Despite astounding economic growth rates and significant improvements in Africa’s participation in global value chains, the overall picture in many African countries remains one of dependency on raw materials exports and finished-product imports.
The resurgence of protectionist sentiments in both developed and developing countries in the context of the global economic crisis poses a further threat to free trade and universal market access policies and endeavors. In an increasingly interconnected world, no country can realistically afford to be on the periphery when it comes to integration into global value chains.
At the 14th International Economic Forum on Africa hosted by the Organization for Economic Development and Cooperation Development Center on Oct. 6 in Paris, Devex spoke to OECD representatives, African decision-makers and private sector representatives to explore how the international community could best help increase and upgrade the continent’s access to global and regional markets.
Below are six key recommendations that emerged from our conversations.
1. Launch a strategic international dialogue on implementing the African agenda.
During the forum, the African Union Commission and the OECD signed a memorandum of understanding aimed at sustaining high-level dialogue on a pan-African agenda of integration and transformation. In addition, the OECD Development Center launched its Africa Action Plan, which looks at how to implement the African agenda by building on the center’s partnerships and activities with member countries and institutions in Africa.
According to Henri-Bernard Solignac-Lecomte, head of Europe, Middle East and Africa at the OECD Development Center, the MoU and the action plan are “the recognition that there is an African agenda and that it needs to move forward.”
“It’s the starting point of the dialogue we want to have with pan-African institutions [on] how to enter global value chains in a way that is beneficial for African economies and wage-owners [and] looking at what can we learn from the Malaysias, Chiles, Australias or United States’ of this world," he said.
However, further efforts are needed to effectively engage the private sector in this dialogue.
“The private sector is made up of very pragmatic people — so, if you want to catch their interest, international fora need to move away from theoretic discourse towards more interactive and solution-based discussions,” Mohamed el Kettani, president of the Attijariwafa Bank, told Devex.
2. Explore ‘niche’ sectors and comparative advantages at national level.
The most important precondition at national level for improving African competitiveness, el Kettani noted, is for a state to have “a strategic vision” for its economic future and to identify the sectors where the country has the “highest comparative advantages in the global value chains in order to allow for the private sector to engage with investments.” He highlighted his own country Morocco’s comparative advantage in the production of aeronautical equipment, a sector in which the North African country has become a credible competitor on international markets.
This argument was echoed by Kako Nubukpo, Togo’s minister to the president in charge of long-term strategy and public policy evaluation, who said that African countries could “position themselves on product ranges that Asian markets are slowly but surely abandoning due to the emergence and extension of a middle class among their populations.” Nubukpo gave the successful example of the shoe manufacturing industry in Ethiopia, modelled on the Asian experience in this sector.
Solignac-Lecomte also stressed that the need to diversify production does not always imply moving away from natural resources exports: it may simply involve a “strategic diversification” within the sector by exploring the country’s comparative advantages.
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“The example of Chile’s exports moving from copper to pulp to salmon fishing and — to the great despair of the French nation — even to wine, is exemplary in that sense,” he said. “The key is to avoid dependency on one single product.”
3. Address access, financing and capacity gaps through innovative partnerships.
“You cannot industrialize a country and make it competitive on regional and international markets without addressing three key pillars for industrialization: energy and infrastructure problems, access to finance and human capital,” el Kettani pointed out.
This, he said, can only be done through innovative partnerships.
“We are, for example, on the eve of launching the ‘Afrique, Ca Compte’ (Africa Counts) initiative — an infrastructure investment fund of several billion dollars, mobilized by the African Development Bank in order to address Africa’s infrastructure financing needs, estimated at $100 billion a year,” el Kettani revealed.
He further characterized access to finance in Africa as vital for small and micro enterprises or individual entrepreneurs.
“In Africa, the percentage of people holding a bank account is on average only 8 to 15 percent,” el Kettani said. Multilateral banks and institutions, he explained, have all too often focused on supporting the big economic players and only recently started working with private sector actors such as his bank in order to strengthen SME development.
This is also true for Africa’s human capital. According to el Kettani, “the public sector alone cannot shoulder the responsibility of providing access to quality education and training for all.” Both the national and international private sector need to be involved — not least through their ability and interest in making valuable investments in the area of vocational training.
In his native Morocco, for example, the private sector — in collaboration with international and private universities — helped the government elaborate a training strategy to respond to the need for 10,000 qualified engineers per year to make their offshore activities competitive on international markets.
“We need to listen to the private sector when it comes to assessing human capital needs and diversifying labor market skills,” el Kettani said. “Public education policies need to be reoriented towards sectors where Africa has significant needs, such as in the fields of manufacturing, mechanical and electrical engineering, as well as tourism.”
And in his opinion, the international development community has not done enough in this area.
4. Strengthen regional integration by retaining a global outlook.
African countries need to recognize and maximize the potential of their regional markets, not least because they are generally a lot easier to access than international markets. However, one key question remains for Solignac-Lecomte.
“International economic players are already seeing the immense potential of tapping Africa’s market, but will Africa be able to tap its own market?”
Most experts we spoke with recognized that European Union support in the form of knowledge transfer and technical assistance has an added value in this field, due to the EU’s own integration history. Solignac-Lecomte cautioned, however, that such support should not be limited to strengthening supranational institutions, but focus instead on “eliminating trade barriers among neighbor countries,” as it had successfully been done in recent years through the East African Customs Union and the establishment of the Common Market in 2010.
Regional integration must avoid potential incoherencies between regional and international trade rules and frameworks, and Solignac-Lecomte sees a major challenge here.
“Finding African champions for reciprocity in trade relations, in order to foster competitiveness, with a farsighted approach to regional integration is a key challenge we need to work on,” he said.
“We need to listen to the private sector when it comes to assessing human capital needs and diversifying labor market skills.”
— Mohamed el Kettani, president of the Attijariwafa Bank5. Gradual integration into international markets for ‘win-win’ relations.
Nubukpo explained that key to Africa’s insertion into global value chains is that it is done "in a phased and equitable manner, to allow African countries to gradually prepare their economies for the multiplicity of new ‘shocks’ they will be exposed to."
In that context, the minister welcomed the EU’s “Everything But Arms” initiative launched in 2001, which gives least developed countries such as Togo full and nonreciprocal duty and quota free access to the EU for all their exports with the exception of arms and armaments.
This is however not the case for most of Togo’s neighboring countries, the minister said. As low- and middle-income countries, they will ultimately have to comply with the World Trade Organization rule of reciprocity — the opening of their own markets to foreign imports.
"Of course, the worst for Africa would be to close its doors to any foreign imports, as we would risk not gaining in productivity and competitiveness, and ultimately losing out in a globalized world," said Nubukpo. “Rather — as in the case of its partnership agreements with the EU — Africa should be granted the right to phase its entry into reciprocity.”
This implies looking at what sectors can be opened up immediately to international competition and those that would temporarily need to keep a certain level of protection.
Simultaneously, the international aid community should help African countries bring their production capacities up to speed — both in terms of the quantity and quality of their products — in order to meet international standards and compete with foreign products.
The EU in particular could support African countries in their efforts to meet EU sanitary and environmental norms. For example, Nubukpo mentioned how certain products from African countries have had difficulties entering the European market due to the level of pesticides measured by the competent EU authorities. To date, many African laboratories are ill-equipped to undertake these required actions and the minister called for increased EU support in this area.
6. Define a new role for aid to facilitate connectivity and knowledge transfer.
“Aid is not dead, but it needs to change course,” Solignac-Lecomte said. At the 4th High-Level Forum on Aid Effectiveness in Busan in 2011, the international development community agreed to move from aid effectiveness to development effectiveness by promising to focus their aid on facilitating the creation of “global partnerships” and recognizing developing country governments, the private sector and civil society as full partners in development.
But have donors kept their promises?
“We still need to work on changing minds when it comes to the relation between for-profit and not-for-profit actors,” el Kettani noted with a smile. It’s thus time to move away from attitudes of rivalry and mistrust toward a proactive search for collaboration and complementarity.
Indeed, aid could take on a new role as a neutral catalyzer and facilitator of development, with cooperation programs refocused to bring the right actors together to exchange knowledge and expertise, without losing sight of the end goal of poverty alleviation.
As a starting point, this implies ensuring Africa's connectivity: not only by financing the physical infrastructure needed to bridge the digital divide, but also, as mentioned by el Kettani, by lifting the remaining barriers to allow for the potential of the Internet to be maximized as a tool for “democratizing access to knowledge,” notably by making access to quality online education and learning truly universal.
Devex was a proud media partner of the 14th International Economic Forum on Africa hosted by the OECD Development Center in partnership with the African Union. Stay tuned as we roll out news and interviews from the forum, have your say online via the forum's online discussion, or join the conversation on twitter using the hashtag #AF14.
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