Despite having a population of over 1.5 billion people which is approximately 18% of the global population, Africa’s contribution to the global economy in terms of Gross Domestic Product (GDP) is less than 3%. The poverty rate on the continent remains the highest in the world yet the continent is the most resource-rich continent on the planet.
Many reasons have been adduced for the continent’s economic backwardness ranging from colonialism to endemic warfare, to widespread corruption and despotic regimes. However, we can no longer use colonialism as an excuse because most African countries have been independent for upwards of sixty years so it doesn’t make sense to continue blaming the colonialists, rather Africa needs to look in the mirror to identify the causes of her economic challenges.
A quick evaluation of the African economy will reveal that there is little or no value added to African commodities such as agricultural produce and natural resources before they are exported out of the continent, there is relatively little intra-African trade going on within the continent, intra African trade is settled using foreign currencies like the dollar and euro, farming is still mostly at the subsistence level, low level of infrastructure development and dearth of skills as a result of poor human capital development.
To unlock Africa’s huge economic potential, the continent will need to have good and visionary leaders who will not only tackle the scourge of corruption but will also invest heavily in the education of our youth and the development of human capital. We would need to take a look at our educational curriculum and redesign it to cater to our current needs instead of the continuous use of the curriculums passed down to us by the colonial administrations. Priority must be given to vocational training and skills acquisition in addition to formal education.
In addition, to create an enabling environment for businesses to thrive in Africa, our leaders must invest heavily in infrastructure development as the dearth of infrastructure constitutes a major impediment to businesses across the continent and makes them less competitive than their foreign competitors. According to the African Finance Corporation (AFC), Africa needs to spend an average of $150 billion or 3.5% of the continent’s GDP per annum to close the infrastructure gap on the continent.
With adequate infrastructure on the ground, Africans will now be encouraged to invest more in the continent’s economy and we can move from subsistence farming to mechanized farming while agro-allied industries will spring up to add value to our agricultural produce before export. This system of adding value can then be replicated in the extractive industries where our natural resources can be processed into finished or semi-finished goods before export. This way, we are not only adding value to our natural resources but also creating jobs for millions of African youths across the continent.
On the issue of regional trade, the African Continental Free Trade Area (AfCFTA) is already doing a lot to promote regional trade and integrate the economies of African countries by removing trade barriers, eliminating or reducing tariffs, facilitating investments, and developing regional infrastructure with the overall objective of improving the socio-economic development of member countries and making Africa more competitive in the global economy.
To support the vision of boosting intra-African trade, AfCFTA established the Pan-African Payment and Settlement System (PAPSS) which allows payments among companies from various African countries trading within the continent to settle their payments in their local currency instead of using foreign currencies like dollars and the euro.
The good news however is that despite the global economic challenges, decades of slow growth, and poor infrastructure. African countries are now emerging among the fastest-growing economies in the world. According to the African Development Bank Group (AfDB), Africa will account for eleven of the world’s 20 fastest-growing economies in 2024. This is apart from the fact that the current average GDP growth of African countries is above the world average.
In the midst of all these, there is an emerging new struggle for Africa with foreign powers like China, Russia, France, America, and the United Kingdom positioning themselves to warm their way into the hearts of African leaders so that they can take control of the natural resources that abound in various African countries. While there is no harm in working with foreign partners to extract and develop their local resources, African countries must be very wary so that they don’t end up being with the short end of the stick.
The time has come for Africa to start looking inward to harness her strengths and exploit them for the benefit of Africans. With a population of 1.5 billion people who are mostly youths, abundant natural resources, and large swaths of arable land, Africa presents itself as the next catalyst for global economic growth and the most fertile opportunity for investors who would like to profit from the growth.
Effectively speaking, the opportunities emerging in Africa today are not just a regional phenomenon but one that would impact the global economy and one in which the international community can benefit. As the African population continues to soar along with the growth of the economy, the continent as a whole will become a much bigger player in the global economy, and addressing key issues such as infrastructure deficits, education gaps, and environmental sustainability will create more opportunities for investments and shared prosperity.
Africa certainly represents the next phase of sustainable growth for the global economy and those who take a position now to invest in unlocking this potential will certainly benefit the most. The time to act is now.
Oshobi, a management consultant, development economist, and author writes from Lagos.