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AfricaMarch 26 2021

Only lasting peace will guarantee lasting prosperity in Africa

Africa is the world's most conflict-torn continent and this is having a direct impact on its economic growth. Policymakers must adopt a bold agenda to foster inclusive growth and social cohesion.
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Only lasting peace will guarantee lasting prosperity in Africa
Fofack

Hippolyte Fofack, Afreximbank

The African Continental Free Trade Agreement (AfCFTA) is a game-changer. It has the potential to accelerate and change the composition of foreign direct investment inflows into the continent, increasing the diversification of sources of growth to boost both extra- and intra-African trade. Corporations can capitalise on competitiveness and productivity gains, as well as greater economies of scale to spread the risk of investing in smaller markets across the region.

But after the commencement of trading under the AfCFTA on January 1, 2021, the issue of security looms large and could emerge as a major challenge during the implementation of the agreement, unless the decrease in conflict exit probability is reversed. The guns must be silenced throughout the continent.

The cost of conflict

Africa has long been the most conflict-prone part of the world. The rise of both intrastate and transnational actors in expanding terrorist networks has seen conflicts intensify on the continent. According to the World Bank, 21 African countries are contending with high institutional and social fragility (nine), or are in a state of either medium- (10) or high-intensity conflict (two). The past few years have been the most awful in terms of fatalities, with the number of conflict-related deaths averaging 14,000 per year since 2014 — a stark increase from 2200 in 2010.

Conflicts impose large short-term costs in both countries that are directly affected and their neighbours, undermining formal and informal cross-border trade. Informal cross-border trade between Mali and southern Algeria has fallen by more than 180% since 2011, largely due to the outbreak of conflict in northern Mali and the closure of the border between the two countries. The negative impact of conflict on trade is also longer lasting: estimates show that the outbreak of conflict is associated with a reduction in exports by 26% the same year, cumulatively 35% five years later, and 58% 10 years after the outbreak of conflict.

But conflicts also affect trade and economic integration indirectly. In addition to destroying physical infrastructure and fragmenting markets, the acceleration of high-intensity conflicts has seen military expenditures rise more than threefold across the region since the turn of the century. In 2014, African defence spending reached a record $45bn. This in a region where large financing gaps have inhibited infrastructure development programmes intended to boost productivity and accelerate the transformation of African economies to alleviate supply-side constraints, and align domestic production and demand to sustain the growth of intra-African trade.

Bolstering security

In recent years, there has been a shift in the balance from development to security. While that swing may be explained by the increasing frequency of high-intensity conflicts, the relationship between security and development is complex. For example, long, drawn-out development can stir up grievances, which threatens growth.

Conversely, protracted conflicts can undermine integration and economic development, most notably through business cycle synchronicity, the misallocation of resources and trade disruptions. Beyond undermining economic performance, the subordination of development aspirations to short-term security considerations breeds corruption, which in turn drives horizontal inequality and grievances, setting the stage for a long-run coexistence of a conflict trap and a poverty trap.

Hence the need to foster both aspirations simultaneously. Mutually reinforcing defence and development initiatives could produce a virtuous cycle of peace and prosperity, sustained by the proper allocation of scarce resources towards the type of productive investments needed to attract private capital and address supply-side constraints. Alleviating these restrictions will bolster intra-African trade — which at only 15% of total African trade remains dismally low, even by developing-region standards — and mitigate the risk of recurrent balance of payment crises associated with commodity price cycles in a context of continued excessive dependency on primary commodities.

A growing number of African countries are settling political differences through the rule of law, rather than down the barrel of a gun

These challenges have been magnified by the Covid-19 pandemic — the largest impact of the crisis on growth has been for tourism-dependent and commodity-exporting countries. Covid-19 underscores the significance of long-term security to economic integration and sustainable development. A secure environment will place and sustain Africa on an irreversible, long-term growth trajectory where the composition of public spending is tilted away from the military towards growth-friendly capital expenditures. This shift will crowd-in the private and patient capital necessary to fuel the diversification of sources of growth and continuously boost cross-border trade and investment throughout the AfCFTA’s implementation.

Road to recovery

The AfCFTA’s success and the deepening of economic integration in Africa hinges on creating the right conditions for long-term security: only lasting peace will guarantee lasting prosperity. While ongoing efforts to deepen economic integration under the AfCFTA may transform Africa’s economy and flatten the income inequality curve, realising this potential depends largely on delivering sustainable peace and security in the short term and sustaining those conditions over time.

Policies geared towards intertemporal security objectives with intergenerational consequences should aim to strengthen national and continental judicial institutions, and ensure accountability in line with collective responsibility to the principle of non-indifference. Policy-makers must adopt a bold agenda of conflict prevention by implementing policies that foster inclusive growth and social cohesion, by improving governance, reforming the security sector and strengthening the rule of law in all AfCFTA member countries.

If economic and democratic governance reforms are complemented by similar improvements to the judicial system and security sector, emphasising accountability and protection of citizens, then the dividends in terms of conflict prevention will grow further. In addition to strengthening the foundations of peace across Africa, the combined effect of these reforms will encourage a departure from repressive traditions and deliver a stable environment for political inclusion and economic growth.

With a few exceptions, progress in following a more inclusive and citizen-centric approach has been promising. A growing number of African countries are settling political differences through the rule of law, rather than down the barrel of a gun. In some cases, judiciaries have been greatly empowered and are increasingly exercising their independence. One noteworthy example was the decision of the constitutional court of Malawi to annul the result of the 2019 presidential election in light of substantial poll irregularities; the rerun in the summer of 2020 resulted in a victory for the opposition.

Governance reforms are also likely to have positive spillover effects for institutional stability and regional integration in the long run. These should be sustained and broadened across the continent. Greater institutional stability and predictability will curtail the risk of discontinuity in the commitment to regional integration during political and democratic transitions.

Although integration is, at its core, a political project, achieving success in this venture is contingent on recognising that the project is too important to be politicised. The commitment to deepening the process of economic integration under the AfCFTA must remain unaffected by either political barometers or business cycles. Instead, the security and development nexus must be consistently strengthened to optimise the allocation of scarce resources and to mitigate the risk of backtracking on integration.

Rebalancing Africa’s security and development objectives is a daunting task, but one the region’s leaders must seize with both hands to enhance implementation of and realise the AfCFTA’s game-changing potential. To paraphrase the late, great Kofi Annan: “There will be no development without security, and no security without development … and both depend on respect for human rights and the rule of law.”

Hippolyte Fofack is chief economist and director for research and international co-operation at Afreximbank.

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