Changes in today’s global landscape mean emerging markets must consider how they shape their own futures. Many countries in the developed world have focused their efforts and resources inwards as a result of challenging economic times. There is a danger that a shift away from emerging markets will negatively impact the global economy’s ability to grow in the future.
This is especially dangerous for Africa given its growing integration with the global economy in recent years. In order to mitigate this, Africa must take steps to secure its own share of global economic growth. In addition, we must be able to sustain the economic growth of Africa ourselves.
The greatest opportunity for realizing Africa’s growth potential is often overlooked, despite lying within the continent: Africa’s ability to trade and do business with itself. What is required is an inward and outward strategy acting in tandem to outwardly cement Africa’s place in the global economy through foreign investment and improved trading links; while internally driving regional trade integration.
It is no coincidence that Africa’s recent growth, epitomized by the Africa rising label, was in part realized owing to increased levels of foreign direct investment. Improvements to fiscal policies, governance and regulatory frameworks, along with a move to diversify economies away from Africa’s traditional commodities-biased economies presented greater opportunities to foreign investors.
If Africa is going to capitalize on this base, it needs to work together on its shared future. Africa’s development must be underpinned by further regional integration and trade liberalization. While the rest of the world becomes increasingly fractured and disparate, it is time for Africa to create ways to better integrate its fragmented markets which have long constrained growth and acted as barriers to trade.
World Bank statistics put intra-African trade at just 11% of the continent’s total trade between 2007 and 2011. In 2015, intra-African trade was worth just $170 million, according to the same institution’s figures, when the potential stands at trillions of dollars.
To collectively succeed, individual governments must work towards a regional imperative if Africa’s economies are to be changed in a way that drives sustainable and inclusive growth for the continent as a whole. These regional trading corridors cannot work in isolation but must be scalable to improve connectivity across the African continent.
This approach has been championed by initiatives such as the African Union’s Continental Free Trade Area (UNCTAD. It is estimated that the implementation of the CFTA will nearly double intra-African trade by early next decade.
We are already seeing positive results from some regional trading corridors, such as the Southern African Development Community (SADC), the Economic Community of West African States (ECOWAS) and the East African Community (EAC), but for Africa to be greater than the sum of its parts, we must learn to work together. This includes harmonizing development and economic policies, regulation, market structure and governance, along with their implementation.
Any regional initiative will need to be accompanied by huge investments in cross-border infrastructure. The African Development Bank estimates the continent would need to spend an additional $40 billion a year on infrastructure to turn around its current deficits and keep pace with economic growth.
The rising trend of urbanization only serves to put pressure on an already inadequate infrastructure and demonstrate the urgent need for greater investment if living standards for Africa’s growing population are to rise. Conversely, the benefit of Africa’s growing population could help facilitate regional trade growth. A customer base of nearly 1 billion people provides not only the opportunity for regional opportunities but also access to the broader African market if the continent’s industrial development plans can improve capacity for productivity.
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If we are looking to the rest of the world to show faith in the African growth story, then as Africans ourselves, we must demonstrate our own commitment. A collaborative approach to Africa’s own growth story driven by the continent itself will make it a stronger contender globally.
South Africa is in the unique position of holding membership to several multilateral fora. As we take over the BRICS presidency for 2018 and as the only permanent African member of the G20, it is our responsibility to champion the case for Africa and its agenda by being at the nexus of discussions with our international counterparts. Moreover, Africa’s significance to our own economic future cannot be underestimated.
We can reap the rewards of Africa’s tandem approach to growth. South Africa’s track record in doing international business makes it the natural access point into Africa for the rest of the world. But we must have a clear strategy in our approach to Africa to ensure we also become part of the continent’s growth story. South Africa must continue to cultivate its role in facilitating positive changes for Africa as this is where our own long-term economic success lies.