The world’s blind spot

2010-11-13 14:46

All around the world – and not least here at the G20 – a lot of the discussions about new opportunities for growth focus on the emerging markets of Asia and South America. But we ­believe there’s a blind spot on the global economic map – an opportunity the world cannot afford to miss – and that is Africa.

Africa accounts for 20% of the world’s population but just 2% of its trade.

Compare the story of our hosts for this week. Fifty years ago South Korea was indistinguishable from many African countries. Now it has a per capita GDP 40 times higher than some of them.

Things are changing. Investment in Africa is soaring. Foreign direct investment, only one part of the total, rose from $9 billion (about R62 billion) in 2000 to $64 billion in 2008. African continental gross product is expected to grow from $1.6 billion today (equal to Brazil) to $2.6 billion in 2020.

We want to play our part in this transformation. As many have argued, a strong Africa that is producing, trading and working is not just good for that continent, it’s good for everyone else too.

The exciting thing today is that with so many of Africa’s leaders and so much of the world committed to development and reducing barriers to trade, there’s a great opportunity for Africa to enter a period of really sustainable growth.

Africa is moving away from being marginal to the global economy to being integrated with it. Africa is beginning to be seen less in terms of what it needs and more in terms of what it can give and generate.

There are many ways the G20 could have a positive effect on African growth. At the moment climate change disproportionately affects agricultural yields in sub-Saharan Africa. So a fair and balanced global deal on carbon emissions is now vital.

We also need to push further and faster on reform of the financial services sector so it does more to direct credit to small and medium-sized business in the very poorest countries.

We need to support investment in integrating infrastructure and support African countries as they strengthen their own tax systems.

We need to support productivity ­improvements in African agriculture and improve the international environment for agricultural trade. We need to help African countries train and retain skilled people.

One of the greatest opportunities for G20 countries to support African growth is to complete the Doha Development Round – the global trade deal. This could add an extra $170 billion to the global economy and help Africa integrate in global markets. Indeed, G20 countries opening up their markets to African countries could boost exports from the least developed countries by 44%.

While we are committed to conclude Doha, it won’t deliver everything Africa needs. So in parallel we need to look at another angle to African trade – and that is trade between African nations.

It is disappointing that today just 10% of African trade is with other ­African nations. That’s because for most of the continent it is still harder to trade across the nearest border than it is with distant Europeans and Americans. Removing these barriers and creating an African free trade area would bring enormous benefits – an estimated increase in GDP across ­Africa by as much as $62 billion a year.

Of course, the central drive for this single market must come from African countries – and progress is being made. For instance, in east and southern Africa 26 countries have been working to establish a free trade agreement across three regional economic communities and in west Africa 15 countries are working to strengthen their regional economic community. But here at the G20 we argued that there is a part for the rest of the world to play too. And three areas stand out.

First, in helping to reduce unnecessary tariffs. Tariffs in some African countries are too high. For example, in some countries they’re even ­imposed on the import of medicines and anti-malaria bed nets.

We believe G20 countries could also play a role in encouraging the reduction of unnecessary tariffs, for example, through the use of tapered subsidies or other incentives to help African economies adjust.

Second, in helping to develop infrastructure and to cut other non-tariff trade barriers. In Singapore it takes five days and $456 to export a standard container. In one fast-growing ­African country it takes 52 days and costs $1 850. Africa’s overstretched infrastructure and red tape makes trading inordinately difficult. That’s why South Africa has agreed to champion an initiative to improve rail and road infrastructure between Dar-es-Salaam and Durban – an investment project the UK is right behind.

Third, having an aid policy that strongly supports trade facilitation. African exporters need to integrate more efficiently into export markets. It’s for that reason that South Africa has increased its overseas development assistance and is establishing its new Development Partnership Agency. South African development assistance, in addition to supporting humanitarian, peacekeeping and post-conflict activities, will aim to strengthen productivity and enterprise across the continent.

And it’s also why the UK is committed to increasing international aid by £3.6 billion (about R40 billion) by 2013 – with much of that money going towards encouraging economic growth and trade across Africa. The British government will shortly be ­announcing an ambitious programme of support that, alone, could be ­expected to increase African non-oil exports by over $3.5 billion by 2015.

We will continue to challenge the G20 countries to play their part. African producers are flexing their muscles but neighbours are often reluctant to take their goods or services.

When Africans are free to exchange goods and services without barriers in their way the engine of wealth creation in Africa will be fuelled up and the whole world will move forward.

- Bloomberg

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