Brittany Davis // 14 March 2019

Increasing globalisation has had many effects on international trade, and Africa is no exception. In Sub-Saharan Africa in particular, economic growth increased to 3.1% in 2018 and is projected to continue rising throughout 2019-2020. However, there are still many challenges that face the continent as a whole. Public debt has increased and the population still vastly outnumbers the number of available jobs.  Africa also has challenges across the continent related to migration, stability and a lack of investment.

The EU is the world’s largest importer for over 100 countries and is the largest single market, so an increase in investment and trade with Africa will open introduce the continent to many more markets.  Europe is Africa’s main trading partner and investor, so the two regions are increasingly interdependent. An increase in trade and economic relations between Africa and the European Union would help ease extreme poverty on the continent and aid economic growth through international trade. EU Investment in the African economy and the African population is key for growth within the continent, and might help in addressing migration issues from the EU’s perspective.

Although relations between Europe and Africa began as a colonial relationship, both regions have been making steps towards a partnership on equal grounds. At the Africa Summit on 9 January, 2019, ECR Group Co-chair Syed Kamall observed that “Africa is a continent of the future…We [Europe] must stop seeing this relationship as one of providing development aid and financial support or based on colonialism of the past”.  As the second fastest growing – yet one of the least developed – regions in the world, it is logical for the EU to invest in the region to foster development to help with migration, political stability, and growing local economies.

To re-affirm their commitment to the partnership, the EU and AU held a summit on 21-22 January to review the African Continental Free Trade Agreement (AfCFTA) –specifically the political and economic aspects. The AfCFTA states that the EU will provide €50 million of support throughout 2018-2020 to develop implementation strategies for member countries, establish an African trade observatory, and conduct policy analysis on trade within the continent. This analysis will create ‘strategic dialogue platforms’ for lowering barriers to trade and aiding African harmonization on the classification of goods, standards, and regulations. This is projected to increase economic investment and growth within the continent. Ministers at the summit agreed on the mutual benefits of the regional integration, improved investment climate, and cooperation that will come from AfCFTA.

AfCFTA is expected to act as a trade equalizer between Africa and the EU as Africa undergoes industrial, environmental, and digital revolutions. The bloc is expected to remove tariffs on 90% of goods and address other non-tariff barriers to trade within the African continent. Lowering of the trade barriers through AfCFTA will lead to a genuine partnership between the two regions, as free trade is the most effective way to increase both investment and job creation within countries. Once ratified, AfCFTA will be one of the largest trading blocs in the world, and will help to stabilize Africa’s food security and thus help with the continent’s food security.

Overall, AfCFTA is expected to be extremely beneficial for growth and development in Africa. AfCFTA is projected to favour SMEs, which provide 80% of jobs within the continent. Lowering of trade barriers will bring these SMEs into new markets, and allow for an increase in jobs and wages. This will also increase trade between African countries, and allow large multi-national corporations to enter the countries to increase jobs, technology, innovation, and add capital into local markets.

The main issue is the large levels of disparity within the African continent between countries – for example, Nigeria and South Africa are much more developed than the Democratic Republic of the Congo and Rwanda. Additionally, many African economies are agricultural, which could be problematic for family-owned farms in low-income countries who are competing with large business-owned farms in high-income countries or foreign suppliers. There are also humanitarian and environmental concerns that come from the need to cut costs to compete with the large corporations. These are all valid concerns, however they can all be managed with policies – both on the EU side as well as within individual countries. Policies that protect labourers, the environment and encourage healthy amounts of competition and diversification will need to be put into place and carefully implemented.

The European Parliament has also been working on the ‘New Africa – Europe alliance for sustainable investment and jobs: taking our partnership for investment and jobs to the next level’ proposal, currently in the preparatory phase in the European Parliament. The proposal outlines a plan for the EU-Africa economic agenda based on five main parts: boosting investment through job creation and the private sector, investing in the population through improving technical and vocational education, strengthening the business environment and investment climate by an increase in EU support, maximizing the potential of economic integration and trade by supporting connectivity infrastructure and strengthening partnerships, and listing Africa as a priority region for external investment funds. AfCFTA is a major part of this, as the EU plans to invest in the connectivity infrastructure between Europe and Africa with EU industries.

Currently, population growth is larger than the job growth in almost all regions of Africa except the southern part, which is a large cause of migration. It is also the only region world-wide where the working-age population is expected to continue to grow past 2035.  An effective alliance is crucial in the creation of a strategy to control the migration occurring out of Africa and into the EU, which is a top concern of EU citizens.  Although an increase in investment can help slow refugee migration, it is unlikely that it will stop migration of the middle-class population. That being said, investment in the population can ensure that migrants have skills and training to maximize their potential to contribute to both their country of origin and their new country.

Migration of refugees has been an issue that the EU has struggled with since the migration crisis in 2015. Leaders of both the EU and the AU came to the conclusion that the best way to manage migration and mobility is to boost the economy at the country of origin to create jobs and growth. Enhanced relationships and partnerships between the two regions can help deal with the root problem of refugee migration, as well as managing borders, responsibility for return, readmission, and reintegration. AfCFTA aims to increase economic investment, as well as investment in the population via education and improved political stability. This is expected to create ten million jobs within the next five years to help match the population growth occurring within the region.

The Africa – Europe Alliance for Sustainable Investment and Jobs views the private sector as the area with the greatest potential for return on investment for the EU. Investment in the private sector creates the most jobs and growth, which is of particular interest for both the AU and the EU. Above all, investment in the population will lead to growth within all sectors. This will also help development within Africa and its economies. Within the Alliance, the EU will support education and vocational skills development for the African population within sectors with the most potential for growth. Development of African economies will benefit trade, which benefits value chains within African countries as well as between the AU and the EU.

The opinions in this article belong to to author only and are not necessarily representative of EPICENTER or its member think tanks.