Africa to lose big as global tensions mount

Africa is set to be the biggest loser should the rocky economic relationship between the Chinese and the United States trading blocs continue to fragment, a new report by the International Monetary Fund (IMF) suggests.

IMF researchers said Africa has been benefiting from global integration, riding on the tailwinds of the growth of emerging economies like China but this could be brought to a halt. “Africa trade openness – measured as imports plus exports as a share of

GDP – doubled from 20% of GDP before

2000 to about 40%. “This doubling, together with buoyant commodity prices, amongst other factors, contributed to the growth take-off of Africa during this period, boosting living standards,” researchers stated.

They explained that sub-Saharan Africa could experience “permanent economic decline” if the world were to crack and split into two standalone trading blocs centred on China and its allies, versus the United States and European Union.

“About half of the region’s value of current international trade would be affected in a scenario in which the world is split into two trading blocs, with Africa set to lose four percent of GDP,” reads the report.

The region could lose an estimated $10 billion in Foreign Direct Investment (FDI) and official development assistance inflows which are around half a percent of GDP a year based on the IMF’s average 2017–2019 estimate. The reduction in FDI could also mean that much of the needed transfer of technology could also be harmed.

For countries looking to restructure their debt, deepening fragmentation could also worsen coordination amongst creditors.

Local policymakers are tracking the rising threat of geopolitical tensions and geo-economic fracturing. Bank of Botswana governor, Moses Pelaelo and his lieutenants have frequently cited geopolitical tensions in Eastern Europe as well as those between the US and China over Taiwan, as threats to both inflation and growth in the country.

Recently, the governor told

BusinessWeek the central bank is aware of a growing push by some major economies against the dominance in global economics of the US and its allies.

“In my monetary policy statement, I made the point about the so-called geoglobal fragmentation and this is an issue that is occupying the global community at large, in terms of what initially started as a push-back on globalisation because there were challenges,” Pelaelo told

BusinessWeek.

“Recently, we have seen this fragmentation globally and sentiments to that effect.”