Afreximbank AGM: ‘Industrialisation required for Intra-African free trade to flourish’

“We need to do more around production [of finished goods] in Africa,” Samaila Zubairu, president and CEO of the Africa Finance Corporation said at Afreximbank’s 29th annual meeting, which took place in Cairo from 15 to 18 June. “Only then will we reduce the trade deficit, create more jobs, and earn more money.”

The Africa Trade Report – launched during the annual meeting – underscores the importance of using AfCFTA to accelerate the process of structural transformation and growth on the continent.

Participants at the event did not dispute the benefits of AfCFTA but were keen to highlight that without industrialisation, African trade – which accounts for three per cent of global trade to date – will remain moot.

Experts argued that exporting finished goods at higher rates is what could pay dividends. At the moment, raw materials constitute around 70% of African exports.

Howard Nicholas, a Sri Lankan economist and lecturer, stresses that only high value-added manufacturing will move the needle on trade balances, citing the industrial revolution in Vietnam over the past decade.

African nations must follow suit, he says. “Once you start, you will see the changes will be precipitous. You will not be suffering these foreign exchange scourges, which have bedevilled Africa.”

‘Economic war’

The war in Ukraine has greatly weighed on African economies, highlighting their shortcomings: wider trade deficits on the back of soaring prices of commodities, lack of financing due to the high risk in most African countries, rising interest rates, weakening purchase power amid uncontrollable inflation, and the fear of rampant stagflation.

Zambia has already defaulted, while 23 African countries are on the brink of applying for structural adjustment assistance with the IMF, which, Nicholas insists, would undermine industrialisation efforts in those countries.

“It has happened to Sri Lanka every single time with 17 agreements with the IMF,” he says. “Every single time we go to the IMF they tell us to do something that is destructive to our industrialisation strategy.

You think they really want Africa to industrialise and start to compete with them

“One of those things they did, which I consider criminal, is that they asked us to privatise our [two] development banks. They know full well that development banking is extremely important for industrialisation.

“Why? Because this is an economic war. Do you think they really want Africa to industrialise and start to compete with them in the same goods they produce? Remember, you sit on the raw materials,” says Nicholas.

Infrastructure

The lack of infrastructure poses other challenges in the face of industrialisation. For example, more than half a billion people do not have access to energy of any form in Africa.

During his speech at the Afreximbank meeting, Egyptian president Abdel-Fattah El-Sisi said building infrastructure in Africa is an uphill struggle.

“We needed over the past seven years […] around $400-$500bn” for infrastructure projects in Egypt, he said, referring to multiple development projects across the nation since he assumed power in 2014.

“I’m talking about a country that spans one million square kilometres, and what we did was on 10% to 12% of that. What about Africa which consists of 30 million square kilometres?” he said, wondering how African nations could secure enough financing for infrastructure projects.