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African challenges and prospects in 2023 and beyond

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Picture: Mohamed Abd El Ghany/REUTERS/Taken on November 1, 2022 – A farmer carries rice during a season that has been difficult because of the lack of water and the adverse weather conditions, in a field in Qaha, Al Qalyubia Governorate, north of Cairo, Egypt. A range of internal and external shocks such as adverse weather conditions, a devastating locust invasion, conflicts, super high debt, the Ukraine conflict – have worsened rapidly-rising rates of inflation and borrowing costs for Africa, the writers say.

By Ashraf Patel and Mika Kubayi

In the moment of Africa Month, a sobering mood and painful existential reality hangs over much of the Continent. A range of internal and external shocks such as adverse weather conditions, a devastating locust invasion, conflicts, super high debt, the Ukraine conflict – all of which worsened an already rapidly-rising rates of inflation and borrowing costs.

Let us unpack some core areas of challenges and some proposed interventions.

Multiple Conflict zones and need for Sustainable Peace

There can be no Development without Peace! has been a clarion call of the African Union (AU) for the past three decades Sadly, in 2022-2023, a series unexpected – and intense proliferation of internal conflicts in Sudan, the Sahel, eastern DRC, Ethiopia, Northern Mozambique and other zones, has caused untold human suffering – internal-regional migration and humanitarian crisis, vulnerability of women and children. These multitude of conflicts have drained nations and regions and created an unmitigated crisis that requires significant of developmental, social and political capital in dealing with the immediate crisis. Schools and clinics are destroyed or damaged, and children forced to abandon their homes rarely find a safe place to continue their education during their displacements.

Picture: Supplied/Dirco/Taken April 30, 2023 – South Africa’s Minister of International Relations and Co-operation, Dr Naledi Pandor, comforts a woman who was among South African citizens evacuated from Sudan following armed conflict between the Sudanese Armed Forces and its Rapid Support Forces. The African Union’s clarion call ‘There can be no development without peace!’ seems to go unheeded with devastating results for Africa, the writers say.

Interventions: To address this crisis, there needs to be immediate ceasefires in all conflicts brokered and led by the AU and UN. A full commitment to ‘silencing of the guns’ is required. Boys and girls affected by armed conflict are also much more than victims of incredibly difficult circumstances. They are key to building the peaceful, strong societies envisioned by the UN SDG development agenda. The reintegration of soldiers and non-state actors is essential for the well-being of conflict-affected children but also beneficial for the community as a whole and must be prioritised.

The Debt Crisis and Development Finance deficit

The complex contradiction and headwinds spill over into the all-important sphere of finance for development. In an era when climate finance and infrastructure requirements are at all time high, many African nations face major debt crisis reminiscent to the those of two decades ago.

The advantages of higher commodity prices are likely to be short-term for commodity exporters in Africa as market conditions are forecast to weaken, given the expected global economic slowdown.

Firstly, on average the public sector debt-to-GDP ratio of African countries stood at above 60 per cent in 2022, and even leading economic ‘stars’ likes Ghana, despite commencing oil and gas production have had to seek IMF packages, that will add to the cost of servicing debt.

Zambia is expected to be the first African country to default, serving as a litmus test for the G20’s Common Framework programme, which was established during the epidemic to ease debt restructuring. Yet, negotiations have been painfully delayed, and external debt has risen to $18.6 billion.

Secondly, in parallel with the projected monetary stance of the Federal Reserve in the United States- and its current major debt ceiling crisis, and the European Central Bank, most African countries will likely further increase policy interest rates in 2023, thus adding to an already super high food and fuel inflation cycle, potentially pushing tens of millions more into poverty in 2023, thus compromising the attainment of the UN Sustainable Development Goals (SDGs).

The Third International Conference on Financing for Development held in Addis Ababa, Ethiopia in July 2015, heads of states adopted the Addis Ababa Action Agenda. The AAAA set out a new global blueprint for financing sustainable development through a comprehensive set of policy actions and commitments that aim to guide governments, international organisations, civil society and other stakeholders in implementing the 2030 Agenda for Sustainable Development. But the high debt crisis and protectionist trade measures by the North, will mean shortfalls in climate finance.

Possible interventions could be to work with the UN and ensure their commitments to the Monterey and Addis Ababa framework on finance for development; as well as G20 commitment on minimum tax for multinational corporations. Stronger regulatory frameworks in bank supervision, managing exploitative interest rates, as well as more robust consumer protection enforcement are required to protect African consumers and citizens.

Noting that the most obvious shifts in the SDGs as opposed to the MDGs is the much longer list of themes (from 8 to 17). New themes, such as infrastructure and innovation, as well as the environmental SDGs, Multilateral banks mandates need new models and approaches, with the New Development Bank (NDB) demonstrating a relevant approach.

AfCFTA: Fair Trade and Industrialisation Pathways

While the AfCFTA has been touted as the ‘silver bullet’ it is a long, winding and complicated journey, and weak institutions and a weak fiscal framework is weaking Africa’s capacity to act as a bloc. The Covid pandemic years and the practice ‘Covid nationalism’ by the US and EU, and a generally unfair global trade system at the WTO and WIPO are huge constraints. Nations such as South Africa and others face multiple trade challenges – and geopolitical headwinds as AGOA and the dumping of poultry in many nations hark back to the neo-colonial mode of trade of yesteryear. New trade protection mechanisms as the EUs new Carbon Border mechanism and the Inflation Reduction Act IRA 2022 in the US, will make it extremely difficult for African nations to access these markets, as the recent blacking of South African citrus products by the EU has demonstrated.

“Africa remains the least industrialised Continent. The industrial sector in Sub-Saharan Africa (SSA) contributes less than 28 percent of the region’s gross domestic product (GDP), which is lower than other low-income regions in the world. Data from the World Bank’s World Development Indicators shows that in 2019 SSA’s industrial output stood at $194 billion – much less than other low-income regions, such as South Asia ($491.6 billion) and Latin America and the Caribbean ($762 billion).” – J Matola (2022)

Innovation for Development

Finally, innovation and technology are powerful drivers of economic development as China has demonstrated in the past 3 decades. Africa’s patterns of structural changes and productivity growth are quite different from those of developing Asia, where the core components of productivity growth made positive contributions over the past four decades.

In the 1990s and 2000s, within sector productivity grew in all sectors, but mostly in manufacturing, boosted by high investment levels, which in turn generated various linkages and positive effects of economies of scale, technological advance, and knowledge and skills acquisition (UNCTAD 2016).

This process generated a positive dynamic reallocation effect that has been growing over the decades. Hence the need for increased ‘systemic innovation ecosystem’ is required in addition to increased spending on R&D that will increase Patent outputs. This requires new models of technology transfer, a range of policy incentives and support, with composite cluster co-operation between African regions and nations entrepreneurs, as well as tapping into its rich human capital diaspora offer new potentials.

Towards a Coherent Global South-BRICS Partnership

The current, fractured multilateral order, with new modes of trade wars, is having negative spill overs for many African nations who are unable to cope with these many geopolitical issues. In this milieu, the BRICS bloc (and its new members), offers new scope and platforms for equitable trade, as well as solid industrial development and inclusive growth and export opportunities – the engine room for job creation.

All BRICS countries have major relations with African countries and the BRICS bloc of countries, with 31.5 percent of global gross domestic product (GDP), has overtaken the G7 [advanced economies bloc], with 30 percent, mainly owing to the growth of China, which has contributed 30 percent of global growth over the past ten years.

The expansion of BRICS membership is a solid step for Africa and Global South co-operation. South Africa can use its position as the 2023 chair of BRICS multilateral bloc to advance the interests of African states, under the theme of ‘BRICS and Africa partnership for mutually accelerated growth, sustainable development and multilateralism’.

Ashraf Patel is a Senior Research Associate at the Institute for Global Dialogue (IDG). Mika Kubayi is a researcher at IDG