[ad_1]
The idea of globalization brought with it the idea of prosperity. This process began within geopolitical and regional blocs, then expanded with the end of the Cold War, financial deregulation, and trade liberalization negotiations, culminating in the creation of the World Trade Organization (WTO) in 1995. It reduced the costs of business and financial transactions.
These developments have unlocked the enormous potential for value creation in the global economy. Production activities are broken down into multiple stages, allowing each stage of production to take place where it can be most efficient.
Yet, ever since globalization has been discussed, questions have been raised about its effectiveness and ability to bring prosperity to all.
This has been particularly true in recent years, given global challenges such as the COVID-19 pandemic, the conflict in Ukraine and the supply chain difficulties it has caused, and the intensification of geopolitical and geoeconomic competition that has led policymakers to go back inside.
Major economic blocs are making more extensive use of policies at the intersection of trade and national security, and restrictions on trade have surged. Industrial policies have made a comeback with protectionist features, and by 2023, trade-interfering measures will affect at least one-fifth of global trade. Many of these restrictions are triggering retaliatory responses, exacerbating tensions between trading partners. The multilateral trading system is effectively paralyzed by its institutional decision-making process within the WTO.
In Africa, we know that despite promise, many Africans have yet to see the benefits of globalization, and many African countries have struggled to move up the global value chain. Africa remains disconnected from global raw material value chains. In fact, by 2022, 46 African economies were considered dependent on primary commodity exports, a situation associated with lower levels of development, economic instability, and fiscal unpredictability.
With the development of globalization, African countries have gained access to the international financial market.
In 2002, Africa seemed poised for economic takeoff and growth. Rich creditor nations had wiped billions of dollars of unsustainable debt off the books of sub-Saharan African countries through the Heavily Indebted Poor Countries (HIPC) debt relief initiative, and a surge in global demand for the region’s exports had raised hopes for continued prosperity.
The credit ratings were created to help sub-Saharan African countries seek development financing from global investors, allowing vast swathes of African countries access to international financial markets for the first time, with investors attracted by high yields versus near-zero interest rates in rich countries.
The debt burden of African countries has increased again, with a large part of the debt becoming commercial debt. The average debt ratio in sub-Saharan Africa has almost doubled in the past decade – from 30% of gross domestic product (GDP) at the end of 2013 to nearly 60% in 2023.
Today, the optimism has evaporated amid a wave of unsustainable debt in more than a dozen African countries and discontent among citizens who have had to bear the brunt of restrictive reforms.
But this does not mean that a globally interconnected world cannot work. It just means that the institutions and operating structures that underpin globalization as we know it must change in a way that benefits everyone.
It is in this regard that Africa has a unique role to lead the debate around reglobalization and place itself at the centre of new efforts to build a new global architecture based on fair and balanced representation of all stakeholders.
Reglobalization will put Africa in the spotlight as it possesses unique mineral resources such as cobalt, lithium and nickel that are critical to the energy transition. Critical minerals can help Africa achieve both its environmental and development goals, but it cannot do so by harvesting its natural resource endowments as it has in the past. Africa must make the necessary investments in infrastructure, human capital, technological know-how and private initiatives that will help it industrialize in a sustainable and resilient way and enable it to make progress in exporting high value-added products and increasing its voice on the global stage.
In order to deliver on the promise of reglobalization, it is also important to recognize existing challenges. Undoubtedly, one of the biggest challenges facing Africa is the overlap of weak economic development, current climate stresses and a growing youth population, coupled with increasing difficulties in accessing finance. We will explore this theme in the following articles.
By: José Correa Nunes
Executive Director of Angola Portal
[ad_2]
Source link
