Trend: Africa's growth potential
A trend indicates a direction of change in values and needs which is driven by forces and manifests itself already in various ways within certain groups in society.
The African continent’s population is projected to reach 1.1 billion people by 2040 and will become the largest workforce globally, mainly concentrated in urban areas. With its ‘Agenda 2063’, the African Union has established an ambitious strategy for a prosperous Africa based on inclusive and sustainable development. Agenda 2063 is a strategic framework for the socio-economic transformation of the continent. It builds on, and seeks to accelerate the implementation of previous and current continental policy initiatives for growth and sustainable development. This includes its potential as a digital technology hub (i.e. 'Silicon Savannah'). The start of the African Continental Free Trade Area (AfCFTA) in 2021, (a flagship project within Agenda 2063), is a huge milestone towards accelerating intra-Africa trade and strengthening the continents position in the global economy.
Increasing global interest in the African economy signals the growing attention of several economies beyond a desire to get access to resources (critical raw materials), but to infrastructure (increasingly digital infrastructure), agribusiness, retail and services. Several global player’s interests culminate in Africa: Europe, China, the US, India, Turkey, the Gulf, Japan and others are all supporting the development of Africa. Africa needs to utilize the various investments and support initiatives in order to transform the investment and support into the sustainable development of their own economy.
This Trend is part of the Megatrend Expanding influence of East and South
Developments happening in certain groups in society that indicate examples of change related to the trend.
Regional integration as a lever to one's own empowerment
In 2015, the African Union launched their Agenda 2063, laying out their ambition to transform Africa into a global powerhouse. In January 2021, the African Continental Free Trade Area (AfCFTA) project became operational; it is one of the key levers of the Agenda 2063 strategy. AfCFTA promises a EUR 1 billion consumer market to African businesses and more than EUR 3.3 trillion in investment in consumer spending by 2030. If implementation challenges are tackled and overcome, it could transform the African continent’s economic prospects.
The Russian aggression in Ukraine has provided an additional push to its implementation and the development of regional value chains. It is perceived as a way to improve African countries resilience from the effects of shocks in other parts of the world, and the competitiveness of their economies.
Africa's future through foreign direct investment
Historically, foreign direct investment in Africa has been almost completely aimed towards natural resource extraction, but since 2000, global investors are increasingly focusing on telecommunications, especially digital infrastructure, agribusiness, energy, retailing and services. Improvements in governance coupled with demographic gains from the large and growing young population in Africa, promise growth for the future. A diversification of the investment flow and using it for structural transformation will be central to Africa’s future economic success.
The geopolitical playground of global interest
The interest of global powers in Africa has been growing since the cold war. Europe is promoting democracy and economic growth and trying to counter irregular migration through the Africa and Europe Joint Vision for 2030, and AU-EU partnership. The EU has launched the Global Gateway as a strategy to boost smart, clean and secure links in digital, energy and transport and to strengthen health, education and research systems across the world.
The US is building its relationship with Africa through aid and security assistance. China is providing infrastructure assistance and is increasing trade via the 'Belt and Road Initiative or BRI' (i.e. its global infrastructure development strategy), and the China Africa Partnership.
India and Japan are offering an alternative to China’s BRI engagement via the Asia-Africa Growth Corridor, which is based on joint infrastructure projects in the Indian Ocean and a sub-regional cooperation framework. Turkey is strengthening is economic, military and diplomatic influence on the African continent. The Gulf countries are significantly investing in the Red Sea and Horn of Africa as their direct neighbourhood and for geostrategic interests. Russia’s interest in the Middle East and Africa is growing to gain allies in international policy, as well as an approach to challenge Western Europe by fostering instability, disrupting elections, exporting arms, fuelling migration politics, etc.
Africa’s resource power
Africa hosts 25% of the natural global biodiversity, and 30% of the world’s mineral resources, but it has a strong resource potential that goes beyond natural resources. Africa has a young population, in contrast to the ageing European and Chinese population. A good skills base in various regions provides huge workforce potential. With two thirds of its population growth in urban areas, there is strong potential for an emerging creative class, and innovation hubs, such as the ’Silicon Savannah’ in Kenya’s capital, or Kigali, Rwanda.
Africa has a huge potential for renewable energy sources, such as solar, wind, ocean energy, green hydrogen, etc. This potential could be used to establish an innovation platform for sustainable technologies and provides a locational advantage for energy intensive industries. Africa’s rich natural resources offer a vast pool of possibilities for the development of a vibrant bioeconomy. Enabled by biology-based innovation, it could drive economic growth, and climate-proof food, health, energy and industrial goods production for a growing, urbanizing population.
Initiatives strive to increase local participation in the added value of using products based on Africa’s own biodiversity and genetic resources. Africa owns critical raw materials and strategic resources that are crucial for digitalisation and green technologies, like battery minerals such as Cobalt manganese, graphite, copper. The African Mining Vision aims to increase local processing, value addition and resource-driven industrialisation. It is crucial for African economies to generate wealth from their resources for their own population by creating jobs and incomes for local populations and avoid the outflow of benefits to foreign economies. Digitalisation has the power to structurally transform regional development. The African Continental Free trade Area has a huge potential to promote growth and development in the region through local production capacity for Africa.
What might this trend imply, what should we be aware of, what could we study in more depth? Some ideas:
- How can the EU help Africa to manage a green sustainable economy that mitigates climate change, and brings well-being to its population?
- What policies need to be improved to gain a fair trade relationship and economic collaboration between the EU and Africa?
- What if Africa and the Global South regionalise their economy, e.g. based on technology innovation ('Silicon Savannah'), or based on a bio-based economy with value-added local processing steps, and play out their autonomy?
- How can Africa mitigate their countries’ ICT dependence? Can Europe support the creation and enforcement of transparency mechanisms for global ICT companies?
- What if African countries align with Europe, but also with other powers with conflicting values and interests?
- What if African countries renege on their climate policy commitments, or are not able to implement them? What would this mean for Africa's influence on the global stage, for its economy, its vocal dissident community?
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