The below is an excerpt from PwC’s recent Africa Business Agenda report.
If we look back over the past 20 years, the surge in global trade has helped to lift millions of people out of poverty, most notably in Asia. Yet, in other parts of the world the benefits have been uneven.
Despite 5% average growth on the back of a huge but now faltering resource boom, the number of Africans living in poverty (less than US$1.25 a day) has continued to rise. In Europe and North America, many voters’ anger over how the pie has been sliced has led to a backlash against globalisation and a rise in populist protectionism.
When asked whether globalisation has helped to close the gap between rich and poor, 51% of African business leaders (Global: 44%) said it’s done nothing to promote equality.
And while economies around the world have become more integrated and interdependent as a result of both trade and digitisation, most CEOs in the previous edition of our CEO Survey said they anticipate a world in which multiple beliefs, value systems, laws and liberties, and trading blocs will prevail.
The potential impact can already be seen in the US’ withdrawal from the Trans-Pacific Partnership and the UK’s exit from the European Union. In their place we’re seeing a return to bilateral ties and bespoke sector-by-sector trade agreements as companies, governments and trading blocs shop around for the best deal and jostle for favoured status.
It’s easy to see the risks for Africa from this rising tide of nationalism and economic fragmentation. In particular, aid could be curtailed and what’s left could be more closely tied to national interests such as access to local resources and consumer markets.
The millions of Africans making up the diaspora studying and working in Europe and North America may also find it more difficult to access education and training, diminishing access to skills and reducing the remittances that are so important to the livelihoods of millions of people across the continent.
Plugging into the new trade order
Yet as one door closes, another opens. The recalibration of the global trading system is a catalyst for Africans to get on the front foot and forge the ties and make the big deals that will take our economies forward.
To capitalise, companies, governments and trading blocs need to optimise their bargaining position. That, in turn, demands some of the building blocks we have always needed – a clear focus on good governance, education, agriculture and other key pillars of ‘smart’ development and global attractiveness.
- Where are you going to compete?
It’s important to look at what you can offer a trading partner and what you want in return, and to be ready to push yourself forward as opportunities open up – the UK’s search for trade deals beyond the EU is a clear case in point.
Many individual governments may lack enough people with experience of complex trade negotiations, so it’s important to pool resources and develop mutually agreeable strategies across multiple African trading blocs.
- Stability is the best shop window
As governments and investors search for the best partners, they’ll be looking closely at stability, governance and transparency.
The economies in the strongest position will have strong and non-partisan leadership.
Tackling corruption and making it easier to do business are also vital. There are no African countries in the top 50 of the Ease of doing business rankings (Rwanda is highest at 56th) – we should strive to be up there.
- Educating our own
Developing world-class schools and universities in Africa is vital, especially if fewer students are able to study abroad.
Financial constraints mean that governments can only do so much. It’s therefore vital that businesses take some of the strain by stepping up their contribution to education, training and development.
This includes partnering with educational institutions and helping with curriculum development.
It also includes looking beyond business’ own workforce needs into areas such as training and short-term work opportunities for young and unemployed people, who can then use the experience to seek longer-term employment or set up their own enterprises
- Digitisation opens the way to diversification
The resource boom and subsequent slide once again shows that economies can’t put all their eggs into one basket. The distribution of wealth has also been deeply unequal.
The rapid development of digital communication and the commerce flowing from it are acting as a catalyst for greater diversification and faster development within African economies.
But we also need better roads, telecommunications and other forms of basic infrastructure to ensure that economic diversification and its benefits reach beyond the cities into the less-developed rural areas.
- Putting agriculture at the forefront of development
To succeed globally, we need to feed our people. While agriculture continues to be at the back of the queue for investment, the riches of our land are an extraordinary resource, capable not only of supplying the domestic needs of multiple African nations, but also of becoming a major source of world food supplies.
Priorities should include bringing unused land into production, using the latest technology to boost yields and moving up the value chain into areas such as seed development.
Window of opportunity
The multiple negotiations over this new and more complex trading order are likely to take at least five years, in some cases longer, but the key foundations need to be put in place as soon as possible. These foundations are not new and many are the factors needed for strong, diversified economies.
If future aid packages are curtailed, Africa must ensure it is at the forefront of these negotiations and in the strongest position to secure the best deals. That’s why we need to move quickly and decisively to put in place the pillars for smart development and ensure we’re open for business.
Joel Segal is Partner and Chair of Africa Business Group, PwC UK.