It is Time for Africa and India’s G20 Presidency Provides An Opportunity

Why in News?

• For decades now, Africa has been characterised as the world’s final frontier for business. Therefore, encouraging investments in Africa is no longer a question of expanding businesses alone.
• Under its presidency of the G20, India has made a historic leap, with Prime Minister of India strongly vocalising the need for the membership of the African Union to the group.

 

Significance of Africa in the Global Economy

• Provide an Opportunity to Diversify Supply Chains
  • Expanding businesses alone is no longer sufficient to encourage investment in Africa.
  • Africa has the potential to provide a diversified supply and value chains which will create an assured and relatively shockproof international economy.
  • Global businesses would do well to recognise, support and leverage such benefits while unlocking robust value chains.
• Rich in Resources: Africa is home to 30 per cent of the global mineral reserves, 12 per cent of the world’s oil and 8 per cent of its natural gas.
• A Young Workforce and Consumer Base: Africa will account for over half of the world’s projected population growth of 1.7 billion people in 2050, comprising a young workforce, a growing consumer base and rising disposable incomes.  

 

How Can Africa’s Potential be Translated into Gains?

• Translating Africa’s vast potential into gains implies a coordinated effort from the global community, including governments, businesses, and civil society.
• At present, Africa contributes less than 3 per cent of the total share of global manufacturing and trade.
• 33 of the world’s 46 least developed countries lie in the continent, many of which are landlocked.
• As experts introspect on existing global trade practices, perceptions of Africa as a valuable market for investments need to widen further.
• The world must look to the region as a contributor to a more inclusive and stable international economic order.
• An indisputable component of this is the regional economic integration of the African continent.

 

Historic Decision by G20 Under India’s Presidency

• Under its presidency of the G20, India has made a historic leap, with the Indian PM strongly vocalising the need for the membership of the African Union to the group.
• Aligned with the Government of India’s vision for heightened inclusion and participation in the Global South, a Business-20 (B20) Action Council, ‘African Economic Integration: An Agenda for Global Business’, has been established.
• Under the B20 umbrella, the Action Council on African Economic Integration identified and studied five key priorities to catalyse its economic integration, with the support and initiatives of G20 countries and businesses. 

 

Key Priorities of the B20 Action Council on African Economic Integration

• Strengthen Healthcare and Education
  • Human capital outcomes across health and education need to be strengthened. Like India, Africa’s population represents an enviable demographic dividend, underscoring the pivotal role that the African youth will assume in its economy in the years to come.
  • Capturing these capabilities requires sharp focus on enhancing healthcare and education outcomes.
  • The African Development Bank states that funds to the tune of $26 billion are required yearly to sustain healthcare expenditure in the continent.
  • As per the World Bank, each additional year of schooling is estimated to increase an 11 per cent earnings for boys and 14 per cent for girls.
• Emphasis on Agriculture Along with Food System
  • Refreshing agriculture and food systems assumes significance, particularly given that about 70 per cent of the African population is employed in the agrarian sector.
  • Farming in the region is characterised by small and subsistence land holdings. The gap in the availability of finance and key inputs such as fertilisers and seeds lead to low productivity.
  • Moreover, value addition stands at low levels and most agri-products are exported without being processed.
• Supplement Resource-Based Activity with Industrial Activities
  • Like all emerging economies, African nations must supplement resource-based activity with industrial activities that facilitate higher productivity.
  • The African Union’s Agenda 2063 articulates the necessity of manufacturing-based industrialisation in better utilising Africa’s rich natural resources.
• Implementation of African Continental Free Trade Agreement (AfCFTA)
  • The AfCFTA represents a landmark initiative that was realised through trade facilitation measures.
  • AfCFTA, when fully implemented, will increase the competitiveness of economies across the continent, boost integration with global value chains, and attract investments.
  • Trade facilitation must be accelerated through technology and implementation support from G20 nations.
• A Robust Digital and Physical Connectivity: Digital and physical connectivity are the arteries of a healthy economy. The construction of roads, railways, and air links to connect the vast expanse of the continent must be stepped up with enhanced private investments. 

 

Steps to Materialise Priorities of the Action Council on African Economic Integration

• Encouraging Private Investments to Improve Health and Education
  • Private investments can be brought to these sectors so as to empower the youth and children in Africa with quality skilling, education and access to healthcare.
  • An integrated economic structure would offer pooling of resources, knowledge sharing and frugal transfer of innovative education and healthcare techniques.
• Training of Farmers to Boost Agri-Sector
  • There is a need to train and educate farmers and increase mechanisation, along with the introduction of sustainable value-added businesses in the sector.
  • Combined with better access to inputs and credit lines, the interventions can yield impressive results in Africa.
• Attention on MSME to Accelerate Industrial Activity
  • Empowerment of micro, small and medium enterprises through better access to finance and improvements in access to electricity are needed to achieve this goal.
  • This can be achieved over time through easier intra-continental trade, policy harmonisation and harnessing natural endowments in renewable energy.
• Technology Support: Attractive financing models, policy uniformity and regulatory certainty will only lend strength to a foundational digital economy — cutting across formal and informal sectors, offering new avenues of growth and employment.

 

Way Forward: Africa Requires a Solid Logistical Foundation

• Today, the regions have transformed into a reality where India stands as one of the world’s fastest-growing, large economies, while Africa is being increasingly highlighted as an engine for equitable and sustainable growth.
• The socio-economic payoff from increased African participation in the world economy cannot be overstated. 
• Amidst these circumstances, India’s call for the inclusion of the African Union is a step forward but to translate the potential of Africa into gains requires a solid logistical foundation.

 

Conclusion

• In the larger scheme of things, India and Africa represent a past that is both the history of civilisation, and the history of economic relations.
• And therefore, amidst a rapidly changing geo-economic order, India’s focus on Africa is timely. 

 

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Q) What is the AfCFTA agreement?

The AfCFTA is an ambitious trade pact to form the world’s largest free trade area by creating a single market for goods and services of almost 1.3bn people across Africa and deepening the economic integration of Africa. The trade area could have a combined gross domestic product of around $3.4 trillion, but achieving its full potential depends on significant policy reforms and trade facilitation measures across African signatory nations.

 

Q2) How does a supply chain work?

A supply chain is the network of individuals, companies, resources, activities, and technologies used to make and sell a product or service. A supply chain starts with the delivery of raw materials from a supplier to a manufacturer and ends with the delivery of the finished product or service to the end consumer.

 

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Source: The Indian Express