Regional integration should be a tool for wealth creation in Africa, says AfDB

21st August 2020

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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The Covid-19 pandemic and its health and economic impacts have forced a global rethink of the current multilateral framework and what it means for the future and, for Africa, Covid-19 has served as a wake-up call in many ways, says African Development Bank (AfDB) regional development VP Khaled Sherif.

The mitigation measures that were put in place by most countries, globally, to contain the spread of the pandemic, and particularly border closures and lockdowns, resulted in reduced economic activity and supply chain disruptions across the whole world, Africa included, he notes.

“Reduced economic activity has resulted in a contraction in demand for Africa’s key markets, who were worst affected by the pandemic, thus depressing export revenues as commodity prices have continued to plummet.

"Several African manufacturers have successfully reoriented operations to begin production of protective personal equipment (PPE) and ventilators to  meet local demand. However, for the most part, pandemic-related disruptions have exposed African economies’ overdependence on high commodity prices and exports of raw materials to fund basic government services.

"Together, disrupted international supply chains and domestic lockdowns created a perfect storm in which income, goods or services stopped circulating as economies came to a standstill. No money, no movement and a realisation that most African countries lack economic diversity and resilience resulted,” Sherif says.

In terms of solutions to this, he says there is a need to focus on certain fundamentals, including producing more of what Africa consumes and consuming more of what Africa produces.

He emphasises that this does not mean cutting Africa off from the outside world, but that it does mean focusing first and foremost on the African market and other markets secondarily.

“It means the need to think about Africa more as a single common market to facilitate scaling up.

"Producing and consuming locally will facilitate the development of supply chains that will offer small companies and countries opportunities to leverage their strengths and specialisations and feed into large value chain networks that create more value through production, processing and distribution.

"And it means raising the standards within African supply chains to enable African firms to produce world-class industrial products,” highlights Sherif.

To achieve this, he posits that there needs to be a concerted effort to shore up manufacturing in Africa.

He notes that the demand for manufactured goods is already there.

Sherif says that, key to enhancing manufacturing in Africa, is improving intra-African trade through the effective operationalisation of the African Continental Free Trade Area (AfCFTA), which would spur industrialisation.

“The Covid-19 crisis has shown that enhanced industrial production in Africa is entirely achievable, especially as countries have struggled to source inputs and products from overseas. African industries do have the potential to respond to demand and, in fact, there is potential to leap-frog into advanced manufacturing and create the required capacity to produce quality, world class goods.

"By extension, the pandemic has also exposed the vital importance of economic capacity not only for socioeconomic development and industrialisation but to enhance resilience against crises and exogenous shocks that often occur without warning. Building on existing regional strategies for disaster risk reduction, there is also a need to factor in how pandemics present a multidimensional set of risks that require integrated responses to mitigate systemic risks,” he notes.

Sherif says the capacity to locally manufacture the basics that are critical during emergencies – foodstuffs, clothing and shelter – and building the markets and supply chains needed to ensure a good supply of these, would contribute significantly to gross domestic product (GDP), income and job creation.

He says the question becomes how to  build the markets and supply chains needed to ensure Africa can provide for itself, including during emergencies.

Sherif says there is a need to take a horizontal view of value creation and maximise opportunities to generate these in Africa, for African economies, African businesses, African workers and African consumers.

To achieve this, he says that fulfilling the AfDB's High 5s priorities − Light Up and Power Africa; Feed Africa; Industrialise Africa; Integrate Africa; and Improve the Quality of Life for the People of Africa – would address these challenges on multiple fronts and instrumentalise a tightly interconnected African market.

“By producing what it consumes and consuming what it produces as its countries and businesses progress up the value chain, Africa can build wealth, opportunity and resilience and ensure the successful realisation of Agenda 2063,” concludes Sherif.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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