Key to Africa’s growth is within the continent
The outcome of the US-Africa Leaders Summit once again shows why the continent is better off looking inwards for solutions. As the dust settles, the deals unveiled at the summit are coming under closer scrutiny.
The $15 billion and the headline commitment by President Joe Biden to inject $55 billion into the continent over a three-year period have particularly attracted animated debate. On social media platforms, many commentators suggested that it was too little for a continent of 55 nations. Parted out evenly, that would average $360 million annually for each of Africa’s independent states.
The commentators are both correct and wrong. They are right because African leaders could have struck a better deal than that money. They are wrong because $360 million invested into a typical economy in sub-Saharan Africa is a not a small deal and can address real needs.
African leaders went to the Summit angling for extension of the 17-year-old African Growth and Opportunity Act (AGOA), which they secured. But the AGOA benefits were always bound to be limited; and it is necessary for leaders to think in a new direction.
Problem with some deals
The problem with some of the deals coming out of the summit is that they mostly speak to Africa’s needs as seen by the US and not Africa itself. There’s also an inherent danger that the proposed investments and associated capital outlay are no more than US government subsidies to American businesses to penetrate the African market. The US programme could also reinforce traditional economic imbalances between Africa and the western hemisphere.
That is the impression one gets, looking at President Joe Biden’s view of the opportunity presented by the African Continental Free Trade Area. In the US’s long-term assessment, the continent will be home to 2.5 billion people by 2050 and $16 trillion market.
American tech companies
Coupled with President Biden’s focus on areas such as clean energy and digital transformation, much of the money will go to American tech companies. The transition to renewable energy will wean Africa off more economically efficient traditional energy sources while hooking the continent onto pricey Western-controlled new energy technologies.
In short, Africa could end up surrendering its competitive advantage, which it needs to scale up, in return for access to the American market. Africa could do better by giving itself what it seeks from others. While seeking access to offshore markets, the continent remains closed to itself. Studies show that by simply dropping 90 percent of the existing tariffs on goods originating from within the AfCFTA, Africa could grow its trade by 50 percent.
There would be more trickle-down effect and better impacts on poverty that could be achieved from the proposed $55 billion investment by the US or the $27.4 billion realised last year in exports under AGOA. More functional intra-Africa trade should make political sense to a continent that is often irked by Western powers’ weaponisation of international trade.
African leaders should get down to the hard, but necessary job of building internal resilience through harnessing of the synergies and complementarities, income generation and job creation, which could come from deeper integration.