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Finance & Economics

Africa and

the 3Ds of

the new

world order

A Ship with shipping containers passing through the Sue Canal

ccording to the World Economic polarization, especially targeted at The continent can do little to counter
AForum (WEF), it is too early to say China, which is likely to respond in the global forces inclining toward de-
that the global economy is entering the a similar fashion. We are likely to see globalization, but it can itself embrace
recovery phase after the humanitarian a rapid erosion of the principles of a self-supportive regionalism through
and economic damage inflicted by free trade that could delay the global enhanced intra-African trade. Almost
COVID-19. However, there are already economic recovery. counter-cyclically, actively promoting
three mega-trends emerging, which trade liberalization to encourage new
will also shape Africa’s economic future Another trend is the increased areas of growth would be a pragmatic
– the three ‘Ds’ of the new world order. significance of Asia as a trading bloc response to the reduction in global
These, are: with China at its centre. In light of trade, not to mention promoting
China’s demand for commodities, both
De-globalization for its infrastructure roll-out and its Africa as an enhanced destination for
investment from multinationals.
The world is no longer converging industry, this will have strategic geo-
but rapidly diverging in an alarming economic consequences for developing Debt and the fiscal sustainability of
manner. Simple proxy indicators are countries, which have primary countries
air travel and shipping volumes, both commodities as their main exports. The outflow of capital from the emerging
of which have all but collapsed in the Already a minor player in global world has been huge in recent months
face of shutdowns and imposed travel trade terms, African economies are in and has left deep holes in developing
restrictions.
danger of even further marginalization countries’ finances. Facing rising
With the global shutdown having as a result of these macro trends. It is fiscal deficits, over 100 countries have
impacted countries that account for unfortunate that the African Union has applied to the International Monetary
over 80% of global GDP, the World decided to postpone the implementation Fund (IMF) for emergency funding.
Trade Organization (WTO) recently of the Africa Continental Free Trade In addition, the G20 has for a debt
warned that, as a worst case, trade Area (AfCFTA) to next year, perhaps moratorium from bilateral sovereign
could collapse by as much as a third the most ambitious free trade project creditors to provide payment relief
this year. Even considering its most since the WTO itself. It is envisioned to highly indebted African countries.
optimistic scenario, the WTO forecasts that, through reducing barriers to Private creditors, however, have been
that trade could fall by 13% in 2020, trade, the economic prospects of a less forthcoming, choosing to review
a similar drop in trade as recorded in continent of over 1.3 billion people debts on a case-by-case basis. It is
2009 after the financial crisis. with a combined Gross Domestic imperative that multilateral financial
The demand shock is being exacerbated Product (GDP) of $2.5 trillion – almost institutions move rapidly to alleviate
by protectionist sentiment. Countries identical to India’s – will be boosted. It the dire financial situation in many
are clearly not actively promoting has be calculated that if Africa was to capital-constrained African countries.
liberalized trade, seeking economic increase its share of global trade from Among Africa’s largest creditors are
solace through protectionism. 2% to 3%, the one percentage point China’s so-called “policy banks” that
Multilateralism is now unfortunately increase would generate approximately have been extensive lenders to African
on the backburner. Rising trade $70 billion of additional income per countries over the course of the past
frictions will result in increased trade year for the continent. decade or more. It is to be expected that

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