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The African continent has been at the top of the agenda of politicians at all times. Historically, the conflict of interest emerged in the era of colonization, when global powers did not hesitate to conquer various parts of Africa for valuable resources such as gold, ivory, salt and more. Everyone wanted these resources because they needed them for production. As time went by, Africans wanted to design their own destiny for themselves, so today’s 54 African states have mostly emerged since the mid-20th century. In modern times, however, with the sovereignty of African countries, the rules have changed so that familiar and new powers would not come to conquer their lands but to invest in their markets.
Why is Africa so important?
In the global dimension, the resource-rich African continent is one of the fastest growing consumer markets as household consumption has increased even faster than its GDP in recent years. Furthermore, the average annual growth of gross domestic product has consistently exceeded the world average. Numerically, on the potential market of 1.35 billion people, since 2010, at a compound rate, consumer spending has increased by 3.9% annually and reached $ 1.4 trillion in 2015. The projected level of this figure is $ 2.1 trillion by 2025 and $ 2.5 trillion by the end of 2030.
On the other hand, a massive increase in the continent’s youth age group in a rapidly growing population creates a suitable environment for industrial development. The median age on the continent is 19.7, while this number is 37.4 in China, 38.1 in the US, 42.9 in the EU and 30.6 globally. Furthermore, the significant youth factor allows for a more rapid spread of access to the Internet and mobile phones. Apart from the traditional spheres, it seems, the future of the digital industry is also bright in Africa.
The significance of Africa lies partly in its geographical position, and therefore in the potential it creates. African ports are the key gateways for domestic and global export and import operations. Although currently, the exports of African economies are mainly based on raw materials; in the long run, monocultural economies will diversify as they grow. Therefore, ports will play an essential role in ensuring the sustainability of the most robust, resilient and diverse economic dynamics in the continent’s economies through exports and imports of industrial products and other manufactured goods. Furthermore, these ports will not only serve African economies; it will contribute substantially to global supply chain systems such as modern transportation facilities.
Traditional and new players in Africa
Africa is very attractive to investors with respect to positive trends and economic growth opportunities. The ninth edition of the Africa Attractiveness report published in September 2019 by EY denotes the African continent in first place in the world according to 2018 FDI (Foreign Direct Investment) GDP data.
According to UNCTAD’s 2020 World Investment Report, the top 5 investors in the African continent are respectively the Netherlands ($ 79 billion), France ($ 53 billion), the United Kingdom ($ 49 billion), the United States (48 billion dollars) and China (46 billion dollars). Interestingly, while other countries on the list reduced their direct investments between 2014 and 2018, only the Netherlands ($ 20 billion) and China ($ 14 billion) increased their investment in Africa. .
The flow of investments is incredibly intricate. The United States has warned countries that certain security risks could accompany technology developed by Chinese companies such as Huawei and ZTE. However, Huawei and ZTE have built and laid submarine and fiber optic cables off the coast of Africa. In this context, the Chinese technological infrastructure forms the backbone of the high-tech network in some states of the continent within the “Digital Silk Road”. For example, in Ethiopia, direct investment in the technology sector was $ 2.4 billion, while this figure was $ 1.8 billion in both Niger and Zimbabwe. It appears that China is in an advantageous position in Africa as it constitutes the “infrastructure of the future” helping to drive growth in cell phone and Internet penetration, in contrast to the United States.
In addition to conventional forces, some new countries, such as Turkey and Russia, are eager to break into African markets. The Turkish Initiative for Africa started in 2003. In 15 years, the number of Turkish embassies in Africa has increased significantly from 12 to 44, Turkish direct investment has skyrocketed from 100 million to 6.5 billion dollars and Turkey’s trade volume with continental countries increased sixfold, reaching $ 17.5 billion. Additionally, Turkey is the second largest investor in Ethiopia with $ 2.5 billion and has increased its political influence on Northeast Africa in recent years.
Russia has a profound experience of cooperation with African states of the Soviet era. After the collapse of the USSR, Russia’s successor strove to perpetuate relations, but mostly failed due to a shift in focus on its internal affairs. However, during this period, it has maintained its area of political influence in specific regions of the African continent to some extent. However, bilateral relations have been exposed to a radical renewal since the first Russia-Africa summit in Sochi on 23-24 October 2019.
In 2018, Russia’s trade with African countries increased by more than 17% and exceeded $ 20 billion. At the Sochi Summit, Russian President Vladimir Putin stated his expectation of at least double the trading volume over the next 4-5 years, which means a jump from $ 20 billion to $ 40 billion. Recently, on November 23, in an interactive webinar organized by the Council of the Russian Federation, the Chamber of Commerce and Industry of Russia and the Russian Business Association, Russian officials once again demonstrated their intention to restore historical relationships through cooperation in numerous fields.
Obstacles and constraints
Although Africa offers countless opportunities, it has some structural problems accompanied by some interstate and interstate conflicts and disputes. Terrorism and disintegration are still the main challenges for the continent. The Armed Conflict Location & Event Data project, which monitors conflict incidents around the world, found that there were 21,600 armed conflict incidents in Africa as of November 2019. For the same period in 2018, that number was only 15,874. This represents an increase of 36%.
Many nations of the African continent have behaved badly in maintaining stable economic growth rates and in reaching appreciable levels of economic development. This could be linked to a list of factors, primarily political instability as it drastically reduces the productive and transactional capacities of the economy. It is estimated that there have been at least 100 successful coups in Africa in the past four decades, with more than double the number of coup attempts. Consequently, there is an apparent correlation between the destabilization of the political theater and the economic imbalance.
Most of Africa is lagging behind the rest of the world in covering critical infrastructure classes, including energy, road and rail transport, and water infrastructure. For example, nearly 600 million people in sub-Saharan Africa lack access to the electricity grid, accounting for more than two-thirds of the world’s population without electricity. Furthermore, the notion of infrastructure plays an essential role in the region in terms of efficiency. For example, agriculture is Africa’s largest economic sector, accounting for 15% of the continent’s total GDP, or more than $ 100 billion annually. Experts estimate that sub-Saharan Africa alone requires additional annual investments of up to $ 50 billion to make the agricultural system work better. It can clearly be seen that from an economic development point of view, bridging this infrastructure gap is vital for the continent as it would increase the quality of life and stimulate the growth of the business sector.
What to expect?
In light of numerous indicators, the future of the African continent appears to be rather complicated. According to recent United Nations forecasts, the continent is expected to double its population by 2050. If the influx of investment does not increase, Africa will face a major demographic challenge. Otherwise, intellectual capital and human resources will contribute to a tiger economy supported by continued investment, and this factor will be a path to prosperity.
An important step was taken towards integration barriers in March 2018 with the signing of the African Continental Free Trade Area (AfCFTA) agreement by 54 African states. Namely, it represents a huge opportunity for African states to bring 30 million people out of extreme poverty and to increase the incomes of another 68 million living on less than $ 5.50 a day. The agreement also provides for simplification of customs procedures that would lead to $ 292 billion of the $ 450 billion in potential revenue gains. Furthermore, the simplifications of customs procedures imply the development of supply chain systems on the continent. Implementation of the agreement can be an introduction to integrated development to improve long-term sustainability in African countries.
It will undoubtedly be a long journey for Africans to overcome all issues. However, the emergence of a new generation with progressive thinking could affect a different environment on the continent. The most crucial factors within the process will be innovation, discipline and, most of all, patience. If so, the sustainable and dynamic African economy will play an essential role in the global system. Overall, there are still some positive signs to be optimistic about Africa’s future; as the famous African proverb says, “However long the night, the dawn will rise”.
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