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Partnerships, special economic zones, new CSR essential for Africa’s economic diversification

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Partnerships, special economic zones, new CSR essential for Africa’s economic diversification

Conversations and policies on economic diversification should aim to break the current vicious cycle that locks Africa at the bottom of global value chains

YAOUNDE, Cameroon, September 28, 2021 / Groupe APO / –

To achieve economic diversification in Africa, which can also benefit its development partners, external actors must adjust their interface with the continent on the basis of the creation of shared value and the promotion of measures beyond the maximization of profit.

Antonio Pedro, director of the sub-regional office for Central Africa of the United Nations Economic Commission for Africa (ECA), made the remark during the Africa at Scale 2021 conference organized virtually by the Africa Foresight Group this weekend on the general theme of “Building a Place in the Global Economy.”

During a panel discussion titled “How the right policies can boost the diversification of the African economy,” Pedro said that economic diversification is a fundamental way to reduce the vulnerability of resource-dependent exporting countries in Africa, as became evident in Central Africa when commodity prices fell in 2014.

Referring to the Douala Consensus on Economic Diversification, Through Resource-Based and Trade-Driven Industrialization, he argued that the African Continental Free Trade Agreement (AfCFTA), as the continent’s Marshal plan , can strengthen trade fundamentals for accelerated industrialization and economic diversification in Africa. . This would make the region a globally competitive investment destination.

The priority should therefore be to strengthen these core principles through evidence-based analysis, which, he noted, has been the main focus of ECA’s work in Central Africa.

With a projected market of 2.5 billion people in 2050 and its endowments of essential resources for the transition to net zero, Africa should be the hub of win-win global partnerships and investments for a greener future, did he declare. This should enable the continent to move up the ladder of global value chains, unlike the current situation where Africa provides raw materials, he said.

He noted, for example, that the DRC produces 60-70% of the cobalt required for batteries essential to deploying solar and wind energy and to power electric vehicles, but captures only a meager 3% of the profits of the battery value. and the electric vehicle (BEV) value chain, which is expected to reach US $ 8.8 trillion by 2025.

“Conversations and policies on economic diversification should aim to break the current vicious cycle that locks Africa in the lower end of global value chains and to address the structural issues that worsen economic activities on the continent,” he said. he observed. This will be the objective of the next DRC-Africa Business Forum which will be co-organized in Kinshasa from November 8 to 9, 2021 by the government of the host country, ECA and its partners including the Africa Finance Corporation, the African Development Bank. , the Arab Bank. for economic development in Africa and Afreximbank.

Discussing industrial policy, he noted that the creation of special economic zones (SEZs) can allow African countries to overcome the binding constraints to be competitive in Africa.

The location, design and area of ​​specialization of these SEZs should be based on business fundamentals established for example through diagnostic growth studies, rigorous determination of what constitutes national comparative advantage / value propositions rather than a simple political will or by government decrees.

He stressed that some of the constraints to industrial productivity for these areas – such as lack of electricity supply, general logistical problems and insufficient skilled labor force, need to be addressed when trying to create SEZs.

This is where the smart local content policy becomes crucial, he noted.

Pedro pointed out that, in line with ECA’s strong campaign on economic diversification, especially in Central Africa, some countries have recently taken important steps in the area of ​​SEZs.

The special economic zone of Gabon (GSEZ), also called “ARISE” is an example to display. Logs are no longer allowed to leave the country as exports. Minimal to high levels of processing must take place, before this happens, facilitated by GSEZ.

A new approach to corporate social responsibility would also be needed for a better policy configuration to support economic diversification in Africa, Pedro argued.

“Corporate social responsibility is important because it is seen as a social license to operate,” he said, adding that it was time to take CSR to another level of impact creation.

“Multinational enterprises are generally endowed with enormous organizational and productive capacities which must be transmitted to local populations through capacity building, especially through national supplier development programs, as a vehicle for the emergence of small and competitive and job-creating medium-sized enterprises (SMEs).

Beyond building local schools and clinics, this should be the next generation of CSR, with smart, targeted and well-negotiated local content policies at the center, he advocated.

Africa as a hub for global green growth and investment, will require recognition of the continent’s natural capital and ecological services, which must be monetized and integrated into the calculation of the wealth of its countries.

“We should integrate natural capital accounting into national accounts, push for a rebasing of local economies by taking better account of natural capital and its services,” said Pedro.

“This is part of our economic diversification program in Central Africa. It will expand fiscal space in the region, facilitate the mobilization of innovative financing, notably through green and blue bonds.

The 2021 Africa at Scale conference was the third in a series started in 2019 to examine the investment and business landscape in Africa and propose ways to improve it, while building the necessary partnerships to do so.

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