As we have seen over the past few years, the 2008 financial crisis in the U.S led to an economic crisis within the E.U. In December 2008, E.U. leaders met and agreed on a €200 billion stimulus plan to help boost European growth following the global financial crisis, but clearly this did not help as Spain, Italy, Portugal, Ireland, and Greece are still struggling to reduce their budget deficits. After these countries reported a sovereign-debt crisis and sent shock waves throughout the eurozone, the continent’s leaders were at odds about best solutions and a way forward.
Looking at the Europe
an Union, what lessons can Africa learn about forming an economic union, building strong economies, and forming unified leadership?
With its 54 fully recognized sovereign states, Africa is one of the world’s most populous continents, with more than one billion people. Having struggled to free itself from colonialism, Africa now seeks to create a new image through global trade, and most importantly through intra-Africa trade, with Africa’s trading blocs playing a key role. If this continues, the continent’s economy is forecasted to grow by more than 10 percent annually in the next 10 years.
The eurozone debt crisis can teach Africa significant lessons about increasing trade within Africa itself. The European integration model can be used by Africa in establishing a one-currency continent. Currently there are great speculations on formation within Southern African Development Community (SADC) countries to allow access and usage of the same currency. The South African rand in Zimbabwe, Lesotho, Swaziland, and Namibia is an example of this type of slow currency integration.
Some of the significant things that have made the European integration a success are the treaties, laws, and regulations that govern the economic union. For Africa to create laws and regulations that promote free trade between its countries, key trading blocs like the African Union, SADC, the Economic Community of West African States, the Common Market for Eastern and Southern Africa, and the Southern African Customs Union will have to constructively collaborate to review and establish new rules and regulations encouraging increased intra-African trade. They must also ensure that African countries minimize raising household and government debt levels, trade imbalances, structural system problems, and monetary policy inflexibility, which are the major causes of the current EU economic meltdown.
To ensure that intra-regional trade is beneficial, African countries will have to focus on exporting products that gives comparative advantage. For example, countries such as Botswana and the Democratic Republic of Congo are principle exporters of copper and diamonds, and thus can increase the export of these goods to other countries. Africa is still a large exporter of agricultural products, but imports many of its manufactured products. The growth of the continent can be better achieved through diversified economic structures. Though it is in a recession, the European economy is still strong, diversified, and has competitive industrial structures. Its manufacturing sector represents one out of every four private-sector jobs.
Just like within the eurozone, African leaders are struggling with regional integration for supporting the continent’s economic development. To increase trade between African countries, regional economic integration of free trade must be established between the countries. The African Union, working with all the continents six key trading blocs, must spearhead Africa’s development and integration. The Programme for Infrastructure Development in Africa is playing a crucial role in connecting, integrating and transforming Africa’s infrastructure in transport, energy, ICT, and transboundary water networks. The programme will spend close to $80 billion by 2020 in developing Africa’s infrastructure.
To unleash intra-African trade and for Africa to take its rightful place in the global arena, the continent needs strong political leadership and policies. Africa is the least integrated continent in the world, with low levels intraregional economic exchanges and the smallest share of global trade. Africa’s governments and heads of state need to serve as champions. They must set the tone, keep the momentum alive, and provide critical national leadership by working together and showing an unwavering commitment to integrated policies, projects, and goals that will take Africa to the next level.
Thamsanqa is a Postgraduate Management student at the University of the Western Cape. He is an intellectual and authentic leader who seeks to champion positive change in the world, particularly in South Africa and in the African continent. In 2011, he went to Germany on an International Business Program at the University of Anhalt. To contribute to the development of his community, he offers free business plan writing and registration assistance to businesses in the township. He is a proud member of the South Africa-Washington International Program, which has significantly contributed to improving his leadership and community service skills.
The South Africa-Washington International Program (SAWIP) is a six-month leadership, service and professional development program that recruits 15 high-potential South African students from three top South African universities each year in pursuit of its mission to inspire, develop and support a diverse new generation of emerging South African leaders from multiple disciplines.