Africa's biggest challenge
" La croissance est bonne mais, pour réduire la pauvreté, il faut changer la nature de cette croissance ". "Growth is good, but to reduce poverty, it is necessary to change the nature of that growth" (Luc Christiansen, chief economist for the Africa region at the World Bank).
It must be ensured that these growth rates are actually due to a dynamic and productive economy, which means that they do not depend on a good harvest or an increase in the price of their raw materials on the markets, but on knowledge, specialisation and technique. If we are to have a realistic view of this factor, there are three elements that must not be lost sight of:
Growth is not homogeneous given the differences between oil and gas producing countries and the rest. Case studies are Algeria and Nigeria: hydrocarbons may inflate growth curves, but they do not prevent the economic and social failure of their peoples.
The African economy - less so now - has not known diversification and industrialisation through the transformation of its resources, and is therefore less inclusive.
The reasons for economic growth are diverse, but they include technical progress, investment and the accumulation of capital, both physical and human. Openness to foreign markets also counts, and the characteristics of what is called the institutional framework are of outstanding importance: in essence, the maintenance of minimum requirements in terms of physical and legal security, peace and freedom. This remains an unfinished business in many African countries. Examples of fragile growth include Nigeria, Algeria, Angola, Mozambique, Equatorial Guinea, Gabon, Central African Republic (CAR), Democratic Republic of Congo (DRC), Zimbabwe and perhaps South Africa.
All of them are endowed with important natural resources, including minerals and agriculture. The causes have already been pointed out: fixation on the exploitation of their main product (abuse of the mono-product: gas, oil and minerals) without paying attention to diversification policies, poor governance, fragile institutions, political and social conflicts, high corruption, capital flight, etc.
Did people think that oil and mineral revenues would last forever, ignoring the cyclicality of the commodities market? Could it be that there has been uncontrolled growth over the last 10 years in Africa, particularly in oil and mineral producing countries? Has this growth been a symptom of development across the continent? Have the necessary structural reforms of the economy taken advantage of this prolonged period of growth? Is inclusive growth taking place? All these questions and more are not new, as many analysts have denounced them over the years, but others have forgotten them.
The Afro-pessimism of the 1990s has been forgotten, but has Afro-optimism been sinned against? Or perhaps we need to come to terms with what Africa is, a mosaic of countries with unequal resources and behaviours, and begin to realise that the most appropriate term for the continent is Afro-realism, that is, to take an honest look at the continent and be aware of its past and the global environment in which it is immersed, as well as the enormous challenges that lie ahead. One could conclude by saying that if countries do not save money, and do not manage their revenues properly during periods of expansion, they will have little capacity to react when commodity prices fall and they will be left with no choice but austerity, which will put a brake on their growth.
The recipe: diversify to minimise risks, as commodities account for more than 60 % of merchandise exports in some 28 African countries, according to a UNDP (United Nations Development Programme) report.
Other countries on the subcontinent - not necessarily endowed with significant natural resources - have for years been setting an example of coherent and more sustainable economic management, according to the book 'África es así / Instituciones o pobreza' by José Ramón Ferrandis Muñoz (Unión Editorial). These are the cases of Botswana, Cape Verde, Ivory Coast, Ethiopia, Mauritius, Kenya, Namibia, Rwanda, South Africa and Djibouti, to which we can add Morocco in North Africa.
On the other hand, technological change has enabled Africa to skip some traditional stages of development. Mobile telephony has penetration rates not far from those of advanced countries, without having to invest in expensive terrestrial telephone networks.
By 2025, half the population of sub-Saharan Africa will have subscribed to mobile operator services. At the end of 2018, sub-Saharan Africa had 456 million unique mobile subscribers, an increase of 20 million from the previous year, and a penetration rate of 44%. Some 239 million people, or 23% of the population, also use mobile internet on a regular basis.
Sub-Saharan Africa will remain the region with the highest growth rate, with a compound annual growth rate of 4.6% and an additional 167 million subscribers by 2025. This will bring the total number of subscribers to just over 600 million, or about half the population. By 2025, Nigeria and Ethiopia will have the fastest growth rates of 19% and 11% respectively. Across the region, the demographic boom will lead many young people to equip their mobile phones for the first time. This segment of the population will represent the majority of new mobile subscribers and, as "digital natives", will have a significant impact on how different mobile services will be used in the future.
Geography, trade and infrastructure are closely linked when talking about Africa. In many African countries, productivity is low mainly due to the poor geographical proximity between their economic actors, and this proximity, which is adverse, has two dimensions: on the one hand, the lack of proximity between African countries and international markets; on the other hand, the distance between the different economic actors within Africa due to insufficient agglomeration of economic activity. African geography undoubtedly influences proximity and productivity, and this is reflected in transport costs.
To understand this geography, a few preliminary facts should be noted: the African continent today has some 83,500 kilometres of political land borders drawn within a short quarter of a century (1885-1909). These chancellery borders were established by Europe on maps that were hardly recognisable and, above all, without prior reconnaissance of the terrain. Sub-Saharan Africa today is a patchwork of political entities with spaces that are too large (Democratic Republic of Congo) and too small (Burundi), too arid (Niger) or too enclosed (Central African Republic) to form coherent economic enclaves. The African continent is very complex and cannot be approached as a homogenous whole. There is not just one Africa. Africa's difficult economic geography represents a major challenge for the development of infrastructure and trade in the region.
Some characteristics of this geography that inevitably condition the viability of infrastructure are:
- The low overall population density, with 36 inhabitants per square kilometre.
- The still low rate of urbanisation (35%).
- A significant number of countries from the interior of the continent, with very small economies and still little intra-regional connectivity and few cross-border connections favourable to regional trade.
The thickness of borders in Africa makes trade costs very expensive. The costs associated with transport, such as the logistics of moving goods, are part of this border thickness, and this is precisely what weighs on the decision to set up in a given region of the continent. The animation of African borders is fuelled by trade in commodities, more or less legal trafficking and fraudulent flows, as well as institutionalised smuggling.
A whole world lives from these border asymmetries (traders, transporters, customs officers and the military) and tens of millions of inhabitants live on these borders. This raises the question of the veracity of official statistics, if we consider the economy as it functions and not just the formal economy, since there are many areas where trade makes a mockery of borders.
Firstly, the necessary rapprochement between transit corridors to promote internal and external trade with more and better provision of logistics and transport services. Next, greater regional integration efforts. The necessary legal and regulatory reforms, greater commitments from the administration and institutions in general, and a greater provision of infrastructures that allow the countries of the interior to develop multimodal trade services (rail, roads, air transport, etc.). The fact is that today Africa trades better with the rest of the world than with itself.
Regional integration has been an aspiration of the various African states since the time of African independence. This need for regional integration is strengthened by the current process of globalisation in which regional blocs prevail. Integration, especially in its most economic aspect, is therefore the necessary vector for African development.
The reality today is that regional integration is a pending issue in Africa and progress over the last 50 years has been very slow. Africa accounts for approximately 3% of world trade. While trade between Europeans reaches levels of 70%, that of the Asian dragons 50% and that of Latin America 21%, this drops to levels of 11% when we talk about Africa, according to UNCTAD data from 2013. UNCTAD is the United Nations Conference on Trade and Development, created in 1964 for matters related to trade, investment and development, and is the main organ of the UN General Assembly.
"When African countries trade with themselves they exchange more manufactured and processed goods, have more knowledge transfer, and create more value".
"When African countries trade with each other they exchange more manufactured and processed goods, have more knowledge transfer, and create more value". (Vera Songwe, executive secretary of the UN Economic Commission for Africa)
In 2018, African Union member countries (44 out of 55) gave a major boost to regional trade and economic integration by creating the Continental Free Trade Area for Africa or African Continental Free Trade Agreement, with commitments to abolish customs duties on most products, liberalise trade in key services and tackle non-tariff barriers to intra-regional trade. The ultimate aim was to create a single continental market in which labour and capital can move freely. It is intended to enter into force this year to create a market of 1.2 billion individuals and 2.5 billion dollars of cumulative GDP. It has already been ratified by 22 countries, which was the required number.
The reality must be told: African sub-continental economic integration is still in the making, progressing very slowly and not without great difficulty. The main explanation lies in the low interest of some African elites in member countries reluctant to change the "status quo" that favours them. As José Ramón Ferrandis points out in his book 'Africa is like this', the case of Nigeria is very African. In July 2018, the country's president, Muhammadu Buhari, finally announced that he would sign the AFCTA. On his tardiness, he said he was a slow reader "maybe because I was a soldier". "I didn't read it fast enough before my advisers saw that everything was right for signature, so I left it on the table," he added. This treaty, moreover, is very optimistic, especially considering that the list of products (goods) and commitments made in terms of services that would have to be negotiated are still unknown, in addition to the already slow procedures in Africa, according to Ferrandis.
That said, it is true that intra-regional trade has developed favourably in recent years. Three quarters of intra-regional trade has taken place within the framework of the main sub-regional communities. In contrast to the rest of the world, it should be noted that these flows are more diversified in terms of products, with a higher value added and a significant weight of manufactured goods (e.g. automobiles and textiles). In short, it would be desirable to concentrate efforts first and foremost on overcoming the non-tariff obstacles to achieving a valid regional trade integration with projection, i.e. overcoming the mediocrity of trade logistics and the lack of infrastructures.
Article written by Matilde Latorre, International Coordinator of Our Hearts for Africans / Casa África Blog