Impact on Africa
Proposed policies and actions from the meeting will have impacts on African economies largely through trade, investment and other financing channels. China, the United States, the UK and Africa’s now again largest economy (in U.s.-dollar terms), South Africa, are all important trading and investment partners to the continent.
As African economies are price takers rather than price setters, commodity price shocks over the past two years have re-emphasized the importance of economic diversification into value-added products and service exports, both for sustaining employment levels as well as export earnings during commodity cycle downswings.
This should be done both by embracing and investing in innovation in the business and development models of countries, while pursuing industrialization strategies and enabling investments. This in itself is a key shift for the majority of African economies. The partnership of G20 economies in the pursuit of these new growth models could provide better opportunities for inclusive and sustainable development in African economies, rather than resource-driven growth paths.
In this light, what is encouraging is that China has tabled a cooperation initiative with Africa to promote industrialization through collaboration on investment and infrastructure as part of the expected G20 outcomes. China thus is championing commercial benefits and diversification prospects for African economies.
For Africa, this builds on China’s foreign commercial policy objectives and means greater prospects for attracting investment into infrastructure (through the Asian Infrastructure Investment Band and the BRICS Bank) as well as agribusiness, manufacturing and other value-adding sectors.
It also provides the potential for African economies to deepen their integration into regional and global value chains as equal economic partners, rather than just resource suppliers, as various trans-national free trade agreements are lobbied for approval, as industries emerge in Africa to serve the growing demand of Chinese consumers and as more renminbi become available to finance trade activities in this corridor.
Although the G20 Summit in Hangzhou will neither be the saving grace of the growth fortunes of the world, nor solve the challenges that African economies continue to face, the agreement by leaders of some of the largest and most important economic players to commit to change is in itself a boost of confidence. So too is China’s championing of Africa’s industrialization agenda at the decisionmaking table of the world’s leading economies. Going forward, G20 partners’ continued focus on Africa’s industrial ambitions could go a long way for the commercial development and diversification of the continent.
(The author is associate director at Deloitte. The opinions expressed in this article are purely those of the author and do not necessarily reflect the views of Deloitte)