Never has the world experienced a plethora of complex challenges as it is experiencing today. The world is suffering from the after-mass effects of the Covid-19 pandemic, two wars in the Middle East and Eastern Europe, climate change events, and even a trade war between China and the U.S.
These events have had lasting negative effects on economies, and as a result, global commodity prices have skyrocketed, supply chain disruptions continue to wreak havoc on services, and all this has caused a cost-of-living crisis.
These effects are more pronounced in Africa, a continent, despite possessing abundant resources, still find itself as a victim in this whole interplay of events. Take for example, African economies currently contribute only about 3.78 per cent to greenhouse gas emissions, yet they are the most vulnerable and least resilient.
Africa is the most vulnerable region in the world to droughts and the second most vulnerable to flood events, temperatures are rising faster than anywhere else in the world and, by the end of the 21st century, could rise by as much as 6 degrees Celsius.
Last year, a report by the Mo Ibrahim Foundation showed that widespread poverty and the low level of economic development in many African countries mean that the ability of governments to respond to climate shocks is low, further intensifying the vulnerability of the continent.
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At the same time, Africa remains vulnerable to external shocks. The war in Ukraine and that between Israel and Gaza adversely impacted global supply chains and dampened Africa's trade prospects in 2023.
As a result, merchandise trade on the continent, after an impressive growth of 15.9 per cent to reach $1.4 trillion in 2022 from $1.2 trillion in 2021, was significantly affected, contracting by 6.3 per cent to $1.3 trillion in 2023.
This complex interplay of crises is commonly known as a polycrisis. When the World Economic Forum released its Global Risks Report last year, it revealed that the risk of polycrises was growing in almost every region of the world.
Donald Kaberuka, Chairman and Managing Partner of SouthBridge Group and Former President of the African Development Bank Group (AfDB), maintained that Africa should recognise that it is neither the first nor the last time that the world is experiencing unusual crises.
"We have to get used to managing crises. The first crisis which shook up the global economy was in 1972 and 1973. 1972 was the end of the fixed exchange rate regime and the devaluation of the dollar followed by oil shock," he said at the African Export Import Bank (Afreximbank) annual meetings in the Bahamas.
Kaberuka suggested that current and previous crises must teach Africa that Africans can no longer fully rely on the international financial architecture, rather contended that Africa should build its own institutions.
"We have a responsibility to build our own institutions, recognise that we have some structural deficiencies, but work on them to make sure that they (institutions) are fit for purpose," he noted.
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Review financial architecture
There has been an increased push from African leaders to review the global financial architecture to serve the interests of African countries, which at the moment are left to be served at the mercy of Western financiers.
Jeffery Sachs, Senior Lecturer in Economics at the International Institute of Social Studies (ISS) of the Erasmus University of Rotterdam, agreed, suggesting the global financial architecture needs fundamental change, especially in how rating agencies like Moody's, Fitch and S&P Global rate Africa.
"The mechanical ways in which these rating agencies rate Africa must change. Small and poor countries are rated lower, not whether they have worse growth prospects. Africa has brighter growth prospects, but they (African countries) are mechanically downgraded because of size and scale, and frankly, a very analytically inappropriate set of standards," he lamented.
At an economic fundamental level, Sachs added, Africa has the capacity to achieve sustained growth over the next 40 years to 2063 of 7 per cent per annum compounded, making the continent a high-income region of the world.
"This is absolutely feasible," he argued, stressing that the core of success is sustained high levels of investments starting with education given that it has the highest return economically of anything that any country can invest in.
However, Sachs said that Africa's most important challenge is unity, asserting that as Africa's population is expected to rise from the current 1.4 billion people to 2.5 billion by 2050, the continent needs to work together.
"We are living in a world of big players - China, India, the United States, and Europe. Africa needs to be a big player," he said.
The Berlin Conference of 1884-1885 which divided Africa left the continent as 54 separate countries, which Sachs said is deleterious for geopolitics, risk premium, and scale of investment and industry.
"You cannot operate in this world as a small country. Even the small countries that are successful are part of somebody's world. Africa is too big to be part of somebody's world, it has got to be Africa as a fundamental pillar of the world's scene," he weighed in.
Perhaps Africa's unity will be tested at a seat that it has received through the African Union by becoming the 21st member of G20, a seat that many experts argue that the continent has to assert.
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Private sector, AfCFTA
Experts also argue that for Africa to navigate the current and future polycrises, governments should create enabling environments for the private sector, as well as leverage that African Continental Free Trade Area (AfCFTA) agreement to create market opportunities.
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Yemi Osinbajo, Former Vice President of Nigeria, contends that governments have to create an enabling environment that allows the private sector to deploy necessary investment.
"We have to encourage the private sector to invest, and create an enabling environment for them to invest," he said, highlighting the recently inaugurated Dangote Refinery, the Africa's largest oil refinery, as an example of what is possible when the private sector acts.
Dangote refinery started production in February this year. At a cost of $20 billion, the refinery will produce 650,000 barrels per day (bpd), enough to reverse Nigeria's reliance on imports for fuel and other refined products.
Nigeria's billionaire industrialist Aliko Dangote indicated that the refinery had enough gasoline, diesel and aviation fuel to supply the African continent and export to Brazil.
He saw the AfCFTA as a key blueprint to enable businesses like his to serve the African market.
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Those views were shared by Yemi Kale, Managing Director & Group Chief Economist Afreximbank, who said that AfCFTA can boost growth, transform economies, and bring prosperity to all of Africa.
"The ongoing implementation of the African Continental Free Trade Area agreement has the potential to accelerate the diversification of sources of growth to mitigate the continent's exposure to global volatility and supply shocks," he said.
