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April 1, 2019
News Analysis: A New Paradigm for U.S.-African Relations – African Regional Capitalism

By Mekki Elmograbi

KHARTOUM, Sudan – Capitalism is quietly transforming Africa. Now it is time for international institutions – and Western perceptions – to catch up.

Private sector-led growth has shown impressive gains in South Africa, Ghana, Morocco, and Ivory Coast. In fact, these economies are rated among the best ten African countries for investors, according to Venture Africa Report 2019.

The combined GDP of Africa’s 54 nations is $2.24 trillion, according to the most recent data from the African Development Bank. That means the continent’s economy is now only slightly smaller than California’s $2.44 trillion in 2017 but still less than half of Japan’s $4.87 trillion for the same year. While still significantly behind the developed world, Africa is growing robustly, posting a 3.7 precent increase in GDP, according to International Monetary Fund reports.

More importantly, GDP per capita was $1,720 in 2017 – roughly equivalent to India. While Westerners generally think of India as incubator of high-tech machines and software, its view of Africa is often trapped in the past. Ask Americans about Africa and they conjure up a mishmash of starving children, street protests and film depictions.

It is bad enough that these misconceptions pervade popular culture. What’s worse is that they inform policy. There are generally two approaches to African economic development. One is built on the assumption that Africa is constantly being beset by emergencies that only the U.N., U.S. State Department, European foreign ministries as well as Western churches and charities can solve.

The track record for this approach is poor. For more than 50 years since most African nations received independence, Western aid has not produced Western-style growth. In fact, development plans too often prolong African underdevelopment because non-profits or U.N. institutions want to maintain their donor appeal. After all, the business of a successful development NGO should be to go out of business. But they don’t want to shutter their air-conditioned offices or close their expense accounts.

China and other countries have applied a different model to Africa focused on infrastructure, not on market development. The Chinese build roads and railroads to haul away the raw materials mined from interior lands. Although Africans reap some tax payments and benefit from the infrastructure – few jobs are created and fewer skills transferred to the native population.

Africa’s economies are increasingly caught between these two approaches – as if between a hammer and anvil. Africa needs to develop a practical and realistic development theory that creates markets, jobs, and skills. This new approach I call “African Regional Capitalism.”

AFRECAP: African Regional Capitalism

African Regional Capitalism reflects the need to shift from emergency and authoritarian-linked development to investment and the private sector. There is an urgent need for African nations to forge new relations with new partners to free the continent from this vicious cycle of humanitarian crisis, international intervention and, of course, China.

This approach has three pillars:

  1. Direct preferential trade and other agreements among African countries. Opening the door to foreign-direct investment from North America, Western Europe and Australia. The core of the preferentiality is to allocate some market opportunities to American businesses and products in trade of domesticating some US technologies and industries in African countries.
  2. New US lottery and immigration system regarding Africa based on the interests of the USA. As an example, there are some African citizens who deserve to improve their skills to the best standards, they can enrich the American system with better experiences from Africa and not just to migrate to improve their standard of living or to escape and abandon their relations with Africa. The new system would better to be designed by the good base of the private sector preferential agreements and the new interests that will be generated from the capitalist alliance.
  3. An annual forum for US-African private sector and think tanks along with suitable state and non-state actors who strongly believe in economic liberty and powerful private sector as a driving force for development, stability and healthy U.S. -African relations.

Africa also needs to present a marketable base for trade and industry with international partners and such agreements mark a step in the right direction.

Capitalism, as opposed to socialism, starts with economic liberty and limits the space for government intervention. In contrast, socialism starts with restrictions, limits, and burdens on both government and community, making economic freedoms and putting the right to property at risk. Although both systems deserve criticism, capitalism is more practical and realistic. Hybrid systems appear as a “third-way solution” but in reality, they are an illusion. They amount to socialism, traveling on a slower road.

Hybrid systems could be worse than pure socialism. The hybrid mix could be better when it starts with making the driving force the free market to push and move the economy and to build alliances and then put limits and taxes favoring the hybrid goals. This is the only way to balance the economy. It is not the right recipe to establish economy on restrictions to protect rights.

While the benefits of capitalism are clear, why should the approach be regional? The alternative is, of course, Pan Africanism. This is a 1960s philosophy that solidified in the days of African liberation struggle both inside the continent and across the Atlantic. Indeed it is not African in origin, but, was born of African descendants on three continents; Africa, North America and Europe. Pan-Africanism has largely failed us in economic development. One reason is size. Africa is home to 1.3 billion people and 54 countries. The European Union has struggled (as Brexit suggests) to solidify its economic union as it has expanded to 30 members, who have shared culture and trade for almost 20 centuries. Imagine 54 countries, most of whom had little contact with one another before the colonialists arrived 300 years ago.

Pan Africanism might continue as a source for cultural inspiration, but it has no connection with economic liberty because it has a tendency toward socialist ideas and is linked to the struggle against western colonialism. During that period most national liberation movements professed socialism but, this was often skin-deep as we have seen once they went to power.

Although Pan Africanism cannot be the basis of a fair and free economic system, Africans still need to Africanize their strategies and plans.  But this should be anchored in a regional, rather than continent-wide approach. In fact, geographical regions are already the pillars of the African Economic Community (AEC) and the African Continental Free Trade Area (AfCFTA) which has ratified by 21 of the required 22 African countries and will likely soon go into effect. There are still some questions on the big economies in Africa that didn’t join AfCFTA such as Nigeria and Algeria. However, the Africa Union seems to be confident that Africa will choose free trade policies.

Prudence Sebahizi the Chief Technical Advisor on the Continental Free Trade Area (AfCFTA) at the African Union said  more countries will come and there is no need to re-open the discussions the agreement because even those who didn’t sign or ratify it were part of negotiations. “Africa has big and powerful regional blocs, and there is a clear concept on how the RECs are the pillars and the building blocks of AfCFTA.”

ECOWAS of West Africa is the first African regional trade bloc founded in 1975 followed by SADC of South Africa in 1980, ECCAS of Central Africa in 1985 and then IGAD in 1986 and EAC in 2001. Although most of the Sub-Saharan countries achieved their independence later than North African countries, they have stronger trade relations among themselves than the  North Africans, a region which only has a single free-trade agreement, known as UMA, which established in 1989 and comprises the five North African countries (Morocco, Algeria, Tunisia, and Libya).

COMESA established in 1994 from members who have stronger ties with their blocs or bilaterally, however it inspired African people that AfCFTA is achievable. CENSAD established in 1998, its members also have stronger relations with their regions. These facts confirm again the power of geography and the efficiency of regionalization in Africa.

The Horn of Africa classified as a separate unit from East Africa. The five countries of the region have not yet established their trade bloc. Sudan and Djibouti are the strongest supporter for the project but they cannot come together without Eritrea and Ethiopia.

The minister of information and the spokesperson of the Sudanese government Hasan Ismael confirmed that Sudan is still committed to create Horn of Africa trade bloc. “We believe that the peace deal between Ethiopia and Eretria will help.”

The minister of finance of Djibouti Alyas Dawaleh called for Horn of Africa bloc in an interview published in my book “Djibouti the pomegranate of the scale in East Africa” in 2015. Indeed, Dawaleh was the first official to call for the free-trade zone in the Horn of Africa. Djibouti’s minister of communication, Ali Hassan Bahdon, phoned me to confirm his government still favors a Horn of Africa trade bloc. The nations of the Horn are late, he said, but they still have good opportunity because the bilateral relations are already strong and the Ethio-Djiboutian integration is a good example. “We – in Djibouti – benefited from our liberal economic policies and we engaged with global trade before most of Africa countries, this why we are not afraid of coming together with  neighbors in a common market or trade bloc,” he said. The minister emphasized that better regional policies for private sector would make such a trade bloc particularly valuable.

Dr. Cheikh Tidiane Dieye the Executive Director of the African Centre for Trade, Integration and Development (CACID) in Dakar, Senegal gave an example of West Africa market, “in the ECOWAS region, the private sector in the center of the policies. This is why we are strong and successful”.

The application of AFRECAP 

We should encourage those relationships only with allies who believe and promote economic liberty and want to work with Africans in a normal atmosphere of investment and business. We should also clear out the bad images created about capitalism and the free economy. Cheikh Tidiane of CACID said one of the biggest challenges for African economy is how can we make the private sector the key component to run production, processing and trade. Tidiane suggested a limited role for African governments in trade “the role of the state and the public sector is to create appropriate environment and context for the private sector to be developed and to take the opportunity inside the country or in the region.”

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