Pascal Lamy sees Africa as the growth continent for the 21st century

A market in Port Louis, Mauritius. For Africa, its people are its greatest resources. Photo/FILE 

By Pascal Lamy
 

 

In Summary

• Africa has changed from the land of pessimism to the land of opportunity.
• Africa as a region has shown great resilience, with an average growth rate of over five per cent over the last decade.
• Several factors have contributed to Africa’s rebound in growth. These include higher investment and savings, stronger export growth particularly resulting from the higher commodity prices, an improved legal, regulatory environment and overall macroeconomic stability. Consumer demand by its growing middle class is also an engine for growth.

The world we live in today is one characterised by profound change. The old theories governing the way that countries produce and trade are being replaced.

The pattern of trade is being transformed by increasingly sophisticated technology and innovations in transportation; and the topography of actors is shifting to reflect new poles of growth. This is no longer the clearly delineated North-South order of the 20th century. A large number of developing countries have now emerged.

And Africa, both as a continent and as the sum of individual sovereign states, is poised to lead the new patterns of growth for the foreseeable future.

There is no shortage of growth stories on Africa. I have been travelling extensively in Africa in the last 20 years. But what is spectacular about the debate on Africa today is the shift in perception.

Africa has changed from the land of pessimism to the land of opportunity. We see this renewed focus in the reporting from the mainstream media which has increasingly widened its traditional narrow reporting to spotlight the innovation and optimism of people on the continent and the growth trajectories of its countries.

Six of the world’s 10 fastest growing economies over the past decade were in sub-Saharan Africa (SSA).

Kenya, in particular, has continued to be a leader on the continent and in the East Africa region, with projected growth this year of around six per cent and with recent reports from TradeMark East Africa highlighting the impressive track record of Kenya’s investment within East Africa.

Five years into the global financial crisis, Africa as a region has shown great resilience, with an average growth rate of over five per cent over the last decade. This is in contrast with the advanced economies, most of which are yet to fully recover from the economic downtown.

The WTO recently published the trade figures for 2012 and the outlook for 2013. World trade grew by just 2.0 per cent in 2012. And this slow growth should continue into 2013 where we are projecting trade growth of only 3.3 per cent, which is below the previous 20-year average of around five per cent.

With structural flaws in some economies remaining for the foreseeable future, I expect the global economy will unfold at three speeds — flat growth in the euro zone; slightly better outlook in the United States and Japan; and faster growth in most developing countries, especially in Africa.

Prospects for economic growth are thus greater in developing and low-income countries. This creates an environment of opportunity for Africa.

Several factors have contributed to Africa’s rebound in growth.

These include higher investment and savings, stronger export growth particularly resulting from the higher commodity prices, an improved legal, regulatory environment and overall macroeconomic stability. Consumer demand by its growing middle class is also an engine for growth.

According to a recent World Bank report, consumer spending accounted for more than 60 per cent of sub-Saharan Africa’s recent economic growth, which it forecast to accelerate to more than five per cent over the next three years, outpacing the global average.

Africa has also made remarkable progress in the area of political stability and governance, all of which are fundamental in enabling growth.

But if I had to name one single factor, I would say it is “confidence”. Africans today are more confident and hopeful about the future than ever before. This is also the great transformation that I have seen in the attitude of African negotiators in the WTO: confident that trade, if coupled with domestic policies and Aid for trade, can be an engine for growth.

The real challenge for Africa lies in sustaining the growth process, enabling it to reach its full potential and ensuring the growth is inclusive.

Widespread and sustained poverty reduction — which is in effect the ultimate aim of growth and development — is only possible if the domestic policies are in place to ensure that the deliverables from this success story translate into real impact on the ground.

Trade is one of the strategies that can be exploited to solidify and enhance the growth prospects. The recent African Union decision on boosting intra-African trade and moving forward on the Continental Free Trade Area are testaments to the political attention being given to trade as a real engine of growth in the continent.

Africa has a number of regional trade agreements, all of which aim to expand trade among its members. These regional agreements can be complementary to multilateral trade opening, provided they are crafted in a coherent manner. Here, I must specifically applaud the East African Community (EAC) for its progressive regional integration efforts.

The creation of a customs union and a common market, and the on-going discussions on a possible monetary union, are smart and economically robust decisions.

The EAC continues to be ahead of other integration processes in Africa and one clear reason for this is the continued and sustained political support, guidance and engagement from the leaders in the participating countries.

I fully expect that my good friends President Kenyatta and Cabinet Secretary for Foreign Affairs Amina Mohammed, with their solid trade credentials, will continue supporting an agenda of closer regional integration.

I also believe that the formation of a tripartite among the EAC, Comesa and SADC should help address the complexity of the tariff regimes imposed by the different regional trade agreements and facilitate freer and less costly trade amongst members. But the fact remains that inter and intra trade in Africa is still constrained by non-tariff barriers and poor connectivity.

Cumbersome border procedures increase trade costs and the likelihood of inaccurate documentation and raise the chances of malpractices such as corruption.

According to a recent study by the OECD, reducing global trade costs by one per cent would increase worldwide income by more than USD 40 billion, most of which would accrue to developing countries. Furthermore, trimming border procedures could lead to more than a five per cent increase in GDP in many African countries.

African countries, in particular, stand to benefit substantially from the on-going negotiations at the WTO for a multilateral Trade Facilitation Agreement which, with its focus on reducing the thickness of borders and removing customs-related red tape, will ease access to markets and boost trade flows including agricultural commodity trade and time-sensitive products such as horticulture and other highly perishable goods.

This is why I am convinced that it is in the interest of all WTO members to deliver a Trade Facilitation Agreement at the WTO Ministerial Conference in December. It will not only be an injection of confidence into the multilateral trading system — and to the notion of multilateralism — but it would lead to concrete economic deliverables on the ground.

Trade opening, coupled with advances in technology and transport, has created opportunities for firms to reorganise their production and distribution systems around “value chains”. Through regional and global value chains, developing countries have found avenues to increase the scope and depth of their involvement in international production and distribution links.

However, effective participation in these regional and global value chains requires investment in human capital (skills), transparent regulatory and business environments and effective hard and soft infrastructure including a steady source of reliable energy generation, transportation systems and information and communication technologies (ICT).