By Olukayode Oyeleye
ISSUES THAT SPUR many people into activism and prompt many more to consider and rally support for collective actions have been coming in torrents to the forefront of global affairs in the past three decades. Voices in favour of common fronts and unifying causes are getting more strident as many risks are identified and various mitigation measures are being proposed. From Rio summit in 1992, to Beijing conference two years later, or to Cotonou agreement and the General Agreement on Tariff and Trade (GATT) which transformed into the World Trade Organisation (WTO) mid-1990s, awareness has never been so widespread. Climate action, sustainable development, regional integration, tariff and trade agreement, poverty alleviation or gender equality – all are gaining more acceptance and wider acclaim globally.
Their wide appeal, however, has not gone without some degree of opposition and misgivings, often taking political dimensions and influencing – as in recent political dispensation – who gets into political office, governments or heads of international organisations, by election or appointment. Although these causes have generated immense passion, influenced government policies and given the world some clear and common directions – one of which was the Millennium Development Goals (MDG) and the successor Sustainable Development Goals (SDG) – the world appears to be set to make an ‘about-face’ in many areas after years of progress. The change in direction could mean undoing some achievements and erasing some milestones.
The odds may favour some while others may find themselves holding the short end of the stick. Within the period filled with a frenzy of change, the world has witnessed tremendous growth in global wealth, unprecedented interconnectedness, faster and more elaborate information dissemination, greater and more widespread industrialisation. Simultaneously, however, the world has seen an upsurge in national and regional insecurity, more violence, rise in extremist attitudes as well as subtle, insidious and festering inequalities, which have fanned the embers of hate, intolerance and racial crises.
Although these negatives acted as headwinds and frictional forces retarding the world’s journey on the path of progress, the drivers of change remained steadfast in efforts to forge ahead nonetheless, often explaining the hurdles away, or wishing them away. For Africa, there were many cases of missed opportunities, lessons not learnt, elusive growth, leadership crises, wars, diseases, food insecurity, pervasive poverty and rising unemployment. The hays were not made while the sun shone. Africa didn’t get appreciable share in outsourcing-induced industrialisation that enriched some Asian countries in the late 1990s, lifting millions of people out of poverty. The African version of Green Revolution was not replicated. And mention of Africa in the world global financial services was infrequent, except for Johannesburg in South Africa.
Africa’s population is nearly the same as that of India. But India and Africa are not on the same pedestal in international trade. Africa’s place in the international trading system has often been simplified to a single statistic: less than two per cent of international trade. Although the analyses that support the theory that African countries barely participate in international trade may sound ridiculous, they are mostly based on a quantitative approach, which may not adequately capture most informal trades, which constitute a significant proportion of African trades. The position of Africa in global merchandise trade still remains very uninspiring.
Through the years, global trade has both fluctuated and has rapidly increased, with the structure and pattern of trade varying significantly by products and regions. Clearly, trade has come with both benefits and daunting challenges to countries involved, especially in African nations, where primary and intermediate merchandise formed a substantial share of exports. It is not surprising that the advanced and newly industrialised economies, which have better technology and know-how, manufacturing industries, access to finance, and market than Africa, have a greater market proportion in the world trade. African countries have been left in the cold as they struggle to compete with advanced economies.
Africa has been struggling for relevance in the world market. Despite this, its global share of merchandise trade has reduced over the decades. This is partly because the continent has concentrated on the exportation of few primary commodities in the form of oil and gas, iron ores, gold, cocoa beans within the period of volatile prices and demand in the global markets.
A World Economic Forum (WEF) publication, that focused on 2017 WTO deal aimed to improve trade in Africa, noted that “there’s still much work to do.” In the publication, WEF went on to state that, “for many African countries, implementing trade-facilitation reforms will require overcoming concurrent challenges, such as supply constraints, slow economic growth, inefficient customs controls, and poor border coordination.”
Scores of international summits on developmental issues kept touting Africa as the next frontier for food security because of idle and uncultivated arable lands that remains a potential waiting to be unlocked. The prospects of feeding the world by Africa has thus become a singsong, the refrain of which development experts would repeat at the slightest prompting. Yet African countries have mostly been net importers of food, producing food mostly for the continent and have only come near anything that goes by the description of food security through expansion of cultivated lands rather than through increase in yield per hectare of crops. On the export turf, some expansions recorded in agroindustrial exports in many African countries could be attributed to the export of raw and unprocessed commodities, which yield far less revenues and do not support or promote sustainability.
In the global market, the share of global exports held by these countries has remained comparatively small where they are stable and the shares of many other countries have been declining. In normal circumstances, African countries had difficulties in adjusting their agroindustrial export composition to fit the changing patterns of world demands, which has placed more premium on processed and semiprocessed commodities. This has denied many African countries the opportunity to tap into the most dynamic market segments of the global agroindustrial products trade. Africa’s competitiveness has therefore remained in question.
Notwithstanding their limited foreign exchange generation, the low value primary commodities still remain a leading source foreign earnings.In the past three decades, and particularly since the establishment of the World Trade Organisation (WTO) in the mid-1990s, Africa has seen great opportunities to form investment and trade links with larger markets such as China, India, EU and the US. Unfortunately, Africa’s main focus has been on the export of raw materials for further processing in Asia and elsewhere.
The United Nations Industrial Development Organisation (UNIDO), in a publication on Agribusiness for Africa’s Prosperity, cautioned that, “while supplying some global value chains can offer handsome rewards in comparison to regional and local value chains, these often come at a high cost in terms of increased risks and greater vulnerability in many areas.” For Africa, one of the ways in which the risks are magnified is that the export activities in Africa lack a robust strategic backstop. With intra-African trade accounting for a mere 18 per cent of the continent’s international trade, Africa still remains a non-starter. Secondly, the weak regional integration within the continent means inter-regional trade still remains a mirage. And, now, with the likely post-COVID-19 scenarios, Africa’s chances of wealth creation through exports may become even slimmer.
Optimism about using trade to launch Africa onto the global trade turf may need a pragmatic re-evaluation. The economic and investment logic that propped up the business model of outsourcing – which is one of the strongest aspects of international trade – is about to run into turbulence. Businesses that thrived on the myth that location no longer matters because logistics had hitherto been inexpensive, information had flowed rapidly and markets have become global, may be in for a rude shock. According to Michael Porter, a Harvard Professor and a strong proponent of ‘Creating Shared Values,’ “that oversimplified thinking is now being challenged, partly by the rising costs of energy and carbon emissions but by a greater recognition of the productivity cost of highly dispersed production systems and the hidden costs of distant procurement.” Although the price of petroleum is currently down due to the COVID-19 pandemic, its profile in the future will be largely determined by any progress made in renewable energy alternatives, including in the rise in the number of non-combustion engine vehicles globally.
The COVID-19 pandemic will exacerbate the urge for a critical reexamination of the use of energy throughout the value chains and supply chains. With more focus on carbon emissions, logistical systems will undergo transformations of some sorts to reduce shipping distances. This will be in addition to nationalism-induced policies and greater emphasis on proximity and regional trade at a time when the influence of the WTO seems to be waning and some powerful countries seem to be ignoring the global trade body in their trade dealings. The US-China trade war is a case in point. The nascent African Continental Free Trade Area’s (AfCFTA) agreement thus comes readily to mind. With the complexity of the continent, the diversity of the various nations’ economies and vast differences in the sizes of their economies, AfCFTA is coming on board at a time of great challenges. It is hoped that it will ride out the gathering storms. Perhaps it should start by working to improve intra-African trade first, watch keenly the international terrain, avoid getting enmeshed in the increasingly combative trade relationships and discreetly decide on the continent’s strategic trade alliances.
The subject of alliances should begin with the intra-African internal cohesion. The strength of the eight regional economic blocs is about to be put to the test in crisis time. It is hoped that the launch of the second Africa Regional Integration Index (ARII 2019) report on Friday, last weekend, in Addis Ababa, Ethiopia, will mark a departure from the previous year’s launch. The report, a joint publication of the African Union Commission (AUC), Economic Commission for Africa (ECA) and African Development Bank (AfDB), is expected to set the pace for a post-crisis economy in Africa. In addition to assessing the regional integration status and efforts of member states of the eight Regional Economic Communities recognised by the African Union, the usefulness of the index will rest on how well it guides African policymakers in transforming the ‘tremendous promise’ of regional integration into prospects and opportunities for Africa through its benchmarking and monitoring data.
It has been widely recognised that the world will never remain the same again after COVID-19. The new era thus calls for unconventional thinking and interventions. These should involve the positioning of Africa for prosperity in unusual times. A lot will need to be done. Leaders will need to roll up their sleeves and be ready to face a new reality – one that had no precedence. For Africa to prosper, it should no longer be business as usual. Survival and prosperity will depend on leaders from within. As various countries of the world struggle to get over their post-COVID-19 predicaments, Africa must evolve it’s own path to recovery and work hard towards it. To say the least, times ahead promise to be more tasking, and Africa cannot afford to remain a laggard among the continents.
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Frontpage September 5, 2019