Barely two years after taking office, the Biden-Harris administration presented its vision for Africa at the Africa-US Leaders Summit, which took place in Washington from December 13-15.
As announced in the document The United States and Africa: Building a 21st Century Partnership, the Americans pledge to invest $55 billion in Africa. A commitment that not only supports the initiatives taken by previous administrations, but also aspires to expand the areas of collaboration with African partners in view of the situation imposed by the world order.
In Canada, such a strategy is long overdue. Some senators have also hounded the Trudeau government on its vision of Africa in the wake of the unveiling of the Canadian strategy for the Indo-Pacific.
Africa courted by the G7
In view of the opportunities that the African continent abounds, our allies, who are also our competitors, impose an unprecedented rivalry on us.
While the share of foreign direct investment of Canadian origin on this continent is estimated at 0.43%, France is the first country to invest there among the G7, with a share estimated at 4.63%, followed by Italy (3.91%), the United Kingdom (3.44%), the United States (1.16%), Germany (0.79%) and Japan (0.77%). Thus, Canada is the G7 country that invested the least in Africa between 2011 and 2017.
The weakness of Canada’s presence in Africa can also be seen in the market share that Canadian exporters hold there. Between 2001 and 20181their share fell only from 0.38% to 0.74%, while the share of Indian and Chinese exporters fell from 6.41% to 8.34% and 2.24% to 4 respectively, 21%.
Meanwhile, our allies and competitors are positioning themselves in African markets through economic partnerships: Belt and Road Initiative (China), Together with Africa Summit (South Korea), Prosper Africa Initiative (United States), Tokyo International Conference on African Development (Japan), India–Africa Forum Summit (India), UK–Africa Investment Summit (United Kingdom), Russia–Africa Summit (Russia) and Africa–EU Partnership (European Union).
Opportunities to seize
While the African private sector spent only $2.6 trillion in 20152its expenditure is expected to reach 3.5 trillion by 2025. By then, 80% of business expenditure will be carried out by five major sectors: agriculture and agro-industry, industry, construction , utilities and transportation, wholesale and retail trade, and natural resources.
For their part, African households3 will spend $2.1 trillion in 2025, an estimated increase of $645 billion from 2015. The market for basic necessities will be the most attractive by then, but the market for services will see significantly more spending growth fast.
However, if African markets remain unattractive in the eyes of our companies, it is mainly because the continent’s business environment remains unfavorable. According to the World Bank’s “Doing Business 2020” ranking, which measures the attractiveness of the business environment according to 10 indicators (business creation, obtaining building permits, connection to electricity, transfer of property, paying taxes, trading across borders, etc.), Africa has one of the lowest results (51.80%) and ranks 140e rank out of 190.
Indeed, four business indicators are below 50%, namely insolvency settlement, which is the most restrictive obstacle (31.30%), protection of minority investors (38.50%), obtaining loans (45.20%) and executing contracts (49.60%).
Despite these obstacles, some African cities nevertheless seem to offer better business conditions. Foreign direct investment to the African continent is indeed concentrated in urban areas. Cairo, Johannesburg, Tangier, Lagos and Casablanca are the cities that received the most international investment between 2003 and 20164.
African cities are thus becoming the new gateways to Africa.
Towards an Africa-Canada Economic Partnership
While the African continent needs international investments, in addition to locally mobilized resources, in order to initiate its transition from an economy based on agricultural products and natural resources towards an economy based on industrial and post-industrial sectors , Canada needs new partners to reduce its dependence on a few saturated markets in the countries of the Organization for Economic Co-operation and Development (OECD).
Africa therefore needs Canada and Canada needs Africa, justifying a vast win-win partnership.
Whether it is to mitigate the business risks that characterize African markets or to promote trade and investment between the two shores of the Atlantic, Africans and Canadians have every interest in building an economic partnership that will guarantee of mutual and reciprocal prosperity.