Trade and Africa’s development goals: A window of opportunity

These are difficult times for global trade. Despite the resilience displayed through successive crises, the world economy continues to be vulnerable to geopolitical tensions,¹ unilateral trade barriers,² and regional conflicts.³

In Africa, while most economies have seen growth tick back upwards after the pandemic,⁴ many are struggling with burdensome debt,⁵ a financing squeeze,⁶ and vulnerability to climate change.⁷

Yet there are opportunities for Africa within these challenges. Structural and demographic trends,⁸ ongoing policy initiatives like continental economic integration,⁹ and changing geopolitical currents¹⁰ create a window for African countries to use trade to spur the faster growth and better job prospects that our young people deserve.

Two key linked opportunities are important to highlight. First, the transition to a clean green energy economy, and second, the move to de-risk and decentralize supply chains to avoid the over-concentration-related vulnerabilities experienced during the pandemic. The natural resources needed to fuel the clean energy transition are currently subject to similar fears of excessive concentration, particularly with respect to their processing.¹¹

Africa has what we term at the World Trade Organization (WTO) a “green comparative advantage.”¹² Just as countries and regions can reap economic gains by specializing in making and trading what they are relatively good at, they can also reap economic and environmental gains by specializing in making and trading what they are relatively green at.

Africa has over 60% of the world’s solar potential along with wind, geothermal, and other renewable resources such as green hydrogen.¹³ At the same time, Africa houses a substantial percentage of the world’s resources of critical minerals needed for the green transition. The continent accounts for over 40% of global production of cobalt (led by the Democratic Republic of the Congo), manganese (South Africa, Gabon, Ghana) and platinum (South Africa, Zimbabwe).¹⁴ But apart from platinum refining in South Africa, these minerals are mostly exported as unprocessed ores.

There is an unprecedented opportunity for the continent to harness its green energy potential and deploy it to the processing of the critical minerals on the continent. To do this, it needs to attract and marry together the value chain investments for both clean energy and critical minerals. No longer should the development model be extraction and export of raw commodities. Rather, processing and value addition should be prioritized on the continent. That way, trade is boosted, thousands of jobs are created for young people, and supply bottlenecks for these products are eased, all while helping close the continent’s energy access gap and meet global targets to ramp up renewable energy.

Attracting investment into these areas and becoming part of globalized supply chains for clean energy products, processed minerals, and lithium-ion batteries, for example, would make Africa part of the re-globalized world economy that we need to create. We need to reimagine globalization to include those parts of the world left on the margins of the global division of labor, making world trade more inclusive, more sustainable, and more resilient.

Despite its immense green energy potential, Africa attracts only 2% of global investment in renewable energy.¹⁵ Its share of world trade has stagnated at around 3% for years.¹⁶ It is time for Africa to seize the opportunity to boost both in tandem, creating jobs and prosperity by leveraging its green comparative advantages.