Vera Songwe: Championing Africa Trade

Vera Songwe is Under-Secretary-General at the United Nations, and Executive Secretary at the United Nations Economic Commission for Africa.

Two years ago, in March 2019, Vera Songwe spoke to the Oxford Business School in the UK about the Africa Continental Free Trade Area Agreement (AfCFTA). She began by saying that two trends were creating a game-changing opportunity.

“The first one is leadership change, and a coalition of leaders who are coming together to say that we can actually be different, we can actually have a continent that will carry the spirit of multilateralism forward.”

The second trend is the coalescing of these leaders around the role of trade and its role in the economic emancipation of the continent: “What the leaders of the continent have decided to do is say we’re going to take a bet on making ourselves one whole continent around the idea that is the African Free Trade Area Agreement.

“When we talk about Africa, it is essentially 55 countries that are trying to trade with each other. We have 15 countries on the continent whose GDP is less than $5bn, Businesses face about 6.1% tariffs, and we have about 107 borders.

“The DR Congo, for example, has nine neighbouring countries each with their own trade regimes.”

Songwe makes a convincing argument that trade is the key to unlocking Africa’s economic potential.  “That is because we have done a lot of studies that show that trade actually builds nations, creates wealth, and trade adds value,” she says.

But the problem is that the continent, as balkanised as it is, has not been able to trade, with itself in particular. “What you see,” she explains, “is that between 1990 and 2014, we had a lot of countries in the world that were diversifying their trading, but Africa didn’t do as much.

“We have Senegal, Rwanda, South Africa, Mauritius, actually Uganda is also on that list, that succeeded in doing some amount of trade diversification, but not as much as we would like.”

The issue is that there are a lot of countries on the continent that are neither working towards better export diversification nor succeeding in improving the quality of the goods that they are producing.

“We started by trying to understand what is happening,” Songwe says, “and why that was.” What she has concluded is the importance of trade, and in particular trade diversification, is paramount.

“The two biggest economies on the continent, South Africa and Nigeria, are actually losing in export diversification. They are not trading as many goods as one would wish. But it’s okay if you’re losing on the export diversification part, if you have intensified on quality and value addition. But they are not doing either. And that is the problem.”

Bearing in mind that she was speaking in March 2019, she quoted figures indicating that 70% of Africa’s trade with the rest of the world is extractives, and only 30% of continental trade with the rest of the world is in industrial goods or services; yet on intra-Africa, 40% is extractives and 60% is manufacturing and the services industry. “It’s okay when you look at it just like that. And you say to yourself, ‘okay, yeah, you know, they are trading more manufactured goods with themselves’.”

But she has a far more ambitious vision for African trade – it is to develop intra-Africa trade so that the continent can join global value chains.

“As a matter of fact, as we integrate regional value chains, the value added that we get when we then export is much higher.

“I give you an example, if you were producing cotton in West Africa and then selling it to Ethiopia, that then produces the material and sells it to overseas markets, we have actually added two pieces of value addition, before we export. And so the exports and the net revenue that we get on the continent are much higher than each one of us exporting individually.

“So that is the secret, really, of the AfCFTA. It is to say, we have a lot of global value chains. But before you integrate into global value chains, we want to integrate regional value chains. It’s much easier to integrate regional value chains.”

Eco-friendly trade

In early February 2021, Songwe contributed to the virtual World Trade Symposium. She chose to emphasise the importance of sustainability. As she put it: ”The AfCFTA is essentially creating one big single market. We are trying to create one single market because the biggest objective on the continent is to create jobs.

“If we can create the right jobs, if we can ensure that those jobs are creating the value that is needed within the continent, then we’re better off.

“Statistics have shown that. Globally, we have about 1.2 billion jobs in sectors such as farming, fisheries, forestry, and tourism, that depend on a healthy environment, and the renewable sector in the continent can create over half a million jobs in Africa by 2022.”

Songwe says that Africa holds one great advantage, going forward. “We have not yet invested a lot in the transport infrastructure that we need for growth and development, which means, that we can do things differently, relying more on rail than trucks or aviation.

“Eco-friendly trade will mean that we will focus more on renewables when we develop our energy. Africa has one of the largest reserves of hydro power, and huge potential for solar and wind power – as well as geothermal.

“Economies just grow much faster when you’re able to connect markets and cities. And so we believe that in the next five years there should be a huge infrastructure plan for Africa, to empower the AfCFTA.”