Africa, “The Hopeless Continent”̶ Perception or Reality?

Is the newest international trade treaty between Africa and the European Union a motivation to forgive all those colonial-era years of slavery and domination?

What is the first thing that comes into your mind when you hear the word "Africa"? It was the question that I asked one hundred students at the University of Grenoble-Alpes. The most common responses were:

1. Poverty

2. Corruption

3. Slavery

4. War

5. Famine

6 Others

Even today many people still think that the economic, political, and social situation of the African continent is  the same as  decades ago. Even in 2000, many economists had named Africa "The Hopeless Continent", a total misperception between myth and reality. Today, several economists predict that Africa may become an economic power by 2025. However, this theory has conflicting views.

Given the BRICS’ recent economic crisis, African countries have found an excellent opportunity to become one of the most important emerging economies in the world. Just as India once was, Africa is again in the sights of European industrialized countries to become its convenient partner. To understand why, we need to consider many aspects.

Firstly, in the past twenty years, at least seventeen sub-Saharan emerging countries experienced substantial economic growth that could lead its population to increase their income status, especially thanks to the raw material exports  such as oil, gas, minerals, or agricultural commodities.

In fact, by 2040, 1.1 billion Africans will be of working age. No country in the world will be able to compete with African labor force, not even China or India.

In addition, communications and information technology have become exceptionally accessible even in isolated Saharan desert areas.

The dark days between the 1970’s and 1990’s will be forever marked in history and no one is prepared to forget this period but today, many countries across the continent have significantly better governance and true democracy. Even if some countries are still dominated by an authoritarian terror regime, major civil and economic conflicts have significantly decreased.

Africa is regaining the confidence of foreign investors. Today, the world’s eyes are set on this continent that for many years has been undervalued and exploited by European superpowers as a result of colonization as well as by opportunistic conflicts caused by many civil wars in the continent.

The thing is that almost all sub-Saharan economies depend on raw material exports leaving them extremely vulnerable to fluctuations in global prices. Thus, Africa’s economic development also depends largely on the global economy.

Economic Partnership Agreements (EPAs) are trade agreements operating in a generalized preference system where developed countries grant preferential tariffs on imports from emerging economies. In an inegalitarian world, such agreements seem to be an opportunity for the developing countries, however, the World Trade Organization imposes trade requirements like the “most-favored-nation clause”. This clause stipulates the need for trade reciprocity among World Trade Organization  members. Therefore, the necessity to comply with its trade-related requirements explains the urgency to end trade-offs involving preferences. Thus, these preferential agreements actually seem to be more normal free trade agreements wherein the major policy is to "give-and-take".

In fact, EPAs have abolished custom duties for three quarters of the Union's exports, whilst the latter will continue to import from West Africa all its products which are already duty-free. Naturally, these agreements represent a great deal for the European Union. The biggest problem is that the least developed countries depend on duty, and therefore the lack of these revenues will undoubtedly have a negative impact on the economies of these less favored countries.

Another major challenge facing sub-Saharan economies has to do with job generation for burgeoning populations. Opening  foreign investments will certainly generate jobs but, for how many? And most importantly, what kind of jobs?  We must take into account that with a fast-growing population there will possibly not be any alternatives for people who do not have an education, which could generate a vicious circle, wherein the richest and educated people have the “good jobs” and big salaries and the poorest and uneducated people have the “hard and dirty jobs” for almost no salary.

In addition, it is known worldwide that developed countries and, especially foreign multinationals, profit largely on the low-price they pay for African raw materials. For example, Starbucks Corp. pays Ethiopian coffee farmers about $1.42 per pound and then sells the “specialty beans,” which the company markets for as much as $26 per pound.

Finally, what could we predict about this explosive African growth? Could the African continent be the new interconnected world’s hope?

What future does Africa have with this foreign trade invasion?

What solutions should governments adopt to prevent multinationals from continuing to take advantage of their natural resources?

Désirée A.