Integrate Africa
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1 INTEGRATE AFRICA Dr. Akinwumi A. Adesina President, African Development Bank 2 Foreword he African Development Bank is The emerging scenario provides playing a pivotal role in integrating the potential for Africa to expand TAfrica. Regional integration is one its markets, create new wealth, and of its strategic objectives, reflected in take advantage of unprecedented its High 5 priorities. Integrate Africa opportunities to feed itself and the links the other related High 5 activities world. This is a compelling reason for together, and tactically connects and enhanced African integration. unifies the continent. As of May 2019, the African free trade In 2017, regional operations agreement (AfCFTA) had been signed represented 28% of the Bank’s African by 52 African states and ratified by Development Fund (ADF) pipeline of 23. The next step is for the African disbursements for 37 low-income Union and African ministers of trade countries. The level of disbursements to finalise work on the instruments to ADF countries simply reflects the to facilitate the launch of the AfCFTA importance of regional integration as a during an extraordinary heads of state key development priority for the Bank. and government summit on 7 July, 2019. By 2050 approximately 2.2 billion people will be added to the global With its capacity for lending and population, and more than half of that financing, sharing knowledge, forging growth will occur in Africa. Africa will partnerships, and with the appropriate account for the highest population capital backing, the African spurt with an additional 1.3 billion Development Bank is strategically people on the continent. positioned to operate as a one-stop shop to support the achievement of However, this rapid population growth one of Africa’s development objectives, poses a conundrum for several African the African Economic Community. countries: how to address public infrastructure, consumer demand, Africa’s journey towards a more joblessness; and stimulate domestic integrated, competitive and business- income. Beyond 2050, Africa will friendly continent is following a be the only region experiencing promising roadmap for success – substantial population growth, Africa’s future is bright! meaning that the continent’s share of the world’s population could rise from 17% in 2017 to 40% by 2100. 1 https://qz.com/africa/1016790/more-than-half-of-the-worlds-population-growth-will-be-in-africa-by-2050/ 2 United Nations, (2017) World Population Prospects: The 2017 Revision 1 Integrate Africa 1 Integration for growth and prosperity 2 Integrate Africa 2 Integration for growth and prosperity To generate growth and prosperity, costs fall and financial institutions work African countries must fling open their more effectively. Financial integration plays markets beyond their national boundaries a key role in terms of smoothing cross- to stimulate and increase regional, border transaction flows while integrating continental and global trade. nations and landlocked countries can connect through financial services. The relationship between integration and growth encourages connectivity, The African Development Bank puts a trade, industrialisation, and the free high premium on the capacity of market movement of people, among others, integration powered by connected as key economic factors. For instance, infrastructure and reinforced by the free cross-border infrastructure connectivity flow of goods, services, ideas, and people. enables economic growth, and is a This is what its Integrate Africa strategy catalyst of integration. Effective and seeks to achieve. efficient infrastructure connectivity boosts trade and investments, permits the The strategy aims to strengthen the free movement of people, goods and required connectivity in all areas for services; and reduces cross-border costs Africa to achieve a single and common by increasing access to services such market. The initiatives are about as mobile phone technology. African making progress in power generation, countries, especially small or landlocked transport infrastructure, information and countries, have much to gain from communications technology (ICT), and promoting infrastructure connectivity to logistics, trade and investment, as well as boost economic growth. financial market inclusion and integration. The initiatives are also about the Bank’s Financial integration is another key factor integrated approach of combining in growth - once capital flows move freely private and financial sector development across regions in Africa, then investments across borders, and using the benefits of will increase. As a result, finance is infrastructure to achieve a unified African allocated where it can generate the most market. productivity. Through financial integration, the investors on the continent get higher Integrating Africa means focusing on five returns because business transaction key priorities: Enlarging Supporting Broadening the markets and making intra-African trade benefits that come from them more attractive the free flow of people, and investment; Improving the ideas, cultures, and to investors; information. Linking landlocked business environ- countries to regional ment for private African markets and sector investment beyond; and know-how; 3 Integrate Africa 3 Africa is one of the fastest growing consumer markets in the world. Africa’s consumer expenditure has been growing at a compound annual rate of 3.9% since 2010. This market is expected to reach $2.1 trillion by 2025 and $2.5 trillion by 2030. The implementation of the AfCFTA will help to create a single continental market for goods and services and an estimated potential market of 1.7 billion people. The vast majority of consumer spending on the African continent currently takes place in informal, roadside markets, even in those countries with the most well- developed retail and distribution markets. By 2030, the largest consumer markets will include Nigeria, Egypt, and South Africa while lucrative opportunities will prevail in Algeria, Angola, Ethiopia, Ghana, Kenya, Morocco, Sudan, Tunisia, and Tanzania, among other African countries. 4 Integrate Africa 4 Facilitate the construction of 3,600 kilometres of cross-border transmission lines, and substantially increasing electricity access for communities. Support initiatives Enhance the construction encouraging financial or rehabilitation of 10,000 services so that they kilometres of cross-border represent more than roads to improve intra- 5% of GDP instead of continental connectivity. the current estimated 1%-2%. Support the Reduce the cost construction In pursuit of its key of cross-border of railway lines to targets for 2025, trading from meet the African $2,350 to $1,950 Union’s 2040 goals, the Bank will per 20-foot and expand and do the following: container by energise transport sea on average. corridors. Help to increase air Increase intra-African travel to 13.5 million trade to 23% of all passengers and air traded merchandise, freight to 143 million and 20% of trade tonnes – an increase Support ICT projects to help in total goods and of 7% from 2015 sustain progress towards services. levels. the African Union Vision for communications by 2040, and increase African internet connectivity from 14.5% in 2014 to 30% in 2025. 5 Integrate Africa 5 Why integrate? frica comprises 55 countries account for 25% of the continent’s total with varying economies - out goods trade. The African Development A of these, 16 are landlocked. Bank’s goal is to help countries integrate Of the 16 landlocked countries, 14 of better by supporting multiple efforts. them are ranked “low” on the Human These include the following: Development Index (HDI), a statistic that takes into account factors such as life • Increasing electricity access to expectancy, education, and income per communities and the continent capita. In Africa, landlocked countries face through targeted investments in challenges in terms of trade, access to renewable energy, among other markets, resources and development of sources. The Bank will support economic infrastructure. regional energy projects while ensuring an appropriate combination A country’s lack of access to water of sustainable regulations, policies resources, energy, trade opportunities and ecosystems. and markets, among others, can have • Sustainable water resource an enormously negative effect on its management – the Bank will support economy. Landlocked countries face key transboundary water resource trade challenges because it is cheaper management and water conservation to transport products over water than projects, as an approach to maximise over land. Similarly, inadequate electricity natural resources in a sustainable access poses a major constraint to the manner while attaining much-needed twin goals of ending extreme poverty and economic and development growth. boosting shared prosperity in Africa. Such • Increasing connectivity - expanding challenges make it difficult for landlocked road, rail, port and air links. countries to participate in regional, • Improving logistics and continental and global economies or information flows by expanding markets. This is one of the key reasons telecommunications platforms. why African countries pursue integration. • Improving the business environment for cross-border trade. Currently, reforms are under way and • Enhance and liberate capital flows having a positive effect. Intra-African trade across Africa as a mechanism to accounts for between 14% and 18% of increase investment while