BusinessNorth AfricaAfrica's commercial strength could be under threat from weak eurozone - Valentine Rugwabiza

Thu,18Dec2014

Africa's commercial strength could be under threat from weak eurozone - Valentine Rugwabiza

Valentine Rugwabiza Deputy director-general, World Trade OrganisationThe arrival of new trading partners has boosted African economies and not just in the oil and minerals sector. But the World Trade Organisation's Deputy director-general, Valentine Rugwabiza, from Rwanda, believes that Africa needs to look beyond natural resources to create jobs for the continent's many young people.

In the WTO we have seen a clear change in trade patterns over the last decade, away from traditional partners and towards emerging economies and developing economies. But it has shot up across the board and not just with Asia. In 2000, exports from Africa were $148bn. By 2011, African exports had reached almost $600bn.

The frica Report: What proportion of that was from Africa's 'new partners'?

Valentine Rugwabiza: Emerging markets in 2000 took 27% of these exports, around $47bn. By 2011, this had jumped to 43%. This is not just natural resource exports of oil or minerals – that's a false perception of the situation. The commerce between Africa and emerging markets is actually more diversified than with traditional partners. But nevertheless, it remains products without much added value.

In agriculture for example, the number one importer of Burkina Faso's cotton is China, but it remains the export of raw cotton. This is one of the real challenges of the continent, to add more value to its exports, and retain more of the value of its exports to keep up with the fast-growing pool of labour in Africa today.

The external picture looks strong – but what about within the continent?
The sad fact of the matter is that intra-African trade has remained stagnant, it has gone from 10% to 12% within the last decade. Obviously there are regional variations. But it really shows the big challenge of the continent. It remains the most fragmented continent with 54 countries, micro-economies, with maybe 3-4 decent-sized ones, like South Africa, Nigeria, Egypt and maybe Algeria. So this shows that there is a huge potential to be explored.

If African exports have done so well with intra-African trade still so low, what might happen if we were to start gaining the economies of scale with pooled markets and getting rid of barriers to trade that exist between African countries? We would get huge jumps in productivity, getting rid of transaction costs and boosting competitivity.

What could put this under threat?

Obviously the euro is in crisis, without a quick solution. With such high unemployment rates and demographic issues they are confronted with, these are serious structural problems that will take a while to work through. Growth in China is coming down, though positive, but it is also an economy that is struggling to accommodate a transition towards consumption-driven growth, even if state spending on big projects is continuing. And growth in the US remains thin, with a worrying level of indebtedness. So all these things are the context for Africa, and it makes all predictions about Africa necessarily short term. We are in a interconnected global context that is changing so fast that long-term predictions are meaningless.

But there remains some bright points for Africa. Demand for natural resources remains high. Competition for these resources will remain very high over the next few years, which will support prices - good for a continent that has 12% of global resources. There is a rise in domestic demand in Africa that is spectacular, the rise of a group of consumers that is overshooting all projections, which will also boost growth. And there is a young population that continues to offer a demographic dividend to African economies, so long as we are careful to create jobs in labour-intensive industries.

 



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