I am a pan-Africanist, firmly of the belief that Africa is stronger together. That when acting in concert we can accelerate socio-economic development, and make our voice heard and matter on the international stage in an increasingly fragmented world.
However, first we must get better at working together, particularly when it comes to economic and trade policy. The selfishness with which we guard parochial economic interests, is at odds with the regional and pan African institutions we have established to foster the continents stated ambitions on trade and development.
Thus, as we try to reach the extraordinary ambition of the ACFTA that envisions a pan-African trade bloc, it is worth taking a leaf from beginnings of the European Union. Starting small and building towards a massive ambition. The EU did not start with a big bang, it started as a steel and coal trading community, between Germany, France, Italy, the Netherlands, Belgium and Luxembourg. Creating a win-win situation that convinced the politicians, bureaucrats, and people to go all in.
The ACFTA can play this role, fostering strategic cooperation using specifically identified regional value chains. Identifying goods that currently do or have the potential to use inputs from across a region and investing in that potential to create positive incomes and linkages for the various countries involved. In doing so, it can lay the foundation and support for pan-African trade and collaborative policy making.
Fostering Strategic Cooperation
I am Kenyan, a member state of the East African Community (EAC), regularly referred to as Africa’s most integrated Regional Economic Community. With a common trade area, coupled with unprecedented cooperation in a multitude of policy areas, with a stated ambition of becoming a political federation. Unfortunately, the reality is far from the ambition. The common trade area is subject to the self-interest of the nation sates, and their own political economic lobbies. Thus in recent years we have been treated to Tanzania burning Kenyan chicks at the border, Kenya banning Ugandan milk, Uganda and Rwanda closing their mutual borders. Undermining the laws and institutions of the EAC.
If the ambitions of the EAC cannot be achieved in East Africa where there is decades of history of cross border collaboration, what makes us think that it can happen across the continent. Far from being a pessimist, I think the ambition is still valid. That we can foster cooperation needed, by investing in and building value chains.
Why value chains
The value chain of a product is everything that goes into making it and getting it to market. For example, if you look at the value chain of a bottle of beer it starts with the inputs, in this case the farmers who grow the barley, hops, and sugar, the chemists who grow the yeast, the glass maker who makes the bottle, the company that makes the bottle caps. It all comes together in manufacturing process at the brewery where the beer is made, put in a bottle and capped. Its then sold to a distributor, put on a truck, and delivered, the distributor then sells it to an establishment who sells it to a customer. A beer is a comparatively simple product when compared to a car, or solar panels or a smartphone, but whatever the product, the inputs come from a variety of places to be put together in a complex manufacturing process and distributed along a complex logistics chain.
Products with the right value chains require a range of inputs, which can be sourced from different countries and industries within a region. In that value chain, can be built a coalition of the willing among the businesses that supply inputs, those that manufacture the goods and those that distribute and sell those products. That coalition of the willing, the participants in the value chain can create the political-economic support within the individual countries necessary to sustain broader political support for open trade.
As value chains gain success there will be proof and willingness to expand the concept, for people to stop seeing buy Kenya build Kenya, or made in SA, but rather buy Africa, build Africa and proudly African. One value chain at a time, from beer, to motorbikes, to fertiliser to solar panels, we can build economic, logistical, and political relationships that can provide a foundation for Africa to think and dream strategically. To realise the dream of using the raw materials that all to often leave the continent should stay in Africa and make the critical technologies of today and tomorrow in Africa.
Building complexity
Beyond the politics, value chains will allow Africa to build the large complex corporations that are at the centre of economic development. Since independence African economies have largely been dependent on small enterprises and smallholder farming. They have proven to be extraordinarily resilient, adaptable, and creative, thriving in booms, surviving in recessions and making do in everything in between.
However, while small may be resilient it is not transformative. As David Pilling points out in a recent article “Large complex companies, drive productivity by organising workers, building on their specialisation, and pulling in vast resources to create economies of scale.” The successes we see in China, South-East Asia and Latin America have all built large complex industrial networks, as the foundation for industrialisation and sustained economic growth.
Deliberately focusing policy efforts on building regional value chains will encourage the set-up and growth of the large complex businesses needed to coordinate, fund, and use these value chains. Which in turn will need attendant goods and services like finance, marketing, ICT among others, creating economic ecosystems. Eventually with time, like we have seen in Asia these African businesses can provide a foundation for growth and become players on the global stage.
Conclusion
Intra-African or pan-African trade and industrialisation is a big dream that could spur the industrialisation of the continent. Which is critical to create the millions of jobs we need and sophisticated companies and services that will keep wealth on the continent.
But it won’t happen overnight, nor will it happen automatically. African governments, industries and multilateral institutions must be deliberate. Using carefully identified products to build value chains of goods, money, trust, political and commercial interests, will give us the basis for pan African industrial networks. If Africa is ever to realise the dreams of the ACFTA, or Vision 2063, if we are to realise the dreams of African built phones, cars, power plants creating these value chains is critical.
Also published on Medium.