Africa is the second most populous as well as the second-largest continent of the globe. In terms of wealth too, the continent is endowed with abundant natural resources that can make it competitive with the rest of the world.
Yet, Africa lags in terms of development due to many reasons. In addition to war, conflict and corruption, there are reasons related to the lack of a development system that contributes to the continents failure to advance its economic development. As a result, it has become dependent on foreign aid as well as foreign resource exploitation.
For instance, the continent has no strong financial system to fund activities related to promoting intracontinental trade and investment.
But in due course, Africa must become capable to exploit its resources and move from aid to trade. The reliable way to move the continent towards such a noble end is by putting in place mechanisms that help it exploit its development potential properly.
One potential is to enable the continent to boost its local trade. The local trade or Intra African trade is believed to help the countries retain the capital that goes out of the continent.
At the core of the trade is improving the financial systems. According to the World Bank (WB), Africa has made enormous progress over the past 20 years in improving the regulation of banking, and as a result, financial systems are much more stable. However, the quality of supervision has been progressing slowly.
Therefore, there should be more and stronger institutions that can help boost the continents financing. Currently, the only bank that is operating to promote trade and investment in Africa is the Afrexim Bank based in Cairo.
An important milestone has been reached recently at the 35th AU summit. The AfCFTA has secured the agreement of the member states to exchange goods with their currency. This decision is very important as it can speed up the trade exchange between the countries without any need to look for foreign exchange as a medium since the countries usually undergo deficiency of it. Furthermore, it is likely to pave the way to the creation of a single continental currency that would eventually reinvigorate the single continental market.
Furthermore, the secretariat has enabled to secure about one billion USD to facilitate the initiatives of AU member states under the scheme of the AfCFTA. The allocated finance is part of the 8 billion USD that the secretariat earmarked to reinforce the continental trade within the coming ten years. This is an important step towards achieving the continent’s journey of becoming an integral contributor to the global economy.
The ultimate success of the continent’s struggles for rapid economic growth needs the all-out collaboration of continental and global stakeholders. In addition to technical support, international partners should also enhance financial contribution in all the necessary forms like loans or investments. It is also important to raise the continent’s access and rights to access loans from international financiers.
THE ETHIOPIAN FRIDAY 11 FEBRUARY 2022
