Steering the right course for Africa’s prosperity

THE PROSPECTS OF A PROSPEROUS AFRICA should be the preoccupation of all African leaders now. But that is not likely to happen based on many factors. Let us be clear, things don’t just happen in policy space or diplomatic relationships. Events are products of deliberate actions or inactions. Beginning with trade, Africa still remains the least relevant in global trade, contributing to less than five per cent of global trade. The continent-wide contributions have remained mostly in commodities in their raw, unprocessed forms. So, in terms of value, Africa’s revenues from the commodities are infinitesimally low. A continent-wide strategy therefore has to be built around the subject of Africa within the context of global value chains (GVC). But this may continue to remain problematic based on governance issues.

Many states exist in named, but the structures that make them states are dysfunctional. For instance, control over natural resources are shared between the state and individual overlords, mafia or syndicates. The pecuniary attraction and inefficient governments have helped to build up these systems and will help to perpetuate them. Many mineral-rich countries of Africa remain among the poorest despite the extensive exploitation and resultant revenues which, for the most part, cannot be accurately accounted for because a lot ends up in private pockets. DR Congo, Angola, Nigeria, Niger Republic, Zambia and Tanzania are prominent examples. It took the rare courage of John Magufuli to tackle the endemic corruption in the mineral extraction and export in Tanzania wherein the country was being heavily shortchanged by a mining company. Félix Tshisekedi followed late Magufuli’s footstep recently, confronting the Chinese exploiters of DR Congo’s cobalt and trying to limit their excesses.  This is where leadership makes all the difference. And how many African leaders can take such bold steps in reducing the influence of local non-state actors and foreign exploiters on their respective countries’ natural resources?

Nigeria’s oil industry is particularly in a mess. For inexplicable reasons, government at the centre gives “oil blocks” to individuals for exploration. This is apart from what should be the monopoly of the Nigerian National Petroleum Corporation (NNPC) the official organ of government that should be in charge of everything on petroleum. The activities of many private explorers run contrary to what should be the national aspirations. It is ridiculous that the central government has become so inept and weak as to turn a short-term intervention into a perpetual policy known as the ridiculous “fuel subsidy” that has become an avenue for shortchanging the entire country for the enrichment of a few well connected political actors and businessmen. The vicious cycle will continue as long as those benefit from the system continue to remain and there is no political leader bold enough to permanently end the mess wherein petroleum products are imported rather than refined locally and countrymen pay so highly for fuel.

While the world is talking seriously about climate change, environmental degradation and global warming, deforestation continues apace in Africa. Loggers for timber and charcoal continually degrade African forests and much of such activities have express approval of government in many countries and tacit approval in some others by their connivance and absence of tough actions to discourage such activities. These happen in heavily forested and sparsely forested countries as in DR Congo and Gambia respectively. The nature of Africa’s contributions to climate change and global warming will be associated with the extensive deforestation going on. The attraction of these activities, best explained as springing from livelihood pressure, has come with its complications. The social problems arising from deforestation have become intractable in some instances. Governments have been mostly unable to resolve them and, in some cases, have escalated them. Since the end of the Conference of Parties (COP) 21 Paris Agreement in 2015, hardly have any significant progress been made by African countries in their commitment to the Nationally Determined Contributions (NDC) to climate actions. It can be inferred therefore that Africa is not prepared for the future under the climate change.

Dependence on natural resources explains this tardiness in part. It shapes the local politics of countries and their foreign relations and diplomatic leanings. Countries that depend mostly on export of raw natural resources for their national revenues will be reluctant to allow certain changes. While many countries of the world are actively promoting renewable energy and pushing the use of mineral oil to the background, Nigerian government is still actively exploring new oilfields.

With fortune spent annually, looking for oilfields and limited attention paid to renewable energy, Nigeria’s lack of preparedness for the future is self evident. Nigeria has a lesson to learn from the resistance mounted earlier this year by environmental activists against Uganda’s oil pipeline extension to Tanzania. It makes no strategic sense therefore to ignore global events while making local policy decisions. It is even more dumb when such decisions are on commodities that have to be exported, and upon which the exporter has limited control. Since global events shape the trade in such commodities, the most sensible thing to do is to embark upon decisions based on emerging global realities.

The recurring decimal of commodity dependency finds expression in the post-industrial era Africa. With the prevalent de-industrialisation, most commodities just have to be exported out of Africa to find values and financial returns. It is more difficult for Africa to industralise in the present circumstances of high labour wage, inadequate and high energy supply, with significant effects on operational bottom line and price competitive edge. Moreover, transportation logistics and infrastructure remain as big hurdles at this time. These are in addition to the pervasive corruption and parallel non-state actors’ prominent roles in the extractive industries generally and the active roles of black markets for many commodities.

Trade in commodities, mostly between African countries and countries in Europe, Asia and America, happen because of the industrial demands for such commodities as raw materials by industrialised destination countries. Why that may not happen in Africa for a long time to come is because of low level of industrialisation and the concomitant little demands for industrial raw materials among African countries.

Trade between and among African countries remains insignificant because of a misalignment between individual countries’ need and what is produced on the continent. This misalignment is indicative of missed opportunities to reduce foreign imports from outside the continent and boost trade flows within. The establishment of African Continental Free Trade Area (AfCFTA) is laudable. To succeed fully, however, diversification of goods and greater emphasis on creation and sustenance of vibrant value chains will be needed. Trade in primary products or raw materials will not confer any noticeable economic benefit on Africa, nor will boost earnings significantly. Moreover, the mismatch between import and export among countries will need to be addressed as many countries annually record trade deficits. Recognising the import needs of neighbouring countries will help reduce logistic challenges associated with transportation of goods. This is in addition to overcoming the long-term problems of implementation of Customs reforms that are not likely to be achieved overnight even under AfCFTA. Trade in commodities, mostly between African countries and countries in Europe, Asia and America, happen because of the industrial demands for such commodities as raw materials by industrialised destination countries. Why that may not happen in AfCFTA for a long time to come is because of low level of industrialisation and the concomitant little demands for industrial raw materials among African countries. Nine months into the commencement of trading on the AfCFTA platform, data on breakthrough transactions still remain sparse. The celebrated landmark achievement that raised much expectations is yet to make any noticeable impact in transforming Africa’s economy. Countries will take a while to learn the ropes, get accustomed to each other in free trade relations, agree on political and legal terms as well as on items of trade.

The service industry in Africa remains underdeveloped and may remain so for a long time to come. The vibrancy of service industry rests on certain props: economy in its broadest sense, industrialisation, employment rates, earnings and purchasing power, and the literacy rates. The low level of financial inclusion is a reflection of most of those factors. Insurance, health services, access to affordable housing, transportation, financial services, legal services and security are of disproportionately low demand compared with human population, growing urbanisation and concomitant urgent demands for such services. In Africa, many still endure certain hardships, resort to self-help or wish away certain challenges where the state has failed miserably and the private service providers are ill-equipped because of low expectations of appropriate returns. The inequalities and gaps between the affluent, the political actors and senior government officials on one hand and the ordinary people on the other has created a situation in which policy interventions to make services accessible and affordable to the poor have not been considered urgent. This is simply because those well-placed are able to get access to such services outside the shores of Africa.

Thankfully, trade in services has opened a window of opportunity for many, and will continue to do so. Official hurdles, however, remain a challenge. As long as governments provide the basic information and communication infrastructure, some aspects of the service sector may provide openings for employment and revenue generation for individuals and countries. This is one of the low hanging fruits from a well implemented AfCFTA in the short and long run. It could generate far more revenues across borders  than trade in goods. Undoubtedly, few within the services sector will dominate in Africa. Information and Communication Technology (ICT), transportation, financial services (including fintech), health care and education – to a less extent. How well these impact on lives and prosperities within countries will go a long way in defining the future of Africa. It therefore means that the last hope of Africa, as things stand now, is in the service industry, particularly as it is subject to less constraints in comparison to the commodities export-based or manufacturing-based economies. Political leaders, technocrats and policy makers need to place this on a higher level in the order of priorities for Africa’s economic development. It time to change course and bring Africa into good reckoning in the global economy. This is one of the most feasible ways to achieving that goal.