Out of Africa: Trade, Technology, and Knowledge—Part I, South-South and Intra-African Trade

by Chevelle Dixon, Harvard University, African Studies and Economics

Last month, I attended Columbia University’s ninth annual African Economic Forum, titled "Africa Reclaiming Africa: Changing The Rules of Engagement."

The pan-Africanist in me hoped the forum would highlight the growing wave of African leadership in solving Africa’s problems. I always enjoy attending Columbia-sponsored Africa related events, as they feature cutting-edge African academic work, leaders, and captains of industry. Keynotes speakers included Lamido Sanusi, the Central Bank governor of Nigeria; Amina Salum Ali, the African Union ambassador to the United States, and Omamofe Boyo, the deputy CEO of Oando Plc. The Saturday of the forum was jam-packed with 16 panels in three sessions, ranging in topic from "Africa’s Creative Industries," featuring Grammy- nominated artists Les Nubians, to "Managing Africa’s Sovereign Wealth."

I attended panels that discussed barriers and creative solutions to sustainable economic growth in Africa. This series of columns, "Out of Africa: Trade, Technology and Knowledge," is inspired by the panel discourse on that day. In three articles, I will discuss barriers to African economic growth including North-South trade agreements, natural-resource dependent economies, energy infrastructure constraints, limited protection of intellectual property rights, and lack of human capital development. I will also discuss solutions to these economic barriers including intra-African trade and South-South cooperation, creative African-focused innovation in technology and telecommunications, and pro-private sector business environments.

While Africa has $1.7 trillion in collective GDP (according to McKinsey) in areas such as agriculture, tourism, and water, Africa’s economic value is much more than its natural resource and agriculturally based trade. According to the Economist, the following six African countries rank in the world’s 10 fastest growing economies (GDP) from 2001-2010: Angola, Nigeria, Ethiopia, Chad, Mozambique, and Rwanda. Tanzania, Ghana, Congo and Zambia make projections for the fastest growing world economies between 2011-2015. Africa has finally learned how to capitalize on more than just commodity trade. This economic growth and development is ushered by increasing collective intra-African trade and South-South cooperation (SSC) knowledge share. Africa’s information and technology revolution is fueled by investment, information trade, and knowledge generation/capture amongst emerging economies. By increasing South-South emerging economy knowledge share and intra-African trade, Africa is learning and growing. I agree with Dr. Marcos Troyjo, co-director of Columbia’s University BRICLab, who during one panel session argued that overtime being a producer of knowledge will far outweigh the importance of being a producer of commodities in South-South trade relationships.

While African countries, known to some as the Lion Kings, are following a different path than the Asian Tigers (South Korea, Singapore, Hong Kong, and Taiwan) of the 1960s-1990s or Brazil of today, a lesson can be learned from both cases. In both cases countries took ownership of their natural resources with export intensive policies, invested in human capital development, and practiced protectionist nationalistic economic reforms. According to the World Health Organization in 2010, intra-Asian trade is approximately 50 percent, while intra-African trade is only approximately 10 percent. It is clear that Africa has much to gain from supporting intra-regional trade. In the panel session titled “South-South Cooperation: Africa’s New Trade Partners,” Dr. Cosmas Gitta, chief of policy in the United Nations Development Programme's Special Unit for South-South Cooperation, argued,

Even with emerging economies which have different interests…collective organization increases their bargaining power whether its going to be negotiating with the North or with other emerging economies (China and India).

Dr. Gitta further argued that regional collective action, will give volume to a collective voice, which will set the common stage for collective institutions with good governance mechanisms to insure equitable distribution.

Developing countries, particularly BRICS, have learned the importance of collective organization in achieving their economic goals. South-South Cooperation (SSC) over the past decade has improved the flow of knowledge, information, resources, and skills amongst developing countries at reduced costs. In contrast to North-South trade relationships that focus more commodities and individual welfare under the Millennium Development Goals (MDGs), South-South relationships focus more on large-scale infrastructure developments that aid poverty reduction, technology development and economic empowerment. According to Mckinsey Global Institute, African infrastructure needs are approximately $95 billion a year, where 2/3 of this is needed for new construction and the remainder is needed for operation and maintenance. Given this much needed investment, approximately $2.6 trillion dollars in revenue annually can be generated by 2020.

In February of this year, African leaders met to endorse the launch of NEPAD, the African Union, and the African Development Bank’s cooperative Program for Infrastructure Development in Africa (PIDA). The main goal of PIDA is to support intra-African trade, and accelerate continental infrastructure projects in transport, energy, information and telecommunications by 2040. With all of the burgeoning economic activity in Africa Ambassador Amina Salum Ali noted that Africa should strive to be the next global port, of commodities and ideas. Ambassador Ali continues to note that the biggest barrier to African regional integration is the duplication of efforts from agencies on regional, national, and international levels leading to non-equitable distribution of services and costs, and giving rise to favoritism and internal regional disputes.

While North-South trade agreements and natural-resource dependent economies are barriers to economic development in Africa, increasing intra-African trade and South-South Cooperation is giving rise to collective emerging economic voice. This collective voice has said loud and clear that Africa is a valuable trade partner and has growth potential. Africa is also producer of knowledge. The next article in this series, "Out of Africa: Trade, Technology and Knowledge," focuses on Africa’s burgeoning Information and Telecommunications Revolution, barriers to economic growth and innovative solutions, including an interview with Beamit CEO, Matt Oppenheimer.

This is the first of a three-part series. Subsequent posts: part II, part III