As a top producer of numerous critical mineral commodities, Africa is set to benefit from the rapid increase in the rate of global energy transition, with the continent’s mining industry playing a role in sourcing and supplying these critical minerals for use in clean energy initiatives. Exporting these critical minerals as raw materials, however, reduces Africa’s trading position to one of price takers, and the current disruptions in global supply chains are hampering the trade of these commodities in Africa, with mining companies subject to long delays and higher costs. The African Continental Free-Trade Area, implemented in 2021, acts as a strong impetus for African governments to address their infrastructure gaps, streamline their supply chains, boost their manufacturing capacity and overhaul regulation relating to trade, cross-border initiatives, investment-friendly policies and capital flows.
The strengthening partnership between the United States and Africa is having a positive impact on the myriad of trade and investment opportunities created by the African Continental Free Trade Area. At the recent US-Africa Leaders’ Summit in Washington, DC in December 2022, a number of exciting initiatives and investments were announced by the US to boost two-way trade and investment between the two regions.
The strengthening partnerships between the United States and African countries is evident in recently announced initiatives that focus on sustainability and community empowerment and that provide reciprocal benefits for the citizens of both regions. Such initiatives include, for example, increased US support for climate, clean energy and infrastructure development projects in Africa, and programs that boost reciprocal trade and investment between the two regions.
The availability of climate financing to assist developing countries, the most vulnerable in the world to climate change, with the transition to a low-carbon, climate-resilient future was one of the key topics under discussion COP 27. There were numerous funding and climate action announcements focusing on Africa at “Africa’s COP”. It is hoped African countries will soon be able to access some of the financing required to fortify the continent against the impact of climate change. Achieving this is essential, not only to address urgent climate change adaption and mitigation challenges, but also to unlock the great potential of the continent.
The African Continental Free Trade Area Agreement (AfCFTA) recently launched the Guided Trade Initiative to test meaningful, continuous trade under AfCFTA and to assist in the development of shorter, regional value chains that will allow for more climate-resilient, sustainable trade across the continent. But for Africa to make the most of free trade, it is essential that large gaps in continent-wide infrastructure and manufacturing be developed in a sustainable way.
The Partnership for Global Infrastructure Initiative (PGII) was launched in June 2022 at the G7 Summit in Germany. The PGII is a USD 600 billion lending initiative to fund infrastructure projects in the developing world, with a particular focus on Africa. One of the aims of the initiative is to help address the massive infrastructure investment gap in Africa.
Bilateral trade between China and Africa is increasing year on year. While COVID lockdowns have resulted in logistics bottlenecks, trade between the two regions has not been severely impacted, especially in terms of exports from Africa into China. China has continued to import African agricultural goods and raw materials, with food security and materials needed for the energy transition considered to be a priority. The ties between these two regions continue to strengthen, and are expected to be further bolstered as free trade under the African Continental Free Trade Area takes hold.