Africa's Economic Hinrance

Africa's Economic Hindrance

International trade is a vital part of any nation’s economic success. It allows the government to collect revenue from tariffs, provides jobs, and builds strong relationships with other countries. For Africa, however, it has been nearly impossible to find a niche in the global economy until just twenty years ago when many governments signed the Abuja Treaty, a long-term plan committing them to building a stronger future for Africa (ICTSD). Africa’s lack of foreign exports costed the government hundreds of thousands of dollars in the years before 2010, but Africa’s revenue has been seeing more growth thanks to the government’s efforts to establish relations with the US.

Africa’s political structure and economy were heavily influenced by European colonization during the nineteenth century. Africa was subjected to European goals, including building a trade network that had Africa exporting commodities such as oil and diamond to Europe (Trace).

Africa still relies on this commodity based trading system today, which makes Africa’s market very narrow and volatile. Commodities are not a reliable export good because their income depends largely on the outside demand. Moreover, government does not incentivize merchants enough for Africa to compete globally, even on the small commodity market. For example, in the US, sellers are provided export subsidies: sums of money granted by the government to promote trade and competition. In Africa, exporters do not receive subsidies, so they do not have the same edge that allows US merchants to put a low price tag on their goods. European countries are also reluctant to lower export subsidies for their own products, which makes it extremely difficult for African traders to profit. The US and Europe could reduce export subsidies for a short time in order to give Africa a chance on the market, however, these countries seem relucatant to do so. Another major concern is “tied-aid,” a relationship which largely diminishes the effectiveness of aid that Africa receives. Africa receives billions of dollars for disease, disaster relief, etcetera from other countries such as the US (ecasurv). The catch is that Africa must return this favor by purchasing that country’s goods. These goods are imported on an uncompetitive market, so the prices can be hugely inflated by the exporting country. Tied aid obliges Africa to still purchase these goods, decreasing their value by 25 to 40 percent because of the steep costs (ecasurv). 

Africa suffers these disadvantages because of the economic structure it was built on. The development of a stronger trading system is the first step to reintegrating Africa and is key to facilitate more exports. Africa’s closed-off past still stands today, so Africa trades almost entirely domestically. Recently, however, the African government has been taking large steps towards achieving the goal of rebuilding Africa’s system to promote competition and international trade using Regional Economic Communities, (RECs) of which there are currently eight. The responsibilities of RECs are to mediate trade and work with other governments in order to boost the progress of the continent through economic growth and social development (UN). The RECs provide the overarching framework for Africa’s new trading system. This system aims to organize a more encouraging and prosperous economic environment by ultimately creating a Continental Free Trade Area, constructed by combining all eight RECs into one large market (ICTSD). This area would decrease domestic trade because all businesses would be trading on essentially one marketplace, effectively forcing competition and the creation of new markets.

Though the government is taking the necessary baby steps towards economic success, the road ahead is still long. Even if all the African government's can collaborate to create the CFTA, it will be a slow road to success before Africa can escape from its own past and find its place the new world as a global supplier.

Works Cited

    “Africa Trade Statistics.” Africa Trade Statistics, www.trade.gov/dbia/africa-trade-stats.asp.

CHAPTER 6. REGIONAL INTEGRATION IN AFRICA, www.fao.org/docrep/004/y4793e/y4793e0a.htm.

Economic Report on Africa 2004: Unlocking Africa’s Potential in the Global Economy. United Nations Economic and Social Council, 12 May 2004, ecasurv2004.doc.

“OSAA, Africa, UN and Africa, United Nations and Africa, Special Adviser, UN, United Nations, NEPAD, African Union.” United Nations, United Nations, www.un.org/en/africa/osaa/peace/recs.shtml.

Settles, Joshua Dwayne. “The Impact of Colonialism on African Economic Development.”Trace: Tennessee Research and Creative Exchange, trace.tennessee.edu/utk_chanhonoproj/182.

“The Continental Free Trade Area: What's Going on?” The Continental Free Trade Area: What's Going on? | International Centre for Trade and Sustainable Development, 28 Oct. 2014, www.ictsd.org/bridges-news/bridges-africa/news/the-continental-free-trade-area-whats-going-on.