By Ben Kazora*
Questions to Ponder Upon
The origin of the name “Africa” stems from the words used by the Phoenicians, Greeks and Romans. Key words include the Egyptian word, “Afru-ika” meaning motherland, the Greek word “aphrike meaning “without cold” as well as “aprica” a Latin word meaning Sunny. Olduvai Gorge in Tanzania holds evidence of the earliest human ancestors. One would venture to say that by extension we are all Tanzanians. Africa as you can already tell is a continent with a rich history, most beautiful cultures, highly educated populous just to mention a few. 25% of all the languages in the entire universe are spoken on this one continent as noted Jared Diamond in his 1997 Pulitzer Prize-winning book, “Guns, Germs and Steel”.
“Why are we having all these people from shithole countries come here” -Trump in January 2018. These remarks included some African countries. On January 31st, 2020 President Trump extended his travel ban to include Eritrea, Nigeria, Sudan and Tanzania. It’s with this backdrop that I was tempted to delve a little deeper into what Africa’s potential really is and what it takes for her to realize it. Several questions come to mind; With a population of 1.3 billion why is Africa’s GDP merely $2.19 trillion while that of the USA is at a staggering $21.44 trillion? France, United Kingdom, India, Germany and Japan all have higher GDP than all of Africa. Why is Norway’s GDP per capita is $81,485 while that of Burundi’s is $310? Why is Norway 262 times richer than Burundi? Why does it take 24 African nations to aggregate $1 trillion in GDP, far more than any other region in the world? Why does it take 24 African nations to cumulative $1 trillion in GDP—far more than any other region of the world? Why does most of Europe has a single trade zone, the European Union while Africa has 16 trade zone? How come it takes 3 hours or less to reach European countries aggregating 70% of Europe’s GDP and 8 hours for Latin America but 15 hours for a comparable trip in Africa? Why does it cost less to ship a car from Paris to Lagos than from Accra to Lagos? I will proceed to explain my thoughts on how we got here and examine the best means to fully realize our potential. Acha Leke Saf and Yeboah-Amankwah in their Harvard Business Review article titled “ Africa: A Crucible of Creativity” highlighted that Africa has more than 400 companies whose revenue exceeds $1 billion dollars. Surely, Africa has all the precursors to be the world’s largest economy attain her deserving dignity.
A National Geographic report suggested that in by 1850 Africa’s population would have been 50 million instead of 25 million, thanks to slavery. The report goes further to suggest that slavery contributed to the colonization and exploration of the continent. Furthermore, it’s suggested that as a result infrastructure and communities were damaged, and this made Africa vulnerable to colonialism. What was a huge loss to the continent the slaves actually provided a head start the slave traders. Had it not been for the slaves in America, the cost of building industry and agriculture would have been much higher therefore the standard of living would be much lower. Today’s western culture is a hybrid of that of Africa and the local customs. This ranges from food to music. While acknowledging impact of slavery on the continent it’s fair to highlight that the westerners didn’t settle in large numbers. However, they were successful in extracting the continents wealth first the human capital (through slavery) then diamonds, copper and rubber just to mention a few.
Today we see Africa hosting 60% of the world’s arable land that hasn’t been cultivated but still imports $35B worth f food annually. This figure is projected to increase to $110 billion by 2025 if nothing is done. Even more mind boggling is the fact that Africa export raw material out of the continent and turn around to import the same products processed. Africa is essentially contributing to her own poverty by exporting jobs in the process. A 2018 Africa Development Bank report noted that Brazil transformed it tropical Cerrados into a $54 billion food industry in just two decades. Certainly, this feat required innovative soil and crop management programs, new agriculture technologies just to mention a few. Africa’s Savannah is more than double that of Brazil and employing a few of the mentioned techniques will certainly make the continent a net exporter of agricultural products.
The challenge remains on of extractive nature of Africa’s political and economic systems. The World Economic Forum reports this is part of the reasons why the impact of foreign aid is never seen trickling down to most citizens. The aide in turn ends up being a tool to continue enslaving the citizens and at times eroding the continents culture and identity with the attached strings. In his book “Confessions of an Economic Hitman” elucidated the tricks that are behind the so-called loans. Karen McVeigh’s article in The Guardian shared a sad finding that in 2015 Africa received $32 billion in loans but paid $18 billion in debt interest alone. As Perkins highlighted such loans aren’t structured with Africa’s interest in mind. This coupled with poor leadership means Africa finds herself in a perpetual race to end poverty. Political evolution is what is believed to differentiate the Africa from the West. The West has proven to host economic and political systems that allow for inclusion and equal opportunities. Botswana is a perfect example of effects of good governance. 50 years ago, Botswana was a very poor African country, today with a GDP per capita of $8,258 this African nation is richer than European nations of Bulgaria, Serbia Albania and Ukraine. This is primarily due to good governance and its handling of the natural resource (diamond) wealth. A good economic institution protects private property right, enforcements of contracts is predictable and controlled inflation.
Thabo Mbeki’s Report of the High Level Panel on Illicit Financial Flows from Africa reports that for the past 50 years Africa lost over $1.2 to 1.4trillion dollars to illicit flows. This was equal to the financial assistance given to the continent in the same period. While these transactions are usually dismissed as a result of pure corruption, Mbeki’s report showed that 65% of these illicit flows were commercial transactions. Some of the means by which this is achieved is through trade mis-invoicing. Multinational corporations have used technics referred to as base erosion and profit shifting which are essentially forms tax evasion from high tax countries to low tax locations. Basically, multinationals decide how much profit to allocate to different parts of the same company operating in different countries, and then determine how much tax to pay to each government. Meanwhile, embezzlement and bribery constitute of only 3% of these illicit outflows.
African countries have done a wonderful job building out modern road systems. However, only 33% of Africans live within 2 kilometers of a paved road that is usable all year round. The cost of travel within the continent is ungodly. Travel cost in Africa between five and eight times that of Brazil of Vietnam. The Economist reported that despite Africa being home to a fifth of the world’s population, the continent accounts for only 4% of the global electric use. About 70 percent of the population has no access to electricity.
Urbanization, a challenge and opportunities
McKinsey & Company notes that Africa’s development is directly correlated with urbanization. While this introduces infrastructural challenges in major cities, it also implies a growing consumer market. Between 2010 and 2020 there was a bigger growth in sales of food and beverages in Cairo than Brasilia and Delhi. This can be best captured in the facts that today; Nairobi’s per capita income is three times that of Kenya. Those who live in Lagos are now earning twice the amount of the nations average. In the oil rich nation of Angola, Luanda the capital city accounts for 45 percent of the nation’s consumption. While this is exciting for the consumer market, I am deeply concerned about the disincentives to grow new cities and in turn new economic frontiers. The right development policies need to be put in place so growth can be equally dispersed.
The Way Forward- the African Continental Free Trade Area Agreement (AfCFTA)
Africa is NOT resource poor by any means. As a matter of fact, Africa is the richest continent on earth. South Africa potential mineral wealth is estimated at about $2.5 trillion. If fully realized this would put South Africa ahead of Italy and Brazil as the 8th largest economy in the world right behind France. Simultaneously, Democratic Republic of the Congo’s mineral wealth is estimated to be worth $24 trillion. Congo doesn’t only have the potential to be the richest nation on the planet but richer than the European Union. Numerous other stunning finds exist about the potential of the continent. However, Africa must trade her way to her fullest potential. With a staggering population of 1.3 billion people, Africa is already her own market. So, Africa’s intra-trade is paramount.
The share of intra-Africa exports have increased over the years to about 17% presently. However, this is still very low compared to other regions. Europe is at 69% and Asia at 59%. The AfCFTA is believed to be the answer to most intra-Africa trade related issues. This agreement will certainly unlock the continent’s economic potential if properly executed. The mere removal of tariffs is expected to boost the continental intra-trade by $50 billion to $70 billion by the year 2040.
To enhance intra-trade a key impediment that needs to be removed is the tariff related costs. According to the Abuja treaty, all regional economic communities should have established a common external tariff within customs unions and fully functional free trade agreements by end of 2017. Clearly, this is yet to take place. The Economic Community of Central African States (ECCAS) has the lowest intra-regional trade. This region posts the lowest intra-regional trade in the continent and for this to change tariff should essentially be wiped away.
None tariff barriers also pose an equally challenging obstacle to intra-trading. These broadly include policies that reduce cost of transactions that stem from custom administrations, documents required, enhanced transport infrastructure. These policies are needed to reduce transaction costs as well as those that create an enabling environment for trade which include reduced bureaucracy and corruption.
Efforts Being Made
International companies such as Maersk, Imperial Logistics and a few others have played a key role in facilitating intercontinental trade. Between 2005 and 2016 the mentioned companies helped increase intra-Africa trade from $30billion to $64 billion.
Another industry that is playing a key role in connecting the continent is the airline industry. As of 2019 Ethiopia Airlines flies to 37 countries in Africa alone, leading the way. Royal Air Maroc, Air Cote d’Ivoire and Rwanda Air are leading the continent in the economic integration efforts.
Africa may be lacking in hard power, but the continent should take control of her soft power. Very few countries have leveraged the power of impact of branding. Rarely do you hear that Mauritius GDP per capital is more than that of Bulgaria or that Equatorial Guinea is richer than Mexico. Yes, there is work to be done on the continent but it’s come a point where she must take control of her own narrative. Talent and capital are increasingly mobile and can have a huge impact on the economy. America isn’t just a nation but an idea. In 2018 about 23 million people applied for the green card lottery which is given to only 55,000 people a year. Very few of these millions try to make it to the US not because they have done a cost-benefit analysis of the key factors. The power of the American dream and the iconography of the Statue of Liberty mean something. They have value far beyond feel-good expressions of patriotism. They represent America as something for which to strive, as an expression of hopes and dreams for a better life, as a fulfillment of a quest for ultimate safety and prosperity and liberty. African nations need rebranding. I have seen images of Africa on CNN and Fox to almost always be of starving children begging for food. Rarely do we see CNN covering stories such as; the Ugandan inventor Brian Turyabagye has created a biomedical smart jacket that can diagnose pneumonia that is responsible for 16% of deaths of children under the age of 5. Square Kilometer Array (SKA) in South Africa which, once completed, is set to be world’s largest telescope that will allow us to see many times deeper into space. Nigeria’s Osh Agabi, has created a device that fuses live neurons from mice stem cells into a silicon chip-for the first time. The device can be used to detect explosives and cancer cells. These examples are endless.
Africa indeed should take the travel bans as an opportunity to look inward and seek out her deep inner capabilities. The above issues highlighted aren’t difficult to resolve if African leaders place their hearts in the right place. With Africa’s median age of 19 the continent has the energy, human capital and vigor to allow the continent to realize her fullest potential of the biggest economy in the word. All precursors are present.
As we strive to realize Africa’s dream let’s not lose sight of the health of our children, the quality of their education or the joy of their play. Let’s world know of the beauty of her poetry or the intelligence of our vibrant and rich public debates. The world ought to know more about the wit, courage, wisdom and compassion of Africans.
We must choose to make this goal our solemn mission. This decision should be made not because it’s easy but rather because it’s hard. It’s the continental collective effort that will organize her citizens and bring forth the best of her skills and energy. This is a challenge the continent must accept now and must be unwilling to postpone and one the continent must achieve. If now us, who? If not now, when?
* The author is co-founder of Limitless Software Solutions and can be reached via emails email@example.com and firstname.lastname@example.org. The views are his.Follow him on Facebook and LinkedIn , email@example.com