AFRICA’S ROLE IN REGENERATING THE GLOBAL ECONOMY
Within the eastern and southern Africa regions, there is a remarkable increase in cross border investment in manufacturing,trade in services – including logistics and financial services.
Africa’s integration into the global economy will be based on three pillars;market integration, infrastructure development and industrial development.
The market integration pillar aims at removing trade and investment barriers.The infrastructure pillar will enable physical connectivity in the region to reduce the cost of doing business and facilitate the movement of goods, people and services. The industrial development pillar will address the productive constraints that inhibit inclusive and sustainable transformation of the region; from low productivity economies that rely on export of unprocessed primary commodities with either little or no value addition, to high competitive economies that produce and export value added products.
Aware of the need to implement programmes under the three pillars,regional economic communities (RECs) are leading their respective member States on this path that will lead full integration into the global economy.In the eastern and southern Africa region, three RECs namely the Common Market for Eastern and Southern Africa,(COMESA) the East African Community(EAC) and the Southern Africa Development Community (SADC) have come together to create single market for trade and investments. The COMESAEAC-SADC Tripartite Free Trade Area isone of the building blocks of the African Continental Free Trade Area which will come into force in 2017.
The Tripartite FTA brings together 26States with a combined population of625 million people and a combined gross domestic product of United States Dollars 1.3 Trillion. It accounts for almost half the membership of the African Union and sixty two percent of the continent’s gross domestic product.The total landmass of the countries that make up the tripartite region is 17.3million square kilometers which is twice the size of China. The above statisticsand comparisons make a compelling case for the integration arrangement that will change the political and economic geography of the region.
This vision of creating a single market will address the challenges that arise from the fragmentation of countries in the region by creating a borderless economy that is sine quo non for structural transformation, inclusive and sustainable development. An interesting feature of the intra-tripartite trade is that it is dominated by trade in intermediate products and manufactured goods thus further confirming available evidence that the region can serve as a basis for industrialization anchored on value addition.
Within the eastern and southern Africa regions, there is a remarkable increase in cross border investment in manufacturing,trade in services – including logistics and financial services – by companies that are emerging as regional champions.The regional trade and industrial policies will further stimulate and enhance these investments. It however acknowledged that trade between African countries and the rest of the world is dominated by exports of unprocessed primary commodities and imports of manufactured products which brings me to the pillar of industrial development.
Although the program for industrialization pillar is still underdevelopment substantial progress has been made by COMESA, EAC and SADCin coming up with regional industrial policies and strategies which are under implementation. Without physical infrastructure connectivity and energy,which is an enabler to development, our countries will remain under developed.To quote the famous Chinese saying: “if you want to be prosperous build roads”.
Currently, mega investments are taking place in infrastructure and energy.Several States have, through innovative means of financing, been able to issue infrastructure bonds in domestic and global markets to finance infrastructure and energy projects. Two examples from COMESA Member States illustrate this;the financing of the second Suez Canal amounting to Nine Billion Dollars was raised from the domestic market in Egypt.Equally, the Ethiopian Grand Renaissance Dam which, when complete in 2017 with6,000 megawatts of power will be the biggest hydro power project in Africa was funded by Ethiopia and a Diaspora bond to the tune of US$ 4.4 Billion.
Standard Gauge Railways are being constructed for the first time in the region. This will replace antiquated railway lines that were built at the turn of the twentieth century. With these well focused development models and a young population, the African continent is now the most attractive trade and investment frontier.