msc

Recalibrating the Compass: Evaluating Geo-Economic Paradigm Shifts in Collaborations with Africa

March 18, 2024

Notes from APCO’s side event at the Munich Security Conference 2024

During the last edition of the annual Munich Security Conference, APCO hosted an official side event dedicated to Africa. Moderated by our CEO, Brad Staples, the conversation focused on where key African countries stand in the international landscape, the continent’s main challenges and opportunities and what win-win business projects in Africa could look like. Leaders from different fields shared their expertise, including former Kenyan Minister of Foreign Affairs Raychelle Omamo, International Crisis Group President Comfort Ero, Bill & Melinda Gates Foundation Europe Director Anja Langenbucher and DP World Group Senior Vice-President Federico Banos-Lindner.

The discussion was wide ranging, substantive and challenged several common perceptions. Some of the insights and experiences shared are elaborated here to help bring new understanding of the geopolitical paradigm shift taking place in collaborations with African partners.

Growing International Attention on Africa

Over the past few years, we have seen growing attention on Africa from increasingly diverse interests and investors—beyond those that have traditionally been present on the continent, for better or for worse. The European Union has a strategy to invest in various sectors such as energy and transportation. The Unites States continues to provide aid and security assistance. Russia’s influence has increased through military support and various economic projects. China is heavily involved in building infrastructure, as are India and Japan. Türkiye is boosting its investments along with the United Arab Emirates, Saudi Arabia and other Gulf states.

The discussion at MSC recognized the multipolarization of the geopolitical landscape, the increasing competition for natural resources and that international attention on Africa can only grow further, providing the continent with tremendous opportunities for growth, development and influence.

A Dual Perception of Africa

The MSC discussion focused on the coexistence of two simultaneous visions of the continent—both valid in different respects:

  • An optimistic perspective. Africa has plenty of natural resources and assets, including critical minerals. There are a lot of opportunities on the continent for developing infrastructure projects (roads, power supply systems, telecoms, healthcare facilities, manufacturing) and to contribute to the economic development of many promising countries. There is also a young and growing population looking for employment opportunities and better living conditions. This population represents a wide consumer base for businesses and foreshadows how some countries could benefit from a demographic dividend in coming years.
  • A preoccupation with prevailing concerns. Since the COVID-19 pandemic, inflation has been growing across Africa with dramatic consequences for personal incomes and food security. National debts are increasing—according to the International Monetary Fund (IMF) the average debt ratio in sub-Saharan Africa has almost doubled in just a decade, from 30% of gross domestic product (GDP) to almost 60%—and are becoming costlier to repay. Pressure from multilateral institutions to reduce countries’ indebtedness and control public spending is high, which limits national governments’ room for maneuver. Many countries are facing social unrest with growing risks of political destabilization or coups. Looking forward, the impacts of climate change on the continent could further threaten food security and access to water, increase migration and lead to even more political and security challenges.

Unchanged Priorities and Ongoing Challenges

Regardless of the context, African leaders will say that their priorities remain the same. With such a young and growing population, the key to limiting social unrest and preventing radicalization is to increase access to education and professional training while developing their economies with diverse strategies—some focusing on natural resources, others on energy or on tech—to create employment opportunities for all. Industrialization has been a priority in many African nations for some years, the COVID-19 crisis, highlighted the importance of African strategic autonomy, in particular the need to reduce dependence on foreign manufactured goods.

Other pressing challenges persist. These include the need for sustained access to power and infrastructure development, especially roads, to enable the circulation of goods and people and to facilitate trade within regions and at continental level. Public investment is essential but most national governments still struggle to collect taxes efficiently or to fight corruption. Moreover, barriers to private investment remain, such as the variability of legal and fiscal frameworks governing private investment as well as the perceived level of risk associated with business projects on the continent.

Economic Integration: An Encouraging Perspective for Continental Trade and International Investors

To enable the development of a more dynamic private sector in Africa, increased economic integration is essential. Intra-continental trade is the weakest in the world. According to the African Development Bank, it is only around 15% compared to 54% for North America or 70% for the European Union. Because of the lack of infrastructure, the transportation costs for goods between countries are among the highest in the world, which makes it cheaper in many cases to buy from international partners. Several projects have been launched to increase economic integration including various regional trade agreements which are starting to provide encouraging results, even though further progress can still be made.

At a larger scale, the widely-debated African Continental Free Trade Area (AfCFTA)—which is currently being implemented—could also provide the continent with both opportunities and challenges. While its detractors claim that it could destroy local businesses by opening African markets to multinational companies which they would not be able to compete with, institutions such as the IMF anticipate that it could increase trade within Africa by 50%, African exports by 29% and international imports by 7%, which would lead to a 10% rise of the GDP on the continent.

More Power and Freedom for African Leaders

One of the discussion’s main highlights is that despite the challenges currently facing Africa, the growing attention on the continent grants African leaders with unprecedented power. As more and more investors take interest and seek opportunities to develop projects in key countries, leaders have the opportunity to choose their own partners, raise their expectations and focus on the projects that will bring the most to their country and people. Moreover, in a fragmented international landscape, Africa, which could represent about a quarter of the world population by 2050, can only increase its influence on the global stage. From that perspective, the addition of the African Union to the G20 last year is encouraging and will provide the continent’s leaders with a new forum to participate in key international debates and share their ambitions, best practices and concerns. The third seat granted to Sub-Saharan Africa at the IMF’s board is another step in the right direction.

A Change of Paradigm Is Needed to Design Efficient and Sustainable Cooperations With Africa

In this fascinating and fast-evolving context, the MSC debate highlighted key takeaways for different stakeholders.

  • For African leaders, pairing ambition with increased responsibility. While most international players must change how they perceive and interact with Africa, African leaders must also take responsibility to show progress on important fronts—such as committing to democracy and ensuring political stability, efficiently collecting fiscal revenue, managing public finances and effectively fighting against corruption. All these factors are essential to gain and maintain the trust of international creditors and investors. Believing in their people and assets is also essential to define ambitious development plans that will drive their countries further and enable them to shape key international debates.
  • For investors, committing to economic and social development. The era of taking without giving back is over and the increasing competition on the continent will make it clearer than ever. Now that African leaders have the opportunity to choose, they will look for investors committed to creating local employment, training people to build knowledge and skills and give back to local communities. These will hopefully become essential conditions to successfully doing business in Africa.
  • For the international community, the absolute necessity of reforming multilateral institutions and development banks. The need for the modernization of multilateral institutions, particularly the IMF, the World Bank and regional development banks is increasingly recognized and discussions are slowly moving forward. This was demonstrated by the Paris Summit for a new international financial pact last summer, the last annual meetings of the World Bank and the IMF last fall in Marrakech or the last climate COP in Dubai. These debates and roadmaps should lead to concrete progress in mobilizing new resources, both public and private. They should allow for thinking outside of the box regarding national debts, to enlightened bottom-up approaches to financing needs and developing a new approach of risk evaluation facilitating investment in developing African nations.

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