Africa is showing encouraging signs of economic integration
While the rest of the world seems to be in turmoil, the continent has an opportunity to form progressive partnerships
Our world is being challenged in ways few people could have imagined 70 years ago. Back then, in the aftermath of World War 2, the institutions that were designed to prevent challenges such as those we are facing today — the UN, IMF, World Bank and others — were operating in a much simpler world.
That era is now over. Climate change, the fourth industrial revolution, the emergence of a new multipolar and multiconceptual world order and rising income inequality, are all placing strains on economies, societies and our environment that our existing framework of international governance institutions are not able to cope with — or stopped coping with, due to a lack of the consensus often needed in intergovernmental processes.
This matters for Africa. When looking to the future, the rear-view mirror is of limited value. Traditional pathways that helped other regions industrialise and develop from low-cost manufacturing hubs to “tigers” and then advanced economies have become more complex, with the new technologies and machine learning. At the same time these same technologies can also be a unique opportunity to leap frog.
Africa’s future must be of its own making. This is no bad thing. These are the reasons I am optimistic about the region’s future:
- We are finally beginning to see signs of much-needed economic integration. Today, only 17% of Sub-Saharan Africa’s exports are traded within its own border. This compares to nearly 60% in Asia and 70% in Europe. Africa must break the cycle of exporting raw materials for processing only to reimport them as value-added products. The new Africa Continental Free Trade Agreement (Acfta) that came into force in 2019, while not perfect, will go a way to addressing this. This is one reason Africa has been the only region in the world to have seen increases in foreign direct investment in the past three years.
- As the motor for economic growth shifts from manufacturing to the knowledge economy, Africa’s youthful and entrepreneurial population will increasingly become an asset. Africans, including those working in the informal economy, are increasingly technology literate and the ecosystem that has built up around them boasts not only world-class players such as Jumia but strength in depth in areas such as fintech and e-commerce. These two areas alone could add more than $200bn to the region’s economy over the next five years. In future we will see many Silicon Valleys all over Africa. This is already the case on the outskirts of Nairobi.
- Africa is not a country and any attempt to draw parallels and divine trends across its huge, diverse geography will always invite oversimplification. But it is possible to discern that elections are becoming more established. At the same time, fragile nations like South Sudan are witnessing renewed attempts at peace-building and efforts to clamp down on corruption are having an impact in countries such as SA and Kenya.
These are all encouraging signs. The imperative for Africa now must be to not lose this unique opportunity. At a time when the rest of the world is moving apart, Africa is at last coming together. Efforts to ease the movement of people, products and services must continue.
More effort must also be made by all of Africa’s leaders to unshackle the region’s greatest asset, its people. Africans are entrepreneurial — far more than the global average — yet their businesses often fail due to burdensome regulations and lack of access to vital funding — and skills. Allocating more resources to education and upskilling is a prerequisite for economic growth and producing higher up in the value chain in the future.
The challenges facing Africa’s development cannot be tackled by its political leaders alone: transformation only happens when all stakeholders work together.
The challenges facing Africa’s development cannot be tackled by its political leaders alone: transformation only happens when all stakeholders work together. At the World Economic Forum (WEF) on Africa this week, new or existing public-private partnerships will advance solutions aimed at many of these. We will see new action agendas for e-commerce, platforms to strengthen risk and resilience in fragile nations and help start-ups scale up. New partnerships will tackle ocean plastic, bring new funds to fight disease, aid the roll out of drone deliveries across the continent and expand Africa’s role in the governance of the fourth industrial revolution.
The decisions Africa’s leaders must take — with growing urgency — are not easy ones. We are sure to see displacement as a result of automation, not only in manufacturing but also services, retail, mining and elsewhere. Worst-case scenarios on the fourth industrial revolution predict a great hollowing out of middle-class jobs. Our own analysis is more positive: we believe that between now and 2025 almost two jobs will be created globally for every one that will be displaced. But herein lies one of our greatest challenges: the jobs that will be created require skills that not enough of us yet possess.
Placing responsibility for reskilling solely in the hands of private sector, our research has found, would result in only a narrow proportion of highly valuable workers receiving investment. Thus governments must also get involved, collaborating with businesses collectively to find cost-effective formulas to ensure everybody gets an opportunity to reskill and upskill. Our research again has found that in the vast majority of cases this would have a positive effect on treasuries, with higher qualified, better paid workers paying more back to the government through higher income taxes.
This is the essence of public-private co-operation: enabling dialogue to lead to consensus and then action to solve issues that in the long term will be overwhelmingly positive for governments, businesses and society.
Systemic change of this nature powered by multi-stakeholder collaboration is the only way to bring about transformation at the scale necessary to improve the livelihoods and prospects of every African. There is no time to lose.
• Brende is WEF president. WEF on Africa takes place in Cape Town from September 4-6.