‘Trade not aid’ isn’t a panacea
Africa’s trade with the world is falling and its share of foreign direct investment is minuscule.
L. Muthoni Wanyeki
Even in its heyday, “aid” was often (correctly) criticised as too little, too conditional, and too patronising to be the path to African prosperity. But “trade not aid”, a response flung around as the alternative, has underdelivered so far.
So says the African Export-Import Bank. Its Africa Trade Report last year shows that trade between Africa and the rest of the world – already low – was down 6% in 2023. Exports dropped by 9%. Imports fell by 3.7%.
Africa’s trade with the rest of the world still suffers from deep-rooted problems that began with slavery, continued under colonialism, and persist today. Inside our countries, rural areas supply the cities. Those cities, in turn, serve foreign powers and economies.
We often blame our own elites for corruption and greed – and rightly so – but in truth, they are only small players in a bigger system, living off the scraps while the real wealth flows outwards. They facilitate plunder but are not its ultimate beneficiaries. The beneficiaries are found wherever the plunder is put to productive use.
The Africa Trade Report is upbeat about the potential of the Africa Continental Free Trade Agreement. Intra-Africa trade still accounts for only 16% of all African trade. That percentage is rising, but too slowly. We seem unable to wean ourselves off commodity exports to foreign markets.
And, despite heavy public debt supposedly incurred to address that very problem, intra-African infrastructure is still poor. Only five economies account for half of intra-Africa trade, with South Africa, Nigeria, and Kenya dominating. Realistically, intra-Africa trade is a hoped-for, future destination. But to use another cliché of indeterminate origin: hope is not a strategy.
Next up: How about foreign direct investment (FDI) to create or boost local industry? Well, again, more hope. Africa receives just over 3% of global FDI. Just over 3%. Only two African economies – Botswana and Mauritius – are deemed “investment grade” by ratings agency S&P. The same sub-structural logic with which trade siphons out of, rather than enriches Africa, also underlies global investment calculations.
Think lithium, which is now critical for batteries fuelling the so-called energy transition. This paraphrased quote, from a story last month in Kenya’s Daily Nation, is an illustrative example on FDI: “American mining company Kobald Metals, linked to Jeff Bezos and Bill Gates, says it has inked a deal that could allow it to mine lithium in the DRC, the first fruits of Donald Trump’s forays in Kinshasa. The company is about to acquire 17,000 mining concessions in the DRC. But the company is coming to an area where China currently reigns supreme.”
Investment used to go to oil and gas. Now it’s going to rare earths and critical minerals. But, as in the past, it continues to be neither by nor for us. It’s coming to extract resources, in their raw form, for productive uses outside the continent.
The significant benefit goes to the likes of Bezos and Gates, the people who own those productive uses. Sure, our governments will get royalty pittances. The functionaries in our governments will get their commissions, facilitation fees, kickbacks, or whatever they’re called. But in all likelihood, the communities in which the rare earth and critical minerals are found will get a big, fat nothing. Except for the inevitable environmental messes, human rights abuses and violations, and so on that accompany extraction.
No doubt money will be made from Africa with foreign direct investment and trade in whatever it extracts. But, barring radical resets in the global sub-structure, African governments, companies, and publics won’t be making it. Nor significantly benefiting from it. Decades from now Africans will ask, “Where’s the money?” and the answer will still be: “Not here.”