It is becoming increasingly inevitable that President Trump will take bold and potentially disruptive actions regarding the US/Africa trade relationship.
The window of opportunity to explore alternative avenues is narrowing. The possibility of terminating preferential trade agreements under the American Growth Opportunities Act (Agoa) or introducing tariffs detrimental to African exports is no longer a hypothesis—it is a looming reality.
Trade volumes under Agoa skyrocketed from $17 billion in its inaugural year to $80 billion in 2008, only to plummet to $9.3 billion by 2023, as noted by the Institute for Agriculture and Trade Policy.
This decline can been attributed to reduced oil exports, inadequate trade diversification, country suspensions, and heightened global competition.
Nonetheless, Agoa is critical to some none-oil exporting countries. Overall, combined two-way trade between Agoa beneficiary countries and the US exceeded $46 billion in 2022, with American imports surpassing exports by $13.5 billion.
Agoa beneficiaries exported $30 billion worth of goods to the US that year, with $10.2 billion traded under duty-free preferences. Any tariffs would be consequential in some countries that have integrated their production into the US value chains.
However, it is not all doom and gloom. According to Afreximbank’s Africa Trade Report, in 2023, intra-African trade saw a more significant rise, growing by 7.2 percent to reach $192 billion. This increase brought intra-African trade to 15 percent of the continent's total trade, up from 13.6 percent in the previous year.
Despite these gains, intra-African trade remains relatively low compared to other regions. In 2022, it accounted for about 17 percent of Africa's total trade volume, whereas intra-regional trade constituted 51 percent of exports in North America, 49 percent in Asia, and 69 percent in Western Europe.
The African Continental Free Trade Area (AfCFTA) has promised to bolster intra-African trade by reducing tariffs and harmonising trade regulations among member countries. It has the potential to increase intra-African trade by over 50 percent by the end of 2025 and could add $450 billion to Africa's GDP by 2035.
The continent could do even better if it seeks to intentionally resolve the raging conflicts to offer development a chance. The resolution of conflicts is paramount, as it will create a stable environment conducive to economic growth and international investments.
Improved security adds value by seamlessly moving people and goods throughout the continent, thus fostering trade. A stable and secure environment will not only protect existing industries but also attract new investments.
As trade barriers diminish and infrastructure improves, the efficiency of intra-African trade will undoubtedly rise, creating a robust economic landscape. Security gives peace and stability a chance.
By improving security, we can ensure the seamless movement of people and goods across the continent, thereby enhancing trade and economic activities. A stable and secure environment not only protects existing industries but also attracts new investments, fostering a sense of safety and reliability crucial for sustained development.
Moreover, the discussion on adding value to strategic mineral resources last December in Addis by the United Nations Economic Commission for Africa (Uneca) should move into action. This will not only create new revenue streams but absorb the large unemployed youth in Africa, hence realising the much-awaited African structural changes.
By focusing on value addition, African nations can transform raw materials into finished goods, which will fetch higher prices on the global market and strengthen local economies. With this approach, the continent can significantly reduce its dependency on exporting unprocessed minerals and instead develop industries that can provide jobs and skill development opportunities for the youth.
This structural change is pivotal for the continent's economic sovereignty and can lead to sustainable growth, ensuring that Africa's vast resources are utilised for the benefit of its people.
For Africa to foster competitiveness, decrease reliance on aid, and bring prosperity to its people, the continent must embrace productivity improvement centers and leverage emerging technologies to usher in the Fourth Industrial Revolution. By establishing centres of excellence focused on enhancing productivity, African countries can cultivate a culture of innovation and efficiency.
These centers can provide training, research, and development support, helping local businesses adopt advanced technologies and modern practices.
Moreover, embracing these technologies will enable African countries to build resilient economies capable of withstanding external shocks that today undermine its prosperity. Enhanced productivity will lead to increased exports, reduced import dependency, and improved trade balances.
In fostering a tech-savvy workforce, African nations can also attract foreign direct investment, as investors seek destinations with a skilled labour pool and a conducive environment for business growth. Ultimately, the combination of productivity improvement centers and emerging technologies will pave the way for sustainable development, economic diversification, and inclusive growth.
By harnessing the potential of the Fourth Industrial Revolution, Africa can transform its economies, reduce aid dependence, and achieve lasting prosperity for its people.
The writer is the Ambassador to the Kingdom of Belgium and the European Union
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