In a move that may boost the economies of an entire continent, 26 African nations have entered into a new free trade agreement. Called the Tripartite Free Trade Agreement (TFTA), the historic agreement was finalized on July 19, and it may signal a turning point in the history and economic strength of the entire African continent.
The expansion of trade among sub-Saharan African nations holds the key to faster growth and development to the benefit of all its citizens. To unlock this potential, countries will have to focus more on trade facilitation, including the simplification and modernisation of trade procedures.
Sub-Saharan African countries have the lowest trade among themselves compared with other regions. Intra-regional trade estimates are at about 10% compared with 40% in North America and 60% in Western Europe.
The factors that hinder rather than help trade
One of the challenges facing African countries is that the global environment is rather unfriendly. This hampers their efforts to tap into global markets.
Additionally, African economies are hindered by them still depending heavily on external assistance. Domestic revenue mobilisation is substantially below potential and progress in this area is very slow.
There has been a chronic failure among economists to explain growth in Africa. The methods and analytical angles they have used to explain relative failure in Africa came in the 1990s, but these were unsuitable for explaining growth in the 1960s or growth since the 2000s.
Africa is on the rise. Once, nations like Ethiopia were poster children for poverty and starvation. Today Ethiopia is one of the fastest growing economies in the world. In fact, according to a report by Forbes, seven of the fastest growing global economies today are in Africa. North Africa expects average GDP growth rate of four to five percent by 2020, and Sub-Saharan Africa expects six to seven percent.
Africa’s only regional bank, the African Development Bank Group (AfDB), has come a long way since its near collapse in 1995. It now reflects its mandate to fight poverty by aiding public and private investment projects that promote socioeconomic improvement.
A number of factors have driven the bank’s advances under the decade-long leadership of outgoing president Donald Kaberuka. For example, it has joined forces with other multilateral agencies such as the World Health Organisation and the World Bank to fight health epidemics such as HIV/AIDS, polio and ebola.
The Egyptian government recently took steps that have led to labeling football fans as terrorists. The arrest and detention of alleged members of the Ultras White Knights (UWK), a highly politicised supporters group associated with Cairo club Al Zamalek SC, has marked renewed attempts by the government to curb the influence of some fans on Egyptian society and politics.
Going by the growing investment opportunities in emerging markets, their popularity with investors from the developed economies is not dying down any time soon. Most of the investors are looking for high returns that their mature markets cannot offer, and hence finding prime investments in the emerging markets.
Much has been written about the impact of remittance inflows on economic and social outcomes, including economic development, inequality, and poverty. However, little is known about the effect they have on the attitude of remittance recipients to democracy in sub-Saharan Africa.
A recent survey done by The Economist Group on 217 companies from 45 different countries revealed that about 65% of them; intend to expand to Africa in the next one decade. Growth potential in most African economies coupled with the peace dividend from democratization of most governments drive the renewed focus on Africa. However, as many companies seek to set shop here, they are missing out on the fundamentals that will assure them of sustained growth within the continent.
