The five conditions for success of the economic meeting in December 2016, between Algeria and Africa?

The Algerian Ministry of Foreign Affairs met on July 11th, 2016, all Algerian economic operators, with the view to preparing the summit Algeria / Africa planned for end of year 2016.  This follows on the announcement by the Algerian Prime Minister, back on January 21st, 2015, of the Algeria / Africa «economic seminar» project.  Algeria moving closer to Africa as I have shown in my various contributions and international conferences, the needs are mutual and both parties facing geo-strategic upheavals, are called to define themselves vis-a-vis those critical issues and challenges which the least that can be said is that they exceed in importance and magnitude the challenges they had faced so far.

Future challenges of Africa being multiple, and whether national, regional and / or global, these bring in competition and / or confrontational interventions of different and unequal world powers.  Africa, as long as its leaders would allow, has all the potential to become a large continent with definite economic influence.  But, Africa will be what Africans want it to be.

1 – Africa is a continent with high potential and is a strategic challenge for the 21st century. It covers 30,353 million km².  Its population increased from 966 million in 2009 to 1.075 billion in 2012, to 1.124 billion in 2014 and to 1.154 billion in 2015.  Some of its countries are penalized in their main products that often deteriorate in terms of trade earnings.  Add to that, rampant poverty, omnipresent famine and internal or external conflicts pushing military budgets often to exceed all allowance of resources for development purposes.  Africa suffers also from a certain lack of strategic vision without which regional sub integration as condition to attract investment, is not feasible,.

Meanwhile, seven countries represent 51% of the population.  By 2020, the African population is expected to spend $1.3 billion and $2 billion in 2040.  In fact, there is not an Africa but many Africas.  On the basis of the World Economic Outlook, the most prosperous 10 economies in Africa for years 2014/2015 in terms of nominal GDP (indicator which should be corrected by the PPP index) are in descending order :  Libya, according to the World Bank, had a GDP: $41.1 billion in 2014 against $65.5 billion in 2013 due to its civil war, for a population of 6.41 million, Ethiopia with a population of 99,48 million has $48.1 billion, Kenya with $55.2 billion for a population of 45.92 million.

Sudan with $70.1 billion dollars for a population of 36,10 million, Morocco with $105.1 billion for 33.32 million inhabitants, Angola with $121.7 billion for a population of 19.62 million, Algeria with $211.9 billion for a population of 39.54 million, Egypt: $271.4 billion for 88.48 million inhabitants, South Africa with $350.8 billion for a population of 53,67 million people and Nigeria with $580.5 billion dollars for a population of 181,56 million people.

In reference to the Human Development Index (HRI), according to the UNDP, noting improvements, the majority of African countries because of their lack of good governance, still have much efforts to provide for a better distribution of wealth.  Amongst the 25 poorest countries in the world according to the UN, 21 are from Africa.  The majority of African countries are dominated by the importance and the weight of their informal economic sectors, with some variety depending on the specifics of each country, but generally exceeding 50% to 60% of the economy of a particular country and employing more than 70% of the workforce.  According to the international Labour Organization (ILO), this sector provides up to 72% of jobs in sub-Saharan Africa, including 93% of the new jobs created, in comparison to the formal sector, employing approximately 10% of the assets of the continent.

In the Maghreb region, [refer our study under my direction for the French Institute of International Relations (IFRI), Paris, circa December 2013], it (the informal economy) exceeds 50% of the conventional economic spheres.  In addition many countries are being hampered by blatant corruption.  The joint report BAD – GFI released on May 29th, 2013 highlights the fact that Africa has suffered net outflow from $597 billion to $1400 billion between 1980 and 2009, after adjustment of the net transfers registered for fraudulent outgoing financial flows, and that this could amount over the last thirty years  to the equivalent of the current Africa’s GDP.

According to the IRES in Paris, Africa represents only 1.5% of world GDP, 2% of world trade, and 2% to 3% of direct foreign investment.  And as per a 2013 report by the African Development Bank (ADB), inter-African trade is only 15% on the continent and inter-maghreb countries less than 3%.  The reasons are multiple, such as :  lack of capital, and suitable infrastructure and poor governance.  Besides, Customs duties are very onerous and quite often informally costly.  All these logistical shortcomings are associated to “the lack of competence of human resources” are a serious brake to the fluidity of trade whereas a business needs skilled workforce.  Of course, organizations such as the economic community of the States of Africa (ECOWAS) and the economic community of Central African States (ECCAS) do exist and were meant for that purpose.

But several disagreements hinder their proper functioning.  Essentially the problem of security and stability of States which must be based on democratic values remain up to now insoluble.  And here arises the problem of tensions in the Sahel where insecurity and uncertainty are becoming endemic.  We witnessed in the Saharan region major geopolitical changes after the collapse of the Libyan regime, with consequences for the whole region.  There are also cultural and linguistic barriers between the Francophone and Anglophone countries that do not facilitate any development of regional integration.  The prime objective of starting the NEPAD was, e.g. to translate into concrete actions the challenge of Africa’s development but it is clear that in view of the result so far is at best mixed.

  1. – To be able to cooperate, Algeria must know perfectly the economic and social situation of African countries. If one refers to the public debt GDP (economic aggregate that measures a country’s national wealth), Eritrea, Cape Verde and the Gambia are the most heavily indebted countries of sub-Saharan Africa with respectively 126% and 122% and 97% of public debt. In addition to these 3 countries, the debt ratio of Sao Tome and Principe (92%), Congo (79%), Ghana (74%), Malawi (73%), Angola (70%) and the Seychelles (65%) bring them to the top 10 of the most indebted African countries in 2016.  Conversely, sub-Saharan countries whose debt levels are lowest are Nigeria (only 13%), Botswana (16%), the DR Congo and Swaziland (20%), Equatorial Guinea (25%) and the Comoros (29.2%).  Namibia’s debt in 2016 ratio is 31%, comparable to those of Côte d’Ivoire and Burkina Faso who are indebted to the tune of 33%.  Mali with sub-Saharan Africa’s average of 52% has only 35% debt ratio.  Africa’s development will benefit the whole of the other economic areas whilst avoiding the traumatic migration of its populations.  Otherwise, it is feared to have repeating political crises.  Many African citizens are going through moral crises because of their leadership’s obvious lack of moral values and consequent polarization of their society.  The gap between the rich and the poor becomes increasingly large.  The income gap reinforces inequalities in education, health, and social mobility.  However, the African continent is a major geostrategic issue in the 21st century with more than 25% of the world population by 2030/2040.  It has significant unexploited resources and could become the locomotive of the world economy by that time.  And this, without better governance, regional integration and primacy given to the economy of knowledge, could not be achieved.  However, a survey conducted in 2012 by the AU/NEPAD in 19 African countries shows that only Malawi, Uganda and South Africa are investing more than 1% of their GDP in research and development (R & D), compared to 0.2% to 0.5% for all others.  A UNESCO report emphasizes that Africa spends only 0.3% of GDP on average in R & D, seven times less than the investment in industrialized countries.  In this context, for the next meeting that will be held in Algeria by year end.  In  the meantime, hope of concrete results with African operators I remind there have been summits USA / Africa and Europe / Africa, Japan / Africa, China / Africa, Turkey / Africa etc.   For Algerian operators to make their way to the African market, they would have to meet five conditions.
  • Firstly, must take account of the rivalry of the couple United States / Europe and China for economic control of this vital continent.  The fatal mistake would be to oppose in the 21st century the United States to Europe, which have fundamentally the same strategic goal, although some rivalries in tactical short-term do exist, the strategy of transnational companies do somehow mitigate their differences.  Also, unlike some populist speeches, disconnected from the practice of International Affairs, penetrating the African market will be as difficult if not more than the European market.
  • Secondly, a cultural revolution amongst the leaders living on the myth of money as capital power, whereas there may not be a diversified economy without the primacy of the knowledge economy: how many competitive companies public and private with a minimum integration rate of 40 / 50%, does Algeria, all to international standards and with the required research and development laboratories.
  • Thirdly, imports being easier than engaging into production, it comes down to de-bureaucratise the administration, and vitally implement the theory of economic intelligence at the level of the strategic State Institutions.  Reliable and real time information from competitors by virtue of the presence for some time of many international firms in Africa did help take market segments and manage their long term local networking.
  • Fourthly, it will take some support and banking logistics (how many Algerian banks are present in Africa).
  • Fifthly, and synthesis, the penetration of the African market assumes a win / win partnership with the firms that control the world market and a strengthening of the internal productive apparatus, assuming the emergence of Algerian enterprises competitive in terms of cost-quality, in the context of the global comparative advantages which must rest their action not on money capital only limited liquid capital of the private sector in the real sphere, as shown recently by the mixed results of the Algerian Forum of Business Leaders for the national Bond Issuance.

Without fulfilling these conditions, it will be very difficult for Algeria, to enter the African market.

Dr. Abderrahmane Mebtoul, University Professor, Expert International,

Translation from French by Microsoft / FaroL

Références :

(1) – See relations Africa/Maghreb by Pr Abderrahmane Mebtoul, study for the French Institute of International Relations (IFRI), Paris – France, November 2011 in French – Relations Europe-Maghreb geostrategic challenges – the Maghreb geostrategic challenges, collective work directed by Pr Abderrahmane Mebtoul and Dr. Camille Sari from the Sorbonne University, [36 authors North Africans and Europeans, economists, political scientists, sociologists, military)-2 volumes Edition L’Harmattan Paris – France 1100 pages 2014].

-Intervention of Professor Abderrahmane Mebtoul – international meeting organized by the international organization ‘The Alliance for Rebuilding Governance in Africa (ARGA)’ 26 to 30 January 2014 – Rabat, Morocco on the theme “Africa must reinvent its economy” in partnership with the Foundation Charles Léopold Mayer for the progress of humankind, the African Innovation and the French Foreign Affairs Ministry.  Professor Abderrahmane Mebtoul is member of the Scientific Council of the Pan-African Organization of the United Nations, CAFRAD representing Algeria, as an independent expert appointed for his scientific work.