Kenya is a middle-income country with a growing economy. The country has a number of free trade agreements with other African countries and is a major producer of agricultural products.
Morocco: Morocco is a North African country with a well-developed infrastructure. The country has a number of free trade agreements with other African countries and is a major producer of agricultural products and textiles.
These are just a few of the countries in Africa that are making progress in developing internal trade. As more countries in Africa focus on developing internal trade, the continent will be well-positioned to achieve economic growth and development.
Benefits of internal trade in Africa
Reduces poverty: When people are able to trade their goods and services within their own countries, they can earn more money and improve their standard of living.
Creates jobs: When there is more trade, there is a need for more people to produce and transport goods and services.
Boosts economic growth: When people are able to buy and sell goods and services within their own countries, they are more likely to spend money and invest in businesses.
Challenges to developing internal trade in Africa
Lack of infrastructure: Many African countries have poor roads, railways, and ports. This makes it difficult and expensive to transport goods and services.
Lack of trade agreements: Many African countries have different trade policies, which makes it difficult for businesses to trade across borders.
Political instability: Some African countries are politically unstable, which makes it difficult to attract investment and trade.
Internal Trade in Africa – The Key to Economic Growth and Development
Despite these challenges, there are a number of things that can be done to develop internal trade in Africa. These include:
Investing in infrastructure: African countries should invest in roads, railways, and ports to make it easier and cheaper to transport goods and services.
Negotiating trade agreements: African countries should negotiate trade agreements with each other to reduce tariffs and other barriers to trade.
Promoting trade: African countries should promote trade by providing information and support to businesses that want to trade with each other.
What can Africa expect from Davos? Optimism in turbulent times: When the great and good of global finance, industry and politics gather in the Swiss mountains for the World Economic Forum in January, the ghosts of 2022, one of the most turbulent years in history will barely have been extinguished.
Author: Masahudu ANKIILU
What can Africa expect from Davos?
When they last met in May for the first in-person Davos since the pandemic, Russia’s invasion of Ukraine was top of mind, not least because of a stirring presentation from President Volodymyr Zelensky of Ukraine.
It was clear, even then, that the invasion, which led to stiff sanctions on Russia and concomitant shocks to Europe’s energy supplies, presaged an extremely difficult year, even as the world was grappling with the aftershocks of the pandemic and the supply chain disruptions it had occasioned.
The result, among other things, was record-high inflation around the world, aggressive monetary tightening by central banks in response and for many emerging markets, including many in Africa, increasing debt vulnerabilities.
The theme for this year’s gathering, “Cooperation in a Fragmented World”, reflects the challenges highlighted in 2022, as global tensions rose and fears of economic and political bifurcation heightened. While Davos is essentially a private gathering, its influence on policy cannot be denied, owing at least in part to the increasing power of corporate entities and their ability to shape the economic narrative of countries they choose to invest or withdraw from.
Optimism in turbulent times
This is why leaders of countries go to Davos, and have done since they were first invited in 1974, three years after German engineer and economist Klaus Schwab first convened the meetings – because the discussions there matter. On their plate this year will be issues of inflation, growth, debt, climate, food and energy security, investment and, of course, the changing political conditions under which businesses big and small must operate in across the world.
Analysts expect the global economic picture to be only slightly better in 2023, with pronounced risks from a recession in Europe and China’s rocky departure from its zero Covid policy. Overall, however, the global economy is expected to grow by about 1.8%, according to Goldman Sachs. Estimates published by the Economist Intelligence Unit peg growth in Africa at 3.2% in 2023, although there will be lingering risks of debt distress, high cost of capital and challenging conditions for especially commodity dependent economies.
These and other critical matters will be on the minds of the African contingent at Davos this year. Chido Munyati, head of regional agenda for Africa and a global leadership fellow at the World Economic Forum expects strong representation from the continent at the annual event. About 10 heads of state are expected, he says, from all the regions of the continent.
Making business part of the solution.
This is reflective of a more muscular presence on the multilateral stage for Africa. The past year has seen an acceleration of calls for restructuring of the international political and financial architecture to give the continent a stronger voice. At the US-Africa Leaders Summit in December, President Joe Biden gave fresh impetus to this push when he openly backed the call for Africa to be granted a permanent, additional seat at the G20.
Munyati is, however, quick to clarify that Davos is an opportunity for the public sector to engage with the private sector and African countries attending must be focused on partnerships with the private sector. Political solutions can be canvassed in other fora but at Davos “it’s really about how business can be a part of that solution,” he says. And with over 1,500 private sector leaders present, there really can be no better place to build these partnerships.
At last year’s meeting, for example, Namibia took the opportunity to launch its green hydrogen offerings to an expectant community of investors. Energy is one of such areas of cooperation that Munyati expects leaders from the continent to address.
“For example, with the energy transition, the reality is that 600m people in Africa do not have access to electricity and this is in the context of Africa having the fastest growing population, and so the question is how will the region attain the cheap affordable and modern energy solutions needed to meet this challenge?” he muses.
The spectre of debt
Generally, Africa’s concerns will mirror those of the rest of the world. Chief among them will be how to return to growth. The combined effects of the pandemic and the war have compromised Africa’s efforts at economic growth. Prior to 2020, the fastest growing economies were in Africa. The twin shocks have exposed the vulnerabilities of African economies, including dependence on commodities for revenue, lack of local production and risky debt profiles.
“More than one in five countries are spending 20% or more of their foreign-exchange income on external debt servicing and this burden is much larger for a handful of highly leveraged states. Debt distress is not consistent across the region but is definitely an issue that policymakers are worried about,” Munyati points out.
Ghana, for example, faces a debt crisis so severe that it has already defaulted on its debts and has announced a debt exchange programme in an attempt at restructure its debts ahead of an International Monetary Fund programme that it expects to enter. Along with its regional counterpart Nigeria, Ghana has faced repeated credit downgrades from ratings agencies and is effectively no longer able to raise money on the international capital markets.
AfCFTA to boost trade and investment
Despite these grim tidings, Munyati believes Africa still has a lot of potential and has the capacity to reverse the trends. He is most optimistic about the potential of the Africa Continental Free Trade Area (AfCFTA) to transform commerce on the continent and create the fifth largest economy in the world if properly implemented.
Launched in 2020, the agreement will see the removal of trade and tariff barriers between countries on the continent, facilitating seamless trade, harmonising regulations and standards and creating one of the largest single markets in the world. While it is yet to be fully implemented, six countries – Cameroon, Rwanda, Tanzania, Ghana, Egypt and Mauritius – have already issued certificates of trade to local companies, allowing trade to begin under its terms. Since then, ceramic tiles, cashew and palm oil have been shipped from Ghana to Kenya and Cameroon, while car batteries, tea and coffee have been sent to Ghana from Kenya.
Analysts expect that free trade in Africa will offer a tremendous boost to the continent, turbocharge investment and create jobs and wealth for citizens, particularly the youth. Munyati shares this optimism.
Friends of the Africa Continental Free Trade Area
“The free trade area provides a framework for attracting investments into critical sectors, such as health, education and infrastructure by connecting and deepening regional value chains as countries start to trade optimally amongst each other. The Forum, in collaboration with the AfCFTA Secretariat, are presenting this opportunity to global business as a new era for global business and investment in Africa. If effectively implemented, the AfCFTA has the potential to become the fifth largest economy in the world with a GDP of $3.4 trillion,” he explains.
So convinced is the Forum that in May, 2022, it launched the “Friends of the Africa Continental Free Trade Area” initiative to support the project. “One of the first pieces of collaboration that we are delivering is the first ever report by global business on the opportunities presented by the AfCFTA,” says Munyati.
The free trade area, he is convinced, will lift several other economic initiatives on the continent along with it. Among these are digital trade, infrastructure, health and the green energy transition, which he believes will all come under the agenda of a thriving AfCTFA.
The Forum also sees digital transformation as key to the future of Africa and is thus supporting efforts to boost technology and innovation on the continent. Currently, it has two centres in Africa – one in South Africa and the other in Rwanda – to pursue the agenda of the fourth industrial revolution (4IR).
They are part of a network of 16 centres across the world and benefit from the expertise and experience of the sister centres. The two centres focus on the different aspects of innovation but are united by a common focus on inclusive technology governance and adoption.
In Rwanda, for example, the centre has had remarkable success with chatbots for the medical sector, helping speed up pulmonary diagnosis. Munyanti says this is an example of the model they are pursuing at the Forum. The AI-enabled triage service in Rwanda is an example of how public private-partnership are supporting and accelerating responsible technological innovation in the region, he explains.
Access to energy
Of course, none of this will be possible without a remarkable expansion in access to energy on the continent. Currently only about 40% of Africa has access to electricity and the International Energy Agency says the continent needs to increase energy production by at least 30% by 2030.
Luckily, the continent also has vast reserves of renewable energy resources and is shaping up to be a potentially important player in the global energy transition, as evidenced by the strong pitch Namibia made at the 2022 annual meeting. Questions, however, continue to linger about the role that hydrocarbons, which have been critical to nearly every growth story in modern history, can and must play.
While African leaders address these questions on the policy level, the World Economic Forum offers an opportunity for them to engage with business leaders and build partnerships to transition to new energy forms without compromising growth objectives.
Africa’s embrace of Davos and its drive to have its voice heard in other multilateral deliberations is a signifier of its growing confidence and recognition by the rest of the world that despite its problems, Africa can no longer be ignored.
While the challenges of the past years will continue to weigh on it in the coming months and years, the continent can perhaps use this year’s gathering to signal its embrace of challenges, highlight its potential and seek out meaningful partnerships that can facilitate its ambitions.
Munyati clearly agrees. “Evidently, there are areas where it is difficult to advance multilateral cooperation but there are challenges where most people or most countries do agree on priorities, systemic challenges around climate energy for example. These are areas where a multistakeholder approach can advance positive change,” he says.
As the continent with the fastest growing population, with estimates showing that one in four people in the world will be living in sub-Saharan Africa by 2050, it will need to build the partnerships needed to provide jobs, and improve quality of life and fast. And some of those partnerships may well be born on a snow-capped Swiss mountain.