Regionalism may hold the key to Africa's survival
July 9, 2009
By Zoleka Ndayi
Africa is severely affected by the current global economic downturn, with expectations of a significant decline in economic growth.
According to the African Economic Outlook 2009, released two weeks ago - published jointly by the African Development Bank, the Organisation for Economic Co-operation and Development and the UN Economic Commission for Africa - growth for the current year is expected to be 2.8 percent, a sharp decline from the more than 5 percent recorded in the past five years.
Nonetheless, as a region well endowed with natural resources (except human capital), Africa is faced with the challenge of low industrialisation and lack of technological know-how.
Both the global economic meltdown and Africa's weaknesses raise fears that African countries might respond with protectionism and adopt inward-looking economic policies. However, there is nothing wrong with protectionism as long as liberalism-free market economic policies are not completely abandoned.
Protectionism in the form of promoting intra-regional trade worked well for industrial countries during the global economic crisis of the 1980s.
As with the current crisis, the previous meltdown happened as a result of the successes and challenges of liberalism.
The 1960s were characterised by vast expansion in international economic interaction - visible in the increased flow of goods and the development of multinational corporations, among other factors.
As is the norm in international political economy, the increase in international economic transactions increases the sensitivity of national economies to economic policies and events outside their borders.
The 1970s saw the collapse of the Bretton Woods system and the energy crisis that led to the global economic crisis in the 1970s and the 1980s. European countries and the US responded by deepening and adopting protectionism in the form of regionalism, respectively.
As an African response to the current global economic meltdown, President Jacob Zuma recently suggested regionalism by highlighting that "the continent has the opportunity to diversify markets and products, including building the requisite infrastructure and systems for intra-Africa trade as well as South-South trade".
However, it is worth mentioning that European and US regionalism do not serve as cases that African countries could draw lessons from.
The aforementioned countries are industrialised democracies of the same level of economic development with the necessary prerequisites, both economic and political, as well as the power potential to influence trade decisions in multilateral economic institutions, such as the World Trade Organisation (WTO).
On the other hand, Africa is well endowed in terms of natural resources, except human capital, but the continent does not have the necessary machinery and the technological know-how for the optimum utilisation of such resources.
However, in terms of human capital, as Zuma noted, the economic crisis "provides an opportunity to alleviate the effects of the so-called 'brain-drain', by attracting the Diaspora back home to reconstruct the continent".
Another challenge is that, in this round of trade negotiations, developing countries are still grappling with issues of market access to the industrialised countries for their agricultural products.
The WTO has been slow in implementing the Agreement on Agriculture and Agreement on Textiles that are of benefit to developing countries.
Nevertheless, calling for regionalism does not mean that economic liberalism should be avoided at all - it would be disastrous for some countries to backpedal on policies that saw improved performance in the global market. For example, South Africa, Algeria, Nigeria, and Egypt are set to survive the current crisis.
The Africa Competitiveness Report 2009 attributes these economic giants' poise to their competitive banking systems.
South Africa, for one, has seen economic growth average 4 percent since the adoption of free market economic policy - the Growth Employment and Redistribution pact in 1996 to 2008.
Though regionalism can be a useful mechanism to deal with the global economic crisis, as illustrated by Europe and the Americas, for Africa there are still too many challenges accompanying the phenomenon. From the economic point of view, lack of skilled human capital and technological innovation are some of the hindrances to the optimal utilisation of the continent's natural resources.
Therefore, Africa's response to the current global economic meltdown should be informed by developmental regionalism - a kind of protectionism that also allows liberalism. This means sectors that are labour intensive and are a source of income for the majority of the population should be protected against foreign competition.
Textiles and footwear is one such sector. However, given the strong trade relations that the continent has with China - a country with a competitive edge in the textile industry - this sector could pose a challenge in realising regionalism in Africa.
Nonetheless, highly global integrated sectors such as trade in services - banking, information technologies and communications - should remain informed by liberalism and active in the global market.
As a long-term strategy, Africa needs to focus on developing a skilled human capital that would meet the needs of the modern economy.
Zoleka Ndayi is a lecturer in the International Relations Department at Wits University
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