Changes in today’s global landscape require emerging markets to consider how they must shape their own future, writes Brand South Africa CEO Dr Kingsley Makhubela. Many countries in the developed world have focused their efforts and resources inwards as a result of challenging economic times.
There is a danger that a shift away from emerging markets will negatively impact the global economy’s future ability to grow.
This is especially critical for Africa, given its growing integration into the global economy in recent years. In order to mitigate this, Africa must take steps to secure its own share of global economic growth. And we must be able to sustain the economic growth of Africa ourselves.
Yet the greatest opportunity to realise its growth potential is often overlooked, despite lying within the continent – Africa’s ability to trade and do business with itself. What is required is an inward and outward strategy acting in tandem; outwardly cementing Africa’s place in the global economy through foreign investment and improved trading links; while internally driving regional trade integration.
It is no coincidence that Africa’s recent growth, epitomised by the “Africa rising” label was in part realised due to increased levels of foreign direct investment. Improvements in fiscal policies, governance and regulatory frameworks, along with a move to diversify economies away from Africa’s traditional commodities-biased economies presented greater opportunities to foreign investors.
If Africa is going to capitalise on this base, it needs to work together to collaborate on its shared future. Africa’s development must be underpinned by further regional integration and trade liberalisation.
While the rest of the world becomes increasing fractured and disparate, it is time for Africa to create ways to better integrate its fragmented markets which have long constrained growth and provided barriers to trade.
World Bank statistics put intra-African trade at just 11% of the continent’s total trade between 2007 and 2011. In 2015, intra-Africa trade was worth just USD 170-million, according to the same institution’s figures when the potential stands at trillions of dollars.
To collectively succeed, individual governments must work towards a regional imperative if Africa’s economies are to be impacted in a way that drives sustainable and inclusive growth for the continent as a whole. These regional trading corridors cannot work in isolation but must be scalable to improve connectivity across the African continent.
This approach has been championed by such initiatives as the African Union’s Continental Free Trade Area. The United Nations Conference on Trade and Development (UNCTAD) estimates that implementation of the Continental Free Trade Area (CFTA) will nearly double intra-Africa trade by early next decade.
We are seeing positive results from some regional trading corridors such as Southern African Development Community (SADC), Economic Community of West African States (ECOWAS) and East African Community (EAC), but for Africa to be greater than the sum of its parts, we must learn to work together. This includes harmonising development and economic policies, regulation, market structure and governance, along with their implementation.
Any regional initiative will need to be accompanied by huge investments in cross-border infrastructure. The African Development Bank estimates the continent would need to spend an additional USD 40-billion a year on infrastructure to turn around its current deficits and keep pace with economic growth.
The rising trend of urbanisation is only serving to put pressure on an already inadequate infrastructure and demonstrate the urgent need for greater investment if living standards for Africa’s growing population are to rise. Conversely, the benefit of Africa’s growing population could help facilitate regional trade growth. A customer base of nearly one billion people provides the opportunity for not only regional opportunities, but access to the broader African market if only the continent’s industrial development plans can serve to improve productivity capacity.
If we are looking to the rest of the world to show faith in the African growth story, then as Africans ourselves, we must demonstrate our own commitment. A collaborative approach to Africa’s own growth story driven by the continent itself will make it a stronger contender globally.
South Africa is in the unique position of holding membership to several multilateral fora. As we take over the BRICS presidency for 2018 and as the only permanent African member of the G20, it is our responsibility to champion the case for Africa and its agenda by being at the nexus of discussions with our international counterparts. Moreover, Africa’s significance to our own economic future cannot be underestimated.
We can reap the rewards of Africa’s tandem approach to growth. South Africa’s track record in doing international business makes its natural access point into Africa for the rest of the world. But we must have a clear strategy in our approach to Africa to ensure we also become part of the continent’s growth story. South Africa must continue to cultivate its role in facilitating positively impacts for Africa as this is where our own long-term economic success should lie.
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- This article was first published on the World Economic Forum website.