Tuesday Dec 06, 2022

Gateway to growth: How the European Green Deal can strengthen Africa’s and Europe’s economies – European Council on Foreign Relations

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Summary

  • In much of Africa, growth is being driven by “green energy innovation ecosystems”, which combine telecoms, digital platforms, solar power, and the internet of things.
  • European companies and states risk losing out on business opportunities and political influence if they fail to integrate their services and infrastructure into these emerging ecosystems.
  • China and other economic and geopolitical rivals will become African states’ main partner if Europeans stand aside from this key growth trajectory.
  • The EU can: assist on offering world-class data regulation and supporting the construction of data centres; support the construction of other infrastructure, such as for 5G; and help roll out off-grid solar power generation and electric vehicle manufacturing.
  • Europeans should work in joint ventures with African firms as this model is proven to create value added that China’s investments often fail to produce.
  • The EU should merge its nascent Global Gateway international connectivity programme with the European Green Deal. The objectives of both require similar levels of investment in African infrastructure and they can unlock the investment potential of European public-private partnerships.

Introduction

Economic and commercial relationships with Africa are set to play an ever-greater role in determining countries’ and blocs’ place in the global economic order. By 2025, Africa will have over 100 cities with more than one million inhabitants – more than three times the number in the European Union. By 2030, 42 per cent of the world’s young people will live in Africa, making the continent home to the largest supply of affordable labour on the planet in the coming decades. And, with an extremely extensive supply of inexpensive and available land, Africa is already attracting international businesses looking for affordable manufacturing sites.

Moreover, Africa is the fastest-growing end market for a widening range of products. This means it is increasingly not just a place that makes things to export, but is also home to important consumer markets that are underserved and set to rapidly expand. This trend will accelerate with the full implementation of the African Continental Free Trade Area, which launched in January 2021.

Much of this growth is being powered by the green energy innovation ecosystems that are emerging in sub-Saharan Africa; they are already defining the future trajectory of economic growth on the continent. These innovation ecosystems thrive by combining cutting-edge digital technologies and telecommunications with renewable energy technologies. They respond to Africa’s unique market needs – which include significant consumer demand for better digital connectivity – and they make use of the considerable green energy potential of the continent. These ecosystems are, by definition, a cross-industry phenomenon in which growth in one sector supports growth in another. Solar energy, electric vehicles, and telecommunications and information and communications technology (ICT) are all intimately interconnected. They synergise with one another to create a virtuous cycle of market expansion for each sector.

Africa has seen growth in these sectors thanks to their interconnectedness. For example, the expansion of digital financing platforms operating over mobile networks has enabled consumers to purchase off-grid solar power systems. The components needed for these systems are supplied by local solar panel manufacturing sectors. Access to affordable power has enabled the development of new commercial markets for other goods and services.

However, it is far from assured that Europe will play a primary role in the new commercial architecture emerging in Africa. Indeed, Europe’s global economic competitiveness is at risk. Now and in the coming years, international …….

Source: https://ecfr.eu/publication/gateway-to-growth-how-the-european-green-deal-can-strengthen-africas-and-europes-economies/

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