In recent years, debate has ensued over how debt and aid have proven to be unsustainable for Africa’s developing nations—most of whom were still ranked among the world’s poorest—albeit being recipients of combined trillions.
Trade and industrialisation are, instead, seen as ideal instruments for accelerating opportunities for investment and growth in the continent, which is endowed with vast natural resources, coupled with a largely youthful population which forms a competitive labour force.
If geographical boundaries were lifted, for once Africa could form a formidable market force to reckon with.
Still, the African Continental Free Trade Area (AfCFTA), an ambitious trade pact to form the world’s largest free trade area by connecting almost 1.3 billion people across 54 African countries, serves the purpose.
With a combined gross domestic product (GDP) of about $3.4 trillion, the AfCFTA creates a single market for goods and services in order to deepen the economic integration of Africa.
It is earmarked to boost intra- African trade by 52.3 percent once import duties and non-tariff barriers are eliminated, according to the United Nations Economic Commission for Africa (Uneca)—a UN entity dedicated to promoting economic and social development and supporting intra-regional integration and encouraging international cooperation for the development of Africa
A catalyst of Africa’s competitiveness, as experts suggest, remains mindset change and a shift of the development agenda; from poverty reduction to wealth creation for all.
At the just ended 27th Inter- Governmental Committee of Senior Officials and Experts (ICSOE) which Malawi hosted last week, delegates agreed that, to attain the aspiration, nations should intensify efforts towards industrialisation, growing the manufacturing sector and value-chains as well as regional integration.
Minister of Finance Felix Mlusu, who delivered a key-note address at the indaba, called on member states to develop fiscal measures such as broadening the tax base that will help them to sustain debt.
“This will allow the development partners to supplement the member states’ budgets,” he said.
Currently, countries within the region are implementing budgets with large fiscal deficits averaging over 10 percent of GDP, to fight the Covid pandemic and sustain aggregate demand.
The pandemic has impacted debt levels through widening fiscal deficits as revenues shrink due to disruptions of economic activity as well as contraction of export receipts.
But Mlusu was of the view that, beyond debt and aid, a lasting remedy remained for nations remained building a landscape for trade competiveness, mixed with collaborative efforts and integration.
“The central dimension is the need to develop a people- centred recovery plan that focuses on well-being, improved inclusiveness and reduced inequality.
“This calls for an inclusive and sustainable growth model that promotes resilience to external shocks, reduces poverty and inequality on a larger scale and makes decent job creation a priority to absorb Southern Africa’s youth population,” Mlusu said.
African countries were victims of exogenous shocks such as elevated prices of fuel and other products as most remained net importers.
Trade imbalances are visible in African economies with the gap between exports and imports seen yawning over the years.
Statistics in a recent report by the African Development Bank and African Export- Import Bank show that only 40 percent of Africa’s trade is bank-intermediated –a far lower share than the global average of 80 percent.
“The trade finance gap also remains unacceptably high at $81 billion in 2019,” the report states.
But nations were building resilient blocks through industrialisation and a competitive edge through integration, according to Uneca Director for Sub-regional Office for Southern Africa Eunice Kamwendo.
While urging development partners to continue supporting local economies towards recovery from the pandemic, Kamwendo asked countries within the region to work together in forming a formidable trade force that would live the test of time.
“We are advocating more support towards recovery. For instance, we thank the IMF for the support rendered to economies through initiatives like the Special Drawing Rights. But beyond that, with the AfCFTA in place, Malawi and other countries would have to use the platform for integration,” Kamwendo, said.
While indicators point to Africa as the world’s least industrialised region, experts feel the future holds the best.
ECA Executive Secretary and UN Under-Secretary General Vera Songwe said the commission was looking foward to deepening its engagement with regional blocks, working closely with other countries in the region to fast-track inclusive and sustainable industrialisation.
She affirmed ECA’s continued support to member states through concrete and collaborative actions such as implementation of the AfCFTA agreement.
Comesa Executive Secretary Chileshe Kapwepwe underscored the essence of promoting regional integration through trade and human resource development for the benefit of the region.
UN Resident Representative Shigeki Komatsubara challenged nations within the region to invest in industrilisation and look at trade as a catalyst for competitiveness and sustainable economic development beyond aid.
He said, as a step towards economic recovery from pangs of the Covid pandemic, countries should leverage on the existing market under the AfCFTA by making their industries competitive.
He said investment from the UN and other development partners should be seen as a catalyst of economic growth and wealth creation which, in turn, should propel trade activities.
He said the UN was working with governments and other stakeholders to increase efficiency of the money used and the resources spent on sustainable economic growth.