The US-China Trade War has seen two of the world’s largest economies battle each other through increased tariffs, political speeches and propaganda. While the presence of both countries in international cooperation forums, such as the G-20 summit should imply that there is hope for a quick “cease fire”, the current scenario points at a long, and more importantly, costly war. Economists estimate that the expansion of tariffs in US-China trade, and a consecutive fall in financial markets, could represent a decline of the world’s GDP by 0.6% ($600 billion) in 2021. Even though Africa is not a direct target in the US-China Trade War, the continent is already being affected by its impacts. U.S. tariffs have contributed to drops in commodity prices, local currencies, and major stock exchanges across Africa, shaking investor confidence in the continent. Moreover, the expected slowdown in the Chinese economy will also hinder the exports and government revenues of many economies across the African continent. However, in this scenario where the world’s largest economies are colliding, there are still opportunities for Africa to reap some benefits. More importantly, despite recent initiatives such as the Continental Free Trade Area (CFTA), the impacts of the trade war have exposed many pending tasks for Africa in terms of economic development. These pending tasks are not only preventing the economies of the continent from reaping further benefits from the Trade War, but also hindering their long-term prospects for economic growth and development. The Threat of the Trade War The African Development Bank estimates that the trade tensions could cause a 2.5% reduction in GDP in resource-intensive African countries and a 1.9% reduction for oil exporters by 2021. In some African economies, the fall of commodity prices has affected export values and revenue generation for some governments. This is especially important for countries and governments that rely on the exports of a small set of commodities with non-African partners, including China. Moreover, weak manufacturing sectors, infrastructure gaps, domestic instability and unsustainable economic policies have hindered the economic diversification of many countries in Africa, making them extremely vulnerable to falls of commodity export volumes and prices. Source: CSIS with data from IMF and the African Development Bank.[/caption] The International Monetary Fund (IMF) lowered African growth projections from 3.3% to 3.1% for 2019 due to rising trade tensions, Brexit and slow growth in China, and warned that the trade war could cause a 1.5% drop in Africa’s GDP growth by 2021. A decrease in demand from China could also reduce annual imports from Africa by $75.26. China is Africa’s top trading partner and represented 12% of total African exports during the past 5 years, with raw material representing most of the total exports from Africa to China during the period. While the reliance on China does not seem very large at continental level, some African countries are heavily dependent on China for their exports. Source: Own elaboration with data from ITC Trademap.[/caption] Some of the most developed economies in the continent, such as Nigeria and Morocco have a relatively diversified trade balance in terms of partners, and China does not weight heavily on their export activity. However, countries such as Sierra Leone, Congo and Angola depend on China for half of their exports, with South Sudan being a more extreme case relying on China for almost 100% of its exports. Source: Own elaboration with data from ITC Trademap.[/caption] While some sources point that the trade war might bring new commercial opportunities for many countries, African economies and businesses are not well positioned to obtain great benefits in this scenario. Even though manufacturing companies are relocating their operations outside of China to avoid US tariffs, other regions with more developed manufacturing sectors and more integrated supply chains, such as Latin America and Asia, are better positioned to reap the benefits and attract these investments. South Africa is probably the only economy in the continent with the capacity to obtain some benefits out of the trade war in this scenario, despite reports of Chinese entities approaching other countries such as Nigeria and Ethiopia. Opportunities Despite the daring scenario for many African economies, there are still opportunities to gain some benefits out of the dispute between the US and China. During late 2018, China started to seek further trade integration with Africa. At the Forum on China-Africa Cooperation, both parties adopted a joint statement and a three-year action plan, looking forward to deepening cooperation in various fields, including boosting trade, nurturing the African industry and reinforcing security. China increased its imports of crude oil from Angola and other countries in order to compensate for the decline in import of natural gas from the US. During 2017, ~40% of China’s crude oil imports came from the Middle East and ~20% from Africa. As China seeks to reduce its reliance on the Middle East and the US, China’s proportion of crude oil imports from Africa could increase up to 30%. Additionally, in order to secure deals on crude oil in Africa, China will continue to invest in the continent through FDI, which cumulatively surpasses $40 billion, and increased offerings of loans and grants, such as the $60 billion financing offered during September 2018. This is in line with recent trends in infrastructure funding in the continent, with China representing 16% of the total infrastructure funding commitments to Africa during 2013-2017. Source: Own elaboration with data from the Infrastructure Consortium for Africa (ICA)[/caption] Meanwhile, the continent-as-a-whole is already taking significant steps towards self-reliance and economic diversification. The entry in force of the Africa Continental Free Trade Area (CFTA) earlier this year is a great initiative to boost intra-African trade, economic diversification within the region, and put African countries in a better position to attract investments. The CFTA will provide a framework that will allow investors to enter a market of 1.3 billion people and a combined GDP of $2.2 trillion. The CFTA transition phase alone has the potential to generate welfare gains of $16.1 billion and increase intra-African trade by 33%. Earlier during August 2019, the Southern African Development Community (SADC) signed a protocol on industry aimed at promoting harmonized industrial development policies and strategies in the region and move economies further away from exports of raw materials. Pending tasks: infrastructure gaps and the need for better regulation The trade war has exhibited not only Africa’s level of dependency on China, but more importantly, the many internal weaknesses in the African economy in general. Continental trade agreements and industrial development policies are beneficial, but only to the extent to which African economies can materialize and spread their benefits. Although the African continent shows recent signs of progress towards economic development, diversification and integration, this needs to be supported by addressing the continent’s infrastructure gap and improvement of the business environment to facilitate the entrance into the formal economy in order to ensure that the benefits of economic growth are materialized and spread, and further contribute to the economic transformation of the continent. Despite the reported increase in funding, the continent still has an infrastructure gap of $130-170 billion per year, and an annual financing gap of $68-108 billion. This gap includes continent-wide needs such electrification, access to water and sanitation, information and communication technology coverage, as well as transport infrastructure. The current quality and high costs of infrastructure services in the continent constrains productivity by up to 40% each year and reduces Africa’s annual GDP by 2%. In terms of quality of the business and investment climate, a key factor to assess the ease of entering the formal economy, Africa stands below the world average, as shown by the regulatory performance of North and Sub-Saharan Africa during the past 4 years. Moreover, there are huge disparities among African countries in terms of their regulatory performance; some of the continent’s top performers are well above the world and regional average, while others are still below these thresholds. [caption id="attachment_4952" align="alignnone" width="1162"] Source: Own elaboration with data from World Bank Doing Business database.[/caption] [caption id="attachment_4951" align="alignnone" width="1121"] Source: Own elaboration with data from the World Bank-Doing Business database.[/caption] While external events have an important impact on Africa’s development, the continent is still being hindered by internal struggles. Even in a scenario without a trade war, there would still be plenty to talk about regarding Africa’s development challenges, opportunities, and the substantial progress observed across the continent in recent years. One thing is certain: recent events such as the Trade War and the Brexit indicate that it is no longer “business as usual” for Africa and the developing world as “our country first” policies in developed countries are now changing the status quo of the world economy. Jesus Cazares - Senior Research Associate at Infomineo Sources: Center for Strategic & International Studies – CSIS: https://www.csis.org/analysis/innocent-bystanders-why-us-china-trade-war-hurts-african-economies Bloomberg: https://www.bloomberg.com/graphics/2019-us-china-trade-war-economic-fallout/ Nikkei Asian Review: https://asia.nikkei.com/Economy/Trade-war/China-turns-to-Africa-to-mitigate-impact-of-US-trade-war World Bank – Doing Business: https://www.doingbusiness.org/ African Union: https://au.int/en/pressreleases/20190531/afcfta-one-year-later-road-travelled-and-road-towards-launch-operational ORD – Observer Research Foundation: https://www.orfonline.org/expert-speak/42580-what-does-global-trade-war-mean-africa/ DW: https://www.dw.com/en/can-africa-benefit-from-us-china-trade-spat/a-49389296 UNCTAD: https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2463 The Citizen: https://www.thecitizen.co.tz/news/1840340-5240736-9alqgg/index.html TRALAC – Trade Law Center: https://www.tralac.org/news/article/12934-regional-industry-protocol-on-the-cards-for-sadc.html Thomson Reuters: https://www.reuters.com/article/us-china-africa/chinas-xi-offers-another-60-billion-to-africa-but-says-no-to-vanity-projects-idUSKCN1LJ0C4 African Development Bank: https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/2018AEO/African_Economic_Outlook_2018_-_EN_Chapter3.pdf Brink News: https://www.brinknews.com/africa-has-a-100-billion-infrastructure-problem-whats-missing/ Morocco World News: https://www.moroccoworldnews.com/2019/08/280034/nigeria-morocco-gas-pipeline-ecowas/ ICA – The Infrastructure Consortium for Africa https://www.icafrica.org/fileadmin/documents/Annual_Reports/IFT2017.pdf Qatar Ministry of Transport and Communications: http://www.motc.gov.qa/en/news-events/news/mwani-qatar-investing-somalia%E2%80%99s-hobyo-port The Africa Report: https://www.theafricareport.com/15263/us-china-trade-war-opens-a-market-for-african-rare-earth-suppliers/
Africa has more than 202 million hectares of uncultivated land, equivalent to almost half of the world’s usable uncultivated land. Despite this, Africa suffers from the highest poverty rate in the world with nearly 47.5% of the population living below the poverty line of US$1.25 a day (as of 2008). Poor resource management and improper governance of land have been the main hindrance to unleashing the potential of the agricultural land in Africa. Recently, this untapped fortune attracted the attention of many international and African organizations. The World Bank report on “Securing Africa’s Land for Shared Prosperity” highlights many opportunities that Africa can make use of to achieve sustainable growth and eradicate poverty through scale-up programs and policy reforms. Such reforms are entitled to increase land productivity, boost food security and ensure inclusive economic growth. The 10-Step Scaling Up Program The World Bank suggests a 10-step scaling up program to enhance land reform in Africa based on lessons learned from countries like Brazil, Argentina, Indonesia, and China. “Land governance is a proven pathway to achieving transformational change and impact that will help secure Africa’s future for the benefit of all its families,” says Jamal Saghir, World Bank Director for Sustainable Development in Africa[1]. The program builds on previous experience and adds customized solutions to address specific challenges in African countries, among which are the following: Poor documentation that leads to land grabs by investors Corruption and incompetent administration of land Lack of expertise and need for capacity management Overcoming Challenges Through Reform Implementation To overcome those challenges, and to ensure the reforms serve the purpose of sustainable growth, the steps suggested by the World Bank program include: Securing tenancy rights over individual and public lands Redistribution of land possession, to include the people whose income is below the poverty threshold and deprived majority Improve land governance: enhance transparency, power decentralization, develop information systems and databases to ensure proper documentation and better mapping of lands Adopt technology innovation to enhance efficiency Capacity building: providing training and knowledge transfer facilities for better administration of land Reforms of planning to ensure efficient use of the available agricultural capacity Empower the rule of law to guarantee farmers rights and resolve disputes Implementing these reforms would enable Africa to make use of its land resources to attract investments and achieve higher returns, which will lead to more growth and less poverty in the region[2]. South Africa and Nigeria have started their way through land reforms and below are lessons learned from each. Nigeria's Path Towards Reform Nigeria is the country with the highest population in Africa, 151 million representing 250 ethnic groups as of 2008. Nigeria’s agricultural sector is one of the major sectors contributing to the economy as it creates jobs for more than 50% of the rural population. The country’s total land area is estimated to be more than 910 thousand square kilometers of which almost 80% is usable for cultivating crops and livestock production[3]. 80% of the Nigerian rural population are farmers, however, the percentage of land used from the total land is only 33%. Limited public investment (less than 2% of government expenditures), corruption, need for land law reforms were among the main reasons behind the inefficient use of land in Nigeria[4]. Since land ownership is a major determinant in the use of land for agricultural purposes, the Nigerian government published the Land Use Act of 1978 to ensure land is accessible to all farmers in a fair distribution system. However, many reforms are yet to be implemented in the Act to ensure that it achieves its objectives. Building trust between government and people, and educating the public about the laws, procedures, and reforms are inevitable actions that the Nigerian government needs to consider to enable the country to achieve its mission to be one of the 20 largest economies in the world by 2020[5]. South Africa Land Reform The need for land reform in South Africa has never been more crucial. The country has witnessed inequality in land ownership between the black majority and the white minority for ages. Reforms tried to address this challenge since 1994, but till 2011 reforms could only help in transferring 6.27 million hectares to the white minority, which is equivalent to 7.2% of the land already owned by the white in 1994. This progress is too slow, and South Africa needs to fasten the pace of reforms implementation. The case of South Africa makes it clear that reforms that do not target small-farmer needs will not be so effective in achieving sustainable growth. To ensure successful implementation, the government should involve civil society and provide enough support to farmers. Lately, many international organizations are trying to induce land reforms in South Africa to benefit from the country agriculture resources. Conservation South Africa (CSA) is working closely with governmental agencies to enhance farming practices to maximize productivity and achieve food security within the nation[6]. Sources [1] http://www.worldbank.org/en/region/afr/publication/securing-africas-land-for-shared-prosperity [2]https://openknowledge.worldbank.org/bitstream/handle/10986/13837/780850PUB0EPI00LIC00pubdate05024013.pdf?sequence=1&isAllowed=y [3] https://usaidlandtenure.net/wp-content/uploads/2016/09/USAID_Land_Tenure_Nigeria_Profile.pdf [4] http://www.hrpub.org/download/20171030/UJAR4-10410070.pdf [5]https://openknowledge.worldbank.org/bitstream/handle/10986/13837/780850PUB0EPI00LIC00pubdate05024013.pdf?sequence=1&isAllowed=y [6] https://www.conservation.org/global/ci_south_africa/our-initiatives/food-security-land-reform/Pages/food-security-land-reform.aspx
At the heart of Africa's economic transformation, the African Continental Free Trade Area (AfCFTA), signed by leaders from 44 African nations at the African Union Summit in Kigali, Rwanda, from March 17th to 21st, 2018, stands as a monumental pact. This ambitious agreement aims to unify Africa into the world’s largest single market, promising to revolutionize the Africa Trade Area by enhancing intra-continental trade and economic prosperity. (1) The pact aims to boost intra-African trade by making Africa a single market of 1.2 billion people and a cumulative GDP over $3.4 trillion. The UN Economic Commission for Africa (UNECA) estimates that the implementation of the agreement could increase intra-African trade by 52% by 2022 (compared with trade levels in 2010) and double the share of intra-African trade (currently around 13% of Africa’s exports) by the start of the next decade. (2) (8) Among the AU member states that did not sign the pact are the continent’s two largest economies - Nigeria and South Africa. Botswana, Lesotho, Namibia, Zambia, Burundi, Eritrea, Benin, Sierra Leone and Guinea Bissau are the other member countries which did not sign the pact. (1) (3) (4) Under the CFTA, governments commit to removing tariffs on 90% of goods produced within the continent. The next step for the governments is to ratify the CFTA in their countries within the next 6 months. (1) Objectives of the Continental Free Trade Area Establish a single continental market for goods and services, with free movement of business professionals and investments, accelerating the establishment of the Continental Customs Union and the African customs union. (5) Expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation across Regional Economic Communities (RECs) and across Africa.(5) Resolve the challenges of multiple and overlapping memberships and expedite the integration processes.(5) Enhance competitiveness at the industry and enterprise level by exploiting opportunities for scale production, continental market access and better reallocation of resources. (5) Potential Benefits & Relevant Implications According to a research paper published by the United Nations Conference on Trade and Development (UNCTAD) in February 2018, the CFTA offers many opportunities for sustainable development and economic growth in the African economies. However, not all countries will benefit to the same extent, and the gain of welfare benefits also implicates relevant costs and commitments. (6) Most of the benefits of further trade integration (i.e. welfare benefits from lower import prices, production efficiency and increase in outputs, higher value-added jobs and exports, technological specialization, etc.) will materialize in the long term, while most of the associated costs of adjustment and integration (i.e. loss in trade tariff revenue, local SME’s vanishing in front of stronger competition, adjusting unemployment, required investment in infrastructure, political and regulatory reforms, etc.) will be incurred in the short term. (6) Using the Global Trade Analysis Project (GTAP) computable general equilibrium (CGE) model, UNCTAD has estimated the quantitative effects of the CFTA according to 2 long-term scenarios: a full Free Trade Agreement (FTA) and Special Product Categorization (SPC). (6) A full Free Trade Agreement (FTA) eliminating all tariffs in the CFTA could generate welfare gains of US$ 16.1 billion, at the cost of US$ 4.1 billion in trade revenue losses (representing 9.1% of current tariff revenues). GDP and employment are expected to grow by 0.97% and 1.17% respectively. Intra-African trade growth is estimated at 33% and the continent's trade deficit is expected to drop by 50.9%. (6) Special Product Categorization (SPC) permanently exempts sensitive products from liberalization. In a scenario in which the sector with the highest current tariff revenue would be exempted from liberalization, UNCTAD simulations estimate a welfare gain of US$ 10.7 billion in the long term. Tariff revenue losses are expected at US$ 3.2 billion (representing 7.2% of current tariff revenues). GDP and employment growth are expected to grow by 0.66% and 0.82% respectively. Intra-African trade is expected to grow by 24%, while, Africa's trade deficit only shrinks by 3.8%. (6) UNCTAD also estimates the employment effect of the agreement by sub-sector (Figure 4). The agriculture sector is extremely relevant for the African economies since it employed about 53% of the continent’s labor force in 2016. Governments are worried about possible adverse impacts of the CFTA on the agriculture sector's economic growth, which would massively affect employment across the continent. Even though the largest employment growth rates are found in manufacturing and services sectors, agriculture sub-sectors are also expected to grow (see Figure 4).(6) Costs & Commitments Despite the many benefits this agreement will render, not all the countries are expected to benefit equally from the free trade agreement. While expected average GDP growth is around 1%, some countries are expected to grow over 3%, while some others are expected to contract (Figure 5). Figure 6 shows that, under the SPC scenario, fewer countries suffer tariff revenue losses above 20% compared to the full FTA scenario. (6) It is vital that African countries commit to continue improving their institutional capacities to efficiently tax and redistribute the gains from the CFTA. This includes integrating and harmonizing regulatory measures, eliminating non-tariff barriers to trade and investment, and facilitating the entry into the formal economy. (6) (8) Another key factor to fully exploit the potential benefits of the CFTA is infrastructure. Addressing Africa’s physical infrastructure gap will require $93 billion per year worth of public and private investment. (8) Even though African exports to the world are undiversified and mostly composed of raw materials, Intra-Africa exports (exports between African countries) contain more value-added products. (7) Manufactured goods represented 43% of intra-Africa exports during 2012-2016, while only representing 20% of exports to the rest of the world. Medium and high technology manufactures represented 25.4% of intra-African trade in 2015, but only accounted for 14.1% of Africa’s exports to developed countries and 13.7% of the continent’s exports to the world (Figure 2). (6) (8) [caption id="attachment_4274" align="aligncenter" width="577"] Figure Africa Continental Free Trade Area[/caption] As such, countries with large manufacturing bases and enabling physical and industrial infrastructure, such as South Africa, Kenya, Egypt, Morocco, and Ethiopia are in a better position to gain the expected benefits of the CFTA. (7) Agriculture will also benefit from the creation of a more viable African marketplace for food. Enhanced trade in agricultural products will also promote agro-processing and further sectoral linkages with manufacturing. (8) Even though the CFTA is a great step forward towards economic integration, there is still a long road ahead. African governments must commit to keep working so that the gains from the CFTA are distributed as fairly as possible, making sure no one is left behind, and ensuring that the CFTA becomes a catalyst for sustainable economic development for the continent as a whole. (8) Sources https://www.businessdailyafrica.com/news/Africa-leaders-ink-largest-free-market-treaty/539546-4351888-ubv411z/index.html https://www.aljazeera.com/news/2018/03/african-continental-free-trade-area-afcfta-180317191954318.html https://edition.cnn.com/2018/03/22/africa/african-trade-agreement-world/index.html https://www.reuters.com/article/us-africa-trade/nigeria-keen-to-ensure-africa-trade-bloc-good-for-itself-president-idUSKBN1GX29V https://au.int/en/ti/cfta/about http://unctad.org/en/PublicationsLibrary/ser-rp-2017d15_en.pdf https://www.moodys.com/research/Moodys-African-free-trade-deal-could-improve-regions-credit-profiles--PR_381153 https://www.weforum.org/agenda/2016/05/this-african-trade-deal-could-improve-lives-across-the-whole-continent/
Is the Italy-Africa relationship taking off? Africa has been one of the fastest growing region in the last decade, holding for long periods the highest rate of return on foreign investment than in any other developing region[1]. Despite a recent slowdown in term of GDP growth rate, there are at least three positive trends that are sustaining Africa’s attractiveness[2]: By 2034, Africa is expected to have the world’s largest working-age population (1.1 billion), Households and business consumption are expected to growth, mainly due to the urbanization processes, African economies are well positioned to benefit from rapidly accelerating technological change. This perspective led the African region to receive USD 54 Billion of FDI in 2015[3]. In this context of opportunities, how does Italy position itself, in terms of actual and perspectives footprint? The past Starting since 1882, Italy has been a colonial power as well as other European countries were, although its presence in Africa evolved in a different way and lead to different historical and socio-economics consequences. In the period of maximum expansion, the Italian colonial possessions covered less than 4% of the overall colonial surfaces, including three African territories (Libya, Somalia, and Eritrea) to which would be later added Ethiopia.[4] Since the end of the Second World War and the progressive loss of colonial possessions, Italian presence in Africa went decreasing, especially when compared to other countries, relegating Italy to a secondary role in terms of economic footprint. The present Today, among the WTO countries, Italy is the 7th mayor exporter to Africa and the total value of the exported goods and services exceeded USD 26 Bln in 2014. Italy to Africa export[5] It is worth to highlight how between 62% and 65% of total Italian export to African countries can be attributed to six main product categories, as the following chart shows[6]. These categories include product like: Machinery and mechanicals appliances, including: dishwashing machines; machinery for cleaning or drying bottles or other containers; turbojets, turbo-propellers and other gas turbines; taps, cocks, valves and similar appliances for pipes, boiler shells, tanks Mineral fuels, mineral oils and products, especially including petroleum oils and oils obtained from bituminous minerals (excl. crude) Electrical machinery and equipment: electrical apparatus for switching or protecting electrical circuits, transformers, converters, wires and cables Iron and steel like bars and rods Vehicles and parts: tractors, motor vehicles for the transport of ten or more people, cars, vehicles for the transport of goods Articles of iron and steel: structures and parts of structures, tubes and pipes, etc. Among African countries, the following markets stand out in terms of size and popularity of Italian products: Tunisia and Morocco, given the geographical proximity South Africa, which is believed to hold about 50% of the overall purchasing power of the continent[7] Ethiopia, to which Italy is bound by mentioned historical reason. The following chart shows the recent trends for the top African market, in terms of value of overall value of products imported from Italy[8]. As for direct investment in African countries, Italian outward flows have considerably increased in the last years, as the following charts show. Italian investment flows in Africa[9] This become particularly relevant when compared to other countries flows, especially because Italy showed no divestments in the last years. The African business environment for Italian companies increase its attractiveness thanks to the strong presence and dynamism of some huge operator. The most relevant among them could be ENI, the national oil company, whose footprint is already well established in 14 countries[10], but also expanding in others – how shown by the exploration permits recently obtained in Morocco[11]. But Africa is also where several entrepreneurial Italian success stories took place, like the case of Mr. Gabriele Volpi’ Orlean Invest, major player in the field of logistics in Nigeria, Angola and Mozambique[12]. The future On May 18th 2016, the biggest Italian ministerial conference ever realized about Africa took place in Rome. In the presence of the institutional leaders, a delegation composed by high-level representatives from 52 African countries met the heads of the most important Italian economics and cooperation bodies, to discuss about migrations, economic and socio-environmental sustainability, peace and security.[13] The Prime Minister Matteo Renzi made clear how Africa became the new priority for the Italian foreign policy. Renzi himself addressed to African countries 3 trips in the last two years (Angola, Mozambique and Congo-Brazzaville in 2014; Ethiopia and Kenya in 2015; Nigeria, Ghana and Senegal in 2016)[14]. Happening for the first time since the foundation of the Italian Republic, this circumstance reveals a strong willing in strengthen the bilateral relationships between the “Bel Paese” and the African economics. Antonio, Analyst at Infomineo. Know more about Antonio. [1] Source: http://www.mckinsey.com/global-themes/middle-east-and-africa/whats-driving-africas-growth [2] Source: https://www.weforum.org/agenda/2016/05/what-s-the-future-of-economic-growth-in-africa/ [3] Source: World Investment Report 2016: http://unctad.org/en/PublicationsLibrary/wir2016_Overview_en.pdf [4] Source: http://www.treccani.it/scuola/tesine/centocinquant_anni_anni_di_guerre_e_di_pace/rabuiti.html [5] Source: Infomineo analysis on ITC data [6] Source: Infomineo analysis on ITC data [7] Source. http://www.investireinsudafrica.org/?page_id=1201 [8] Source: Infomineo analysis on ITC data [9] Source: Infomineo analysis on OECD data [10] Source: ENI 2015 annual report: https://www.eni.com/docs/en_IT/enicom/company/integrated-annual-report-2015.pdf [11] Source: https://www.eni.com/en_IT/media/2016/03/eni-enters-into-the-upstream-of-morocco [12] Source: http://www.orleaninvest.com/ [13] Source: http://www.vita.it/it/article/2016/05/18/italia-e-africa-si-corteggiano/139435/ [14] Source: http://www.rivistaeuropae.eu/esteri/esterni/lafrica-priorita-politica-estera-litalia/
This article aims to provide a general insight of the commercial exchanges’ background between Spain and Africa. On this purpose, we will display figures and charts which may enable us to understand the reasons behind the current context, we will also compare Africa with the rest of the world economic areas, as well as Spain with its neighboring countries, and we will try to forecast hypothetical trends for the long term. To start with, in the recent years, Spain has experienced one of the most dramatic economic crisis in his history. On account of this context, Spanish products have seen themselves forced to explore new markets, apart from the existing ones. If we analyze the historic background, Spain, due to its privileged geographical position, has always been regarded as the main bridge between Europe and Africa. Since the Arab occupation in 711 a.c., the Iberian Peninsula has been a key strategic location for commercial and cultural exchanges between both continents. However, after the colonization and decolonization of Africa, due to the fact that Spain did not receive as much territory as other European countries, such as France, UK, Portugal, or Belgium, the Iberian Country lost several influence in the relationships with the continent, both political and commercial. Nowadays, Spain has overturned this situation, as it has increasingly been gaining influence in the continent. Following with this, the Spanish export figures to Africa are remarkable in their growth rate and they are on their way of turning the continent into an engine of foreign trade, given its shown potential. So much so that, Spain is currently the 4th commercial partner in Africa, as well as the main partner of some African countries, highlighting Morocco and Algeria, and is addressing other important markets in the continent, such as Nigeria, South Africa, Angola, and so on. Figures speak by themselves: in the last 15 years, exports from Spain to Africa have more than tripled. Except for the 2008-2010 period, coinciding with the hardest episode of economic recession in Spain, the growth rates have been impressive. Moreover, in 2014, among the top 10 destinations of Spanish Exports in the continent, there were five countries located in the Maghreb Region. What´s more, Algeria has recently surpassed South Africa, which, until last year, had been leading this ranking: Analyzing the ranking, it seems obvious that the Maghreb Region countries, due to their proximity, occupy the leading positions. On the other hand, if we break down each of the countries´ recent record, we can appreciate different tendencies, as each of them are involved in different contexts. For example, Libya has recently suffered from a civil war, which has paralyzed his economic development. Yet, all the top 10 countries have increased their purchases to Spain in the last 15 years, though at different levels. In the second place, if we check the origins of the sales, France was the principal exporter to the continent, recording 20% of the EU exports to Africa in 2014, whereas Spain, occupied the 4th position of the ranking with 12% of the exports. Once again, if we break down each of the countries´ recent record, we can notice how remarkably Spanish exports in the continent have grown compared to other countries, surpassing the United Kingdom and Netherlands. Also, France has been leading this ranking during this period, getting higher export figures than the rest of the EU members. But, what is the magic force pushing this new trend? Experts agree that, it derives from the fact of the unstoppable growing medium class in Africa, matching the needs of internationalization of the Spanish Economy, what is actually allocating the Spanish goods in the respective African Markets. There are other reasons upon the table: the improvement of the legal and political frameworks, allowing most of the African countries to benefit from more transparent, economically safer and less state-owned economies, is undoubtedly playing a positive role in their development. However, despite what figures indicate, the relevance of Africa, among the different geographical areas, still remains low. Although, on the other hand, the share of Spanish exports in Africa has experienced a slight increase, compared to other economic regions worlwide. Besides, in 2014 the share of exports constituted 3.3%, whereas in 2000 they did not surpass 2.5%. In addition, this difference is more noticeable when looking at non-European exports, being an 11.5% in 2014 compared to a 9.4% in 2000. Africa has become the world's third largest region by growing purchases from Spain, after the Middle East and Asia. Sub-Saharan Africa received more than a quarter of Spanish sales to the continent in 2012 and the first semester of 2013 received almost 23% more than in the same period of 2012. As a matter of fact, Africa has recently surpassed Latin America (including Brazil) in total volume of exports. This is quite astonishing if we bear in mind the historic and cultural ties which have linked both locations for centuries. Regarding the composition of the Exports, Capital Goods are the main traded items. In contrast, during the last ten years, we have seen how other items have been increasingly wining more relevance, giving special emphasis on manufactured goods and energy products, which have seen their sales duplicated within this gap of time. This scenario implies a dynamic transformation of the African Economies. To conclude, this scenario is likely to continue in the short run, as a result of a combination of certain positive facts, which we will herewith break down: • The positive macroeconomic perspectives forecasted in most of the African Countries, as a consequence of a progressive transformation to more industrialized and service oriented economies. • The Spanish Economy, weighed down by the economic crisis, is giving signals of recovery. • The previously mentioned growing class in Africa, accounting 400 million people in the recent years. • The unstoppable progress of most of the African Countries towards more transparent and democratic societies. • The willingness of Spanish companies to address unexplored markets. • Economic Liberalization of certain African Countries, removing critical barriers such as import taxes. Javier Solar Irazabal, Analyst @Infomineo. Know more about Javier