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Africa and the emerging New World Order 10 Mar 2017

On 24th June, 2016, the world was greeted with news of the United Kingdom’s referendum decision to leave the European Union (EU). A little over four months later, another seismic shift in the world order occurred. On the night of November 8th, Donald Trump, who had drummed up an extreme nationalistic agenda during the campaign, won the presidential election. His agenda would appear poised for free rein, with the Republican Party also having majority in the Congress, and President Trump was expected to appoint the 9th Supreme Court justice.  
    
In the UK and US, there is now a path to political decisions that could have considerable impact on both countries’ international partners, including those in Sub-Saharan Africa (SSA). Furthermore, as President Donald Trump unveils the policies of his new administration and Prime Minister Theresa May moves on with Brexit negotiations, there are second-order effects from the multiplicity of global actors – e.g. China, Iran, and Turkey – together with political and economic trends that could impact Africa.  
One region, two tales

Notwithstanding a positive medium- to long-term economic outlook, these events are likely to further pressure economic performance in the SSA region, in the short-term. GDP growth for the region dropped from highs of over 6.5% per annum in the last few years to less than 2% in 2016.

There is also a weak forecast for 2017. Behind this trend of subdued growth are weak commodity prices, waning demand for key commodities, drought in some regions, debt overhang and reduced fiscal buffers. However, there are two tales from the region. On the one hand, we have those countries with narrow commodity specialisation and, in some cases, coupled with acute productivity problems. On the other hand, we have the fairly well-diversified economies, including those also experiencing rising productivity.

Nigeria, for example, falls into that bracket of countries with a narrow commodity specialisation. In this instance, oil and gas. The outlook for 2017 rests on international oil prices and the extent to which Nigeria can raise hydrocarbons output while diversifying the economy. In addition to this, Nigeria must address weaknesses in power supply and confidence in policymaking. By contrast, countries such as Senegal, which is expected to grow above 6% per annum this year, have benefited from falling oil prices as well as diversification of the economy.

Moreover, happening alongside the above economic dynamics will be a busy political calendar in the SSA region. Of the 48 Sub-Saharan African countries, twenty-one, including regional hegemons like Kenya and Angola, and fragile states like Liberia will hold elections this year.

Investigating Brexit and the new US administration in terms of how these factors will impact demand for exports from the SSA region and support political stability is a useful starting point for analysis.  

The United States

One of President Donald Trump’s promises during the campaign was his $1 trillion infrastructure spending programme. Abstracting away from how these moneys would be raised, it is possible that revamping and expanding American power, communication and transport networks will translate into demand for commodities produced in Sub-Saharan Africa. This would be a welcome development for the SSA region given Chinese faiblesse. However, such expectations should be balanced against the president’s explicit commitment to back “away from the Obama-Clinton globalization agenda”. This would seem to imply some scepticism around trade and a desire to seek political premium by sourcing inputs at home.

Or at the very least, it appears there would be concerns regarding trade and aid arrangements between the United States and Sub-Saharan Africa. For instance, a question posed at the State Department by the Trump team during the transition gives credence to this impression. The team reportedly asked: “Most of AGOA (African Growth and Opportunity Act) imports are petroleum products with the benefits going to national oil companies. Why do we support that massive benefit to corrupt regimes?”

If the scepticism translates into a new AGOA that is focused on the non-oil sector, this would be supportive of the region’s long-term need for diversification. However, this may require that 1) the Trump administration does not view manufactures or other non-oil African production as competition; 2) non-oil production in those African countries does not benefit “corrupt regimes”.       

With regard to foreign aid, there is no clear view at this stage. Statements made by Donald Trump during the campaign could be interpreted in various ways. Tentatively, it might be said that the president is in favour of emergency assistance, e.g. disaster relief, but it becomes more ambiguous on long-term programmes. Changes are already in effect. In January 2017, for example, the US president introduced an expansive restriction on health organisations performing abortion or providing information on abortion from receiving aid from the US government. Historically, Congress has crafted aid policy in a bipartisan fashion; however, these are more partisan times and the Republican Party will likely take its cue from the president.

We will learn the precise distribution of policymaking between the president and the State Department, headed by Rex Tillerson, going forward. But the latter, as the former CEO of Exxon Mobil, does have substantial experience and networks in Sub-Saharan Africa, some of which may earn controversy. During his vetting by the Senate, Tillerson expressed support for present staples of US-Africa relations, including aid programmes such as the Millennium Challenge Corporation and the President's Emergency Plan for AIDS Relief (PEPFAR). However, he has also promised “a complete and comprehensive review” of USAID spending.

Europe

The balance of analysis on the EU rests on outlook. Brexit has not yet happened but the UK parliament has awarded Prime Minister May’s government the right to trigger Article 50 of the Lisbon Treaty, commencing negotiations for the UK’s exit – the process is expected to last for up to two years. The outlook would be clearer with the outcomes of the elections in France and Germany later this year.

In contrast with Trump’s “America First” rhetoric, the UK government has been at pains to present Brexit as the beginning of “a stronger, fairer, more Global Britain,” to quote from the recently released white paper. And among the policy document’s 12 principles is “securing new trade agreements with other countries.” Such a policy will target bilateral trade and investment agreements with developing countries and engagement in multi-national arrangements such as the World Trade Organisation, the G7, G20, and the OECD.

However, it should be noted that there is no mention of Africa in the UK white paper, nor of any sub-Saharan African country – though there is mention of China, India, Morocco and other “key emerging markets.”

By contrast, there has been a fairly steady stream of EU policy announcements on sub-Saharan Africa – though not driven by Brexit. One such policy is the EU External Investment Plan with its ambition to mobilise $46 billion for investment in Africa to support job creation and backbone industries, e.g. power, ICT, transport and social infrastructure.

Germany has announced its “Marshall Plan for Africa,” which seeks to boost aid and investment on the continent in a bid to reduce the need for migration to Europe. 2017 has been designated the Year of Africa in Germany, and during Germany’s G20 Presidency, which began on December 1, 2016. A conference will be held in June of this year entitled "Partnership with Africa". The German plan highlights 10 thematic areas to strengthen economic performance on the continent with a focus on initiatives that require less direct aid but more partnerships, institutional/capacity building and private sector investments.

Elections in the EU’s industrial giant will take place in September; current opinion polls are too close to predict a winner. An alarming development has been the rise of the far-right Alterative fur Deutschland (AfD) that holds radical views on immigration. With Germany normally requiring a coalition government, the AfD could soon be more influential than many would desire.

France recently concluded the 28th Africa-France Summit, President Hollande’s last before elections to be held in April. Whilst the main event was dominated by security concerns, the side-line Africa-France Economic Forum saw the participation of 60 business leaders, led by Pierre Gattaz, head of the French employment union, Mouvement des Enterprises de France (MEDEF). Hollande recently called for trade with the African continent to be doubled, even as France has invested at least $13 billion over the past four years. But with the two frontrunners in the upcoming elections (Marine le Pen of the Front National and Francois Fillon of Les Republicaines) both falling right-of-centre, we can expect a shift in the Francafrique relationship away from governmental and political support. However, French troops will remain available as needed, particularly when it comes to protecting gas assets in the Maghreb.

There is also an ongoing drive for ratification of Economic Partnership Agreements (EPAs) between African regional economic communities (RECs) and the EU. Although countries like Kenya and Ghana are eager to implement and advance EU market access, efforts at the RECs have been slowed by the concerns of others such as Nigeria and Tanzania.

Outlook

It is too early to take stock of Brexit and the election of Donald Trump. Brexit has not yet happened, while President Trump has been in office for less than 45 days.

Whilst Europe concentrates on reducing illegal immigration to ease the burden on its state services, it continually ignores the elephant in the room. Low birth rates and higher life expectancies across the 28 member states are leading to ageing populations. According to Eurostat, this is increasing the strain on healthcare and welfare services as the (contributing) working population falls. Similar dynamics are at work in the United States.

Sub-Saharan Africa is experiencing the converse; a population boom has seen a rise in the working age population whilst sufficient employment opportunities are not being created. A healthy medium of controlled migration from SSA to Europe could help address the challenges on both continents whilst also increasing remittances, which already contribute 2.6% of the SSA region’s GDP.

The EU and European states are seeking stronger trade ties with SSA to offset Official Development Assistance (ODA). This is seen as an all-around winning strategy, as trade – not aid – is expected to boost African domestic industry, reduce the need for governmental assistance in austere times, and improve socio-economic conditions, leading to falls in (illegal) migration. This strategy will also counter the influence of competitors such as China, India and Turkey.

For the immediate future, there is a considerable breadth of potential outcomes. Scenario-building should take into account changes in the global order – multiple actors, tensions between blocks, and potential consequences, intended or otherwise. Any harm to global demand would pose a risk to the regional interests, e.g. export markets, inward investment and aid flows.

For most African governments, the things that were true yesterday are even truer now. Fiscal consolidation, economic diversification, regionalisation and inclusive growth should be viewed as an immediate and long-term priority.