Africa, in the last decade, has experienced a marked economic growth fueled by emerging economies. South-South cooperation, as well as intra-African trade, has jump-started the continent’s growth. This comes as the economic center of gravity shifts from industrialized economies to large developing economies. Africa can only take advantage of the new economic landscape by addressing continental cohesion, infrastructure development, and governance — both at national and cross border levels, to further the continent’s economic progress.
New trade partners are offering new possibilities as the African continent experiences a new gold rush. The economic center of gravity continues to shift from the industrialized economies to the large developing economies. And emerging economies such as Brazil, Indonesia, India and China are hungry for raw materials, more than ever before, and also need new trading partners for their finished products. Africa provides fertile ground for both.
According to UNCTAD statistics, trade in goods between Africa and developing countries has been on the uprise since the mid-90s. While it represented only $34 billion in 1995, trade rose to $97 billion in 2004, before surging to $283 billion in 2008. In the same year, trade between other developing countries and those in Africa exceeded the total volume of trade between Africa and its main trading partner, Europe, for the first time ever.
Trade between Brazil and Africa, for example, quadrupled during the tenure of President Lula. Standing at $6 billion in 2002 when he took office, trade between the Latin American country and the African continent has reached $26 billion in his final year in office. But while trade has increased, experts have encouraged Africa to take advantage of this new economic landscape to drive its economy.
Indeed, while exports to Asia stood at $96 billion, imports from Asia to Africa amounted to $146 billion in 2002. A strong proof of a lopsided exchange largely due to the fact that those economies are aggressively seeking new markets for their manufactured products and Africa, besides being their natural resource well, is also an inarguable market resource with its one billion plus population.
A recently released OECD report anticipates that “emerging and developing economies will account for nearly 60% of world GDP by 2030.” And with Africa’s raw materials and human resource having become even more essential in the new economic dispensation, the continent stands to gain from this shift of wealth only if it acts now.
Some experts say that a fair distribution of wealth within individual countries is essential. To do this, Africa must seek to develop its infrastructure and refine its own raw materials before exportation, thus creating employment nationwide. Asian and Latin American market shares and trade earnings, for example, have risen considerably following their shift from selling primary goods to selling finished or semi-finished products.
Pierre-Noël Giraud, economics professor at the École des Mines de Paris, believes that although the continent’s development is inextricably linked to foreign investments and the installation of big multi-national organizations, African governments have an obligation to propagate this newfound wealth nationwide. But this should not be the case only at a national level, but also at regional and continental levels. “Africa is doomed to integrate its markets if it wants to overcome the challenges of underdevelopment,” says Raymond Sibailly, special advisor on investment policies to the Ivory Coast government.
To eliminate the damper of higher import and lower export, the World Bank insists that there is an urgent need to address poor infrastructure, customs barriers and high import duties to reduce the significant hurdles to trade within Africa. In fact, World Trade Organization statistics indicate that trade among African countries amounted to only 8.9 per cent of their total exports in 2006. During the same period, it was noted that 51.2 per cent of all Asian exports went to Asian countries, while 24.3 per cent of those in South and Central America stayed within that region in that same year.
A more serious need for regional economic integration cannot be overemphasized. The interaction encouraged by South-South cooperation—which pushes for sharing of both economic and technical know-how amongst developing countries—should be applied on a continental scale.
Although leaders from East and Southern Africa agreed to form the largest free trade area in the continent two years ago, bringing together 26 countries and three existing regional groupings — the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern African Development Community (SADC), — the setting up of the needed infrastructure will only enhance development if governance issues, including political stability, continental trade policies and corruption — both among security forces and government officials — are addressed.
As Africa awaits a 4.4 per cent and a 5.2 per cent growth in 2010 and 2011, respectively, according to African Development Bank economic forecast, it is evident that the continent’s importance to the economic development of other continents cannot be exaggerated. Africa’s failure, as a mineral resource powerhouse, to take more advantage of its own importance should be examined more closely by its governments and institutions, especially at a time when the world is experiencing a significant shift in wealth.