Africa must boost trade between nations, Davos hears

28 January 2016

African countries must encourage foreign direct investment, focus on trade between its nations and improve relationships with rural citizens, the World Economic Forum’s annual meeting has heard.

Poor access to energy, education and markets is hampering the continent’s ambitions for rapid and sustained economic growth. To secure universal access to electricity, “revolutionary partnerships” need to be secured, the conference held in Davos, Switzerland, heard.

Paul Kagame, president of Rwanda, spaking at the 2016 World Economic Forum in Davos, Switzerland © World Economic Forum/swiss-image.ch

These include partnerships between industrial firms and foreign direct investment. “ICT is coming naturally into the whole continent,” said Hans Vestberg, president and CEO of Ericsson, Sweden. “Broadband and cloud is coming into Africa. Almost all Africans will have smartphone five years from now. Think about what that can do for governance,” he said.

In addition, African countries need to make the most of relationships with overseas nations, in particular, China, which is looking to Africa for new opportunities due to its own slowing growth, excess labour and slowing growth.

Ethiopia’s prime minister Hailemariam Desalegn told the forum that the strategic platform between China and Africa is “the best I’ve ever known”. “But emerging economies like China and India are no longer more competitive in labour, and it is the turn of Africa now,” he added.

The continent must also focus on expanding regional commerce, which currently accounts for 11% of trade. Falling global commodity prices are elevating the risk of overseas exports, but also providing an opportunity to add value and reduce volatility through enhanced supply chains within Africa.

“We know that, if we traded more goods among ourselves, we would have a lot of gains,” said Paul Kagame, president of Rwanda (pictured). “We don’t have to wait for these changes, but can easily compensate for what we’re losing overseas by concentrating on what is very close to us and what we can do among ourselves,” he said.

And focusing on Africa’s rural citizens, particularly women, will enable better trade amongst African countries. Africa holds 65% of the world’s arable land. To process raw agricultural products like cocoa within the continent, Africa’s leaders can invest in farms as a business, half of which are run by women. By helping women link their products to markets, some $300m in loans can leverage $3bn in new potential.

Akinwumi Ayodeji Adesina, president of the African Development Bank said the only thing that worries the continent’s political and economic leaders about disruptive revolutions in industry, energy, trade and education is that they won’t be fast or big enough to keep up with growing demand for them. One problem is that over half of Africa’s total population currently has no electricity.

“More than a century after Edison invented the light bulb, half of Africa is still in the dark,” Adesina added. “We talk about the ‘fourth industrial revolution’, but it all starts with the need for electricity, which is like blood in the system. If we don’t have it, we can’t live.”

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