An Equal Chance for Africa to be a Global Superpower?
Executive Summary
Despite Africa being the fastest growing continent in the world, its development and the creation of equal opportunity for all Africans is still a puzzle to be solved. With most states under debt distress from foreign markets, governments find themselves paralyzed with the inability to pay off loans but also fund infrastructure and growth for their subjects. In order to alleviate said issues and begin to create the Africa that comfortably houses and progresses its billion plus population, it begins with accountability, synergy, economic transformation, service-led growth, and the creation of intermediaries that can support all countries with a united vision.
Introduction
Welcome to Africa. A continent that houses 30% of the world’s mineral reserves, 8% natural gas, 12% oil reserves, 40% gold, ~90% chromium and platinum, 65% arable land (1.1 billion hectares of untilled farmland), 10% internal renewable fresh water source, and more than 60% of the ~1.3-billion-person population under the age of 25 (United Nations).
With agriculture historically being a fundamental pillar of Africa’s gross domestic product (GDP), it continues to be as it employs two-thirds of the continent’s population. For example, chocolate is a $130 billion industry in which ~60% of the world’s cocoa comes from only two countries: Ivory Coast (44.4%) and Ghana (16.3%) (Boyson et al.). However, these same countries that have the raw cocoa beans derive only $3.5 billion and $1.8 billion respectively in exports i.e., a meager 3% of the pie. 1.4 million cocoa farmers in those same countries are living below the extreme poverty line ($1.90/day) on less than $1/day with an estimated 1.5 million children employed who then miss out on education, are exposed to hazardous working conditions, and get paid little or no wages (WEF).
Unfortunately, the cocoa situation captured above is not an outlier but representative of the little that Africa gains in global trade despite being the origin of critical resources. With the continent’s history and reality inextricably connected to one of desperation, war, famine, and steaming squalor, its abundance sounds like a myth and its potential cannot be envisioned by anyone — even within the continent.
Post-colonial Africa
In 1957, H.E. Dr. Kwame Nkrumah led the Gold Coast (now Ghana) to be the first independent country on the continent. In doing so, he began the toppling of the colonial dominoes as this passion and will to reclaim one’s land and provide adequately for one’s people without any subjugation spread across the continent like a wildfire. The Organization of African Unity (OAU) was established in 1963 and sought to encourage solidarity among African states and defend their sovereignty, improve the quality of life for Africans, and fight for the eradication of colonization in all its forms. It began with 32 newly independent countries at the time and ended with 54 (Morocco declined to join) by the time of its dissolution in 1999.
Depending on the perspective, the expiry of the OAU signaled that its main aim was achieved — an independent Africa. However, if one dares to look behind the curtains, amongst a myriad of issues, one will see the organization’s failure to address many events such as the Rwandan Genocide in 1994 and the multiple military regimes that overthrew governments throughout the continent during its existence. Its credibility was crippled and prompted “observers to criticize the OAU as a forum for rhetoric rather than action” (Beverton). However, the hope for an economic self-sustaining powerhouse never died and the OAU transformed into the African Union (AU) in 2002. This body was more focused on development and growth as decolonization had been achieved. Guided by its new vision of “an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena”, the AU included all 55 nations of the continent.
Growth ≠ Social Progression
Still standing to this day, the Union has presided over Africa experiencing significant economic growth, with the continent becoming one of the fastest-growing regions globally as real GDP grew by an average of 3.4% annually between 2010 and 2019, outpacing the global average of 2.9% (IMF). This growth was driven by several factors, including robust domestic demand, rising commodity prices, and increased foreign investment. With this growth has also come increased stability and peace throughout the region very much so relative to the state it was in while the OAU existed.
One of the most significant drivers of growth has been the continent’s young and growing population. The United Nations estimates that by 2050, Africa’s population will reach 2.5 billion, retaining the 60% of people sub 25 years old. This demographic dividend has created a large and expanding consumer market, with a growing demand for goods and services, and a significant workforce, which has contributed to increased productivity and economic output.
Despite this positive economic trend, poverty remains a significant challenge in Africa. The continent is still home to the world’s highest poverty rates, with over 40% of the population living below the poverty line. This is compounded by other issues, including high levels of inequality, limited access to basic services such as healthcare and education, and persistent conflict and insecurity in some parts of the continent. Moreover, the COVID-19 pandemic has posed a severe threat to Africa’s economic growth and development. The pandemic has caused the first recession in the continent in 25 years, with an estimated 30 million people falling into extreme poverty in 2020 alone (AfDB).
Internal Growth is the Bridge Between Output & Welfare
Much of the boom in output is thanks to the debt taken on by all governments in the attempt to finance development totaling $702 billion (World Bank). Every country in the world borrows money to fund infrastructure but should lay the groundwork to keep debt sustainable and ensure it does not jeopardize growth and stability as that leads to debt distress.
Without undergoing any agricultural revolution or having an industrial backbone, it is unsurprising that debt was projected to stay elevated at 59.5% of GDP in 2022 in Sub-Saharan Africa (SSA). Eight out of 38 IDA-eligible (section of the World Bank that assists the poorest nations) countries in the region are in debt distress, and 14 are in high risk of joining them. African governments spent 16.5% of their revenues servicing external debt in 2021, up from less than 5% in 2010 (World Bank).
The threat of global stagnation in the face of a plethora of new and covariate shocks not only highlights the dire need for African policymakers to take a different approach to diplomacy and governance, but also because the old ways have not enabled a consistent upward social mobility of their people. Relying vastly on foreign aid and assistance has led the continent to where it is today and maybe it is high-time that all the countries look within and begin a resource-and-people-led economic revolution. This can be achieved through:
1) Holding Leaders Accountable
2) Establishing Clear Regional Economic Communities & Transforming Economic Complexity
3) the Creation of African Financial Intermediaries and Institutions
By addressing these challenges, Africa can achieve its full potential and emerge as a prosperous and equitable continent.
1. Accountability
The first step to a thriving continent begins with holding heads of states accountable for negligence and malfeasance. The OAU failed to respond to multiple humanitarian crises during the second half of the 20th century, and unfortunately the AU’s record has been similarly disappointing. Although many conflicts have subsided, the union has been silent on numerous atrocities, and leaders have walked free without facing repercussions. Amongst many cases, this was shown in their failure to effectively intervene in Nigeria’s #EndSARS protests, and for its response — or lack of — to Robert Mugabe constantly exceeding his term limits as the President of Zimbabwe.
The #EndSARS protests sought police reform. The Special Anti-Robbery Squad (SARS) in Nigeria had a history of using torture, rape, and extrajudicial killings to execute, punish, and extract information from suspects, and despite promises from the Nigerian authorities to disband the unit, it had continued to operate. Recent events at the time sparked widespread protests demanding justice and accountability from the Nigerian government. The special unit was dissolved but protests persisted demanding more than empty promises. On October 20th, 2020, the military opened fire on the peaceful protesters at the Lekki toll gate in Lagos leaving 12 people dead (Amnesty International). The AU did not explicitly condemn the lethal response to the protests nor support the protesters’ rightful demands for police reform.
In the case of Robert Mugabe’s exceeding his term limits as President of Zimbabwe, the AU was silent against the violation of democratic principles and human rights abuses in the country. Mugabe, who had been in power for 37 years, was accused of rigging elections, suppressing opposition, and committing human rights abuses. Despite this, the AU did not take sanction to hold Mugabe accountable or to support the pro-democracy movement in Zimbabwe. Instead, the AU emphasized the principle of non-interference in the internal affairs of member states and urged dialogue and peaceful resolution of the crisis.
These failures by the AU to effectively intervene in Nigeria’s #EndSARS protests and Zimbabwe’s crisis have been attributed to a lack of political will among member states, a lack of resources and capacity within the organization, and a commitment to non-interference and respect for state sovereignty that has hindered the organization’s ability to prioritize human rights and democracy.
In such cases, the silence and lack of action by the AU clearly indicates who it is exists to protect. Course correction starting at the top will undeniably trickle down to the general population. In effecting justice, it signifies that the union truly cares for the advancement of the pan-African principles of a people-centered Union, in line with the organization’s stated mission. Citizens would be empowered, and it will deter bad-minded people from getting into politics. This reshuffling helps to break the cycle of debilitating leadership and paves the way for the reigns to be put in the right hands. If they continue the way they are, the union will continue to lack the reverence and sanctity it requires to lead Africa in the right direction.
2. Restructuring RECs & Transforming Economic Complexity
One could argue that the establishment of a 55 member — all independent countries — caucus is in its nature, too big to be as effective as desired. The OAU recognized this problem and created the African Economic Community (AEC) in the Abuja Treaty in 1991. Objective (1)(a) under Article 4 is “to promote economic, social and cultural development and the integration of African economies in order to increase economic self-reliance and promote an endogenous and self-sustained development” (Treaty Establishing the African Economic Community). Regional Economic Communities (RECs) however had already existed as neighboring countries naturally sought to develop further through neighborly integration and became the basis for how the AEC would progress (AU). Within the treaty, Article 6 outlined six modalities by which the AEC will follow:
o Stage I — Strengthening of existing RECs.
o Stage II — Harmonizing tariffs and building sectoral integration.
o Stage III — Creation of a Free Trade Area (FTA).
o Stage IV — Continent-wide customs union by adopting a common external tariff.
o Stage V — A common market that also allows for the free movement of people across states.
o Stage VI — Merge RECs into one economic and monetary union with a single currency.
Stages II through IV have also technically been achieved through the establishment of the African Continental Free Trade Agreement (AfCFTA) in 2021. However, for the agreement to have its expected effect, it would do a massive service first to restrict the RECs to five groups and not eight in which member nations can only ascribe to one community. Belonging to more than one — which occurs frequently — creates the space for stagnation and indifference. This is because the communities may have conflicting or separate goals constantly leaving the nation involved in both at a crossroads and effectively on their own.
To help with this, the RECs should be watered down to five in total; each named after a compass point including a central one. This would mean ten to eleven countries per REC to discover how to collectively build their internal capabilities for the betterment of their economies. Each region and nation has their own unique gift whether it be the breathtaking wildlife that spans from the east to the Sahel regions, or the boundless oil that Nigeria and the Gulf of Guinea boasts of in the west. Within the region, members would come together to see how they may leverage and grow what they individually possess to contribute to a final output. This may be achieved through splitting production of whatever good or service, or facilitating trade within the region that is mutually beneficial, all according to the individual nation’s strength. The cumulative effect of that would be the turning point for the continent.
This resource led approach provides the basis for maturing the primary and raw material economy that most countries unfortunately have. A complex economy is crucial for economic diversification, reducing vulnerability to commodity price fluctuations, and increasing profitability through value addition. For example, instead of just harvesting the cocoa beans to export, it would be to keep them, process them, and make the bulk of chocolate on the continent. One can apply this thinking to gold, lithium, crude oil, and the extensive resources that exist throughout. The shift to secondary and tertiary industries will promote employment and inspire innovation, resulting in larger markets (through the growth of the middle class) and greater efficiency and competitiveness. Emphasis on such growth would enhance sectoral integration within and across regions in line with stage II of the modalities of the AEC.
The creation of synergies in this manner may then solve the currency illiquidity problem that currently threatens development. With 41 different currencies, many countries are challenged with currency conversion as most are not readily available in the market due to low trade and demand for it. This inhibits growth as the absence or inability to exchange currency leaves multinational companies and/or NGOs unable to work in certain countries and pay the staff or fund projects at all for that matter. A byproduct of that is the labeling of many nations as high-risk and subject to anti-money laundering (AML) and the financing of terrorism and proliferation (FoP) regulations, leaving them without help (World Bank).
However, with the REC cleanup and increased cohesion intra-region, the possibilities of a centralized currency may be achieved. In following the five-region model, a currency per region that is backed by its level of integration and output would massively stabilize and propel many economies beyond what can be envisioned. A currency for the Northern region, that differs from the one in the West, which differs from the Eastern region, and as such for the Central, and Southern Regions. Adopting five currencies from 41, would not only promote investment and development but help streamline and make the AfCFTA a success as well as trigger stage VI of the Modalities for the Establishment of the Community — one monetary union and currency for the continent.
3. The Creation of African Financial Intermediaries and Institutions
Self-sustenance cannot be attained without financial freedom. On Tuesday July 11th, 2000, the OAU met in Lomé, Togo to establish the Constitutive Act of the African Union (the Act) that proposes an all-encompassing plan to have a successful union. Under Article 19 of the Act, the creation of The African Central Bank (ACB), The African Monetary Fund (AMF), and The African Investment Bank (AIB) is considered imperative under which the Union will be guided by their financial policies, recommendations, and aid. As it stands, the African Development Bank (AfDB) and African Export-Import Bank (Afrieximbank) serve as the continent’s main local financial “intermediaries.” They operate more so as advisors and fundraisers for all the nations and as a liaison for global and western financiers such as the International Monetary Fund (IMF) and the World Bank.
Upon the harmonization of currencies recommended in the REC section, these institutions would be pivotal for unlocking the next step in development. Firstly, the existence of the ACB would streamline monetary policy amongst the national central banks that would eliminate exchange rate risks and reduce transaction costs. They will also be providing a lender of last resort, monitoring financial risks, and coordinating macroeconomic policies across the continent. These abilities would not only make it easier for businesses to operate across borders and for countries to attract foreign investment, but also help to prevent financial crises and reduce their impact where they to occur. Secondly, the AMF aims to facilitate monetary integration, provide financial assistance, coordinate monetary policies among member states, and encourage capital movements between member states. Thirdly, the AIB seeks to promote investment activities, mobilize resources, and provide technical assistance to strengthen the private sector. This would help modernize rural sector activities and infrastructure on the continent. Together, the two will coordinate with other development institutions such as the AfDB, regional, and local development banks. A key way to ensure equitable assistance and distribution amongst all nations would be to establish a 5-person executive board consisting of a member from each REC (voted by member nations) that meets monthly or quarterly. With there being 3 institutions, this provides the opportunity for there to be a combined general committee of 15 members that will meet however often to ensure that everyone is on the same page. These boards will also report to the AU.
The critical distinction between having African financial bodies versus foreign (IMF, World Bank etc.) is the perspective and intention with which assistance and aid is provided. Foreign involvement on the continent by those organizations is generally believed to be a short-term fix that creates a dependency on them, enables corruption and mismanagement of funds, leads to the appreciation of local currencies and in turn, hurts domestic industries and reduces purchasing power. Not ignoring that a major cause of this is the lack of systems and accountability but also, the innate flaw of the support being foreign and hence the inability to properly understand the local dynamics. On the other hand, African-made financial arbiters would operate accordingly considering the realities on the ground.
The ACB, AMF, and AIB have the potential to help address the infrastructure deficit and promote inclusive growth and development which would in turn promote peace and security. It would be a significant step towards achieving greater economic growth, development, and integration throughout the continent. However, it will require the commitment and cooperation of all African countries to make it come to life.
Conclusion
Africa’s economic growth has been primarily driven by borrowing rather than internal development, leading to unsustainable levels of indebtedness. The continent’s policymakers must prioritize building from within, by:
1) Holding Leaders Accountable
2) Establishing Clear Regional Economic Communities & Transforming Economic Complexity
3) the Creation of African Financial Intermediaries and Institutions
Only by doing so can Africa achieve its full potential and emerge as a flourishing and just continent. Their leaders must take bold and innovative steps but also institute and reinvent what their predecessors hoped to accomplish back when the OAU was established: to drive sustainable development that prioritizes the welfare of its people while creating an economic environment that can thrive in the face of global challenges. While the rest of the world relentlessly pursues a technological arms race, Africa should leverage the outputs of this and quietly develop and look after their own. The time is now for African leaders to act and lead their nations towards a brighter future before it is too late. At the first Organization of African Unity (OAU) Summit in Addis Abba, Ethiopia on Wednesday May 8th, 1963, H.E. Dr. Kwame Nkrumah said,
“The resources are there. It is for us to marshal them in the active service of our people. Unless we do this by our converted efforts, within the framework of our combined planning, we shall not progress at the tempo demanded by today’s events and the mood of our people. The symptoms of our troubles will grow, and the troubles themselves become chronic. It will then be too late even for Pan-African Unity to secure for us stability and tranquility in our labours for a continent of social justice and material well-being… As long as we do not do away with the root causes of discontent, we lend aid to these neo-colonialist forces, and shall become our own executioners. We cannot ignore the teachings of history.”
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