A revolution hastened: Africa looks within amidst global trade wars

Mbongeni Mguni | Monday July 14, 2025 15:21

If there’s one thing African leaders are adept at, one thing they have mastered over the decades of post-colonial independence and development planning, it is accurately, fastidiously and beautifully describing the challenges facing their individual countries and the continent at large.

Each meeting of the numerous multilaterals and supranationals formed on the continent has descended into a talk-shop where problems facing the continent’s developments are detailed, but the resulting resolutions, protocols and decisions are rarely moved forward.

Africa, its citizens say, has been stuck in a paralysis analysis for decades, its resources sub-optimally exploited in the continent, opportunities falling away, young population relocating to other continents and the poorest only sinking deeper into the mire.

While the continent’s supranationals were admittedly effective in bringing about political freedom, they have performed below par in securing economic success for citizens and Africans remain in the lower rungs of most human development indicators.

In Abuja, where the African Export and Import Bank (Afreximbank) was holding its 32nd Annual Meetings recently, leaders shared a statistic reflecting the difference between knowing what to do, and doing it.

“A recent Harvard Business School study found that there are two requirements for success – strategy and execution,” said Olayemi Cardoso, governor of the Central Bank of Nigeria. “Many times, you find leaders have one or the other. “Just eight percent of leaders have both and in some organisations, they have none and that’s a huge challenge.”

Turbulent times

Africa, having missed out on the Industrial Revolution and playing catch-up with the world in a time of climate change and Artificial Intelligence, desperately needs more of that eight percent.

As noted by various high-level speakers at the Afreximbank meetings, the global financial and trade architecture is undergoing profound transformation. In Afreximbank’s words, geopolitical fragmentation, rising protectionism, volatile capital flows, and a growing tendency towards deglobalisation are “redrawing the contours of international economic cooperation that have prevailed since the end of World War II”.

“African economies face a complex web of structural constraints, including a persistent continent-wide trade finance gap estimated at about US$100 billion annually, regulatory dissonance, exchange rate volatility, and macroeconomic instability. “Compounding these constraints are sovereign debt vulnerabilities, infrastructure deficits, and systemic biases embedded in global financial systems, among them skewed credit rating methodologies, limited access to concessional finance, and underrepresentation in global decision-making bodies,” the trade bank noted.

Much of the current turmoil has either been caused directly or worsened by the Trump administration’s planned imposition of global tariffs, with African nations facing some of the highest rates planned. The tariffs are expected to kick off in August and will bring with them billions of dollars more in costs for African goods seeking a foothold in the world’s single richest market.

While for Botswana (37% planned tariff) the direct impact is minimal given the lower direct exports to the U.S, for economies such as Lesotho (50% planned tariff), the consequences are existential as the country’s economy depends on the U.S market for its key textiles sector. This week, the mountain kingdom declared unemployment as a “national disaster,” a move premised on the incoming U.S tariffs.

As a cruel consequence of colonialism, trade routes, including logistics, policies and infrastructure of the 55 countries in Africa have been positioned towards economic powers in Europe, the main states involved in the Scramble for Africa.

Very little intra-African trade has been taking place, a fact that can be seen in the logistical nightmares involved in moving goods between one part of the continent to another. Very often, traders are forced to either spend fortunes and exhausting delays transporting goods between neighbouring African regions, or fly out of the continent, land in Europe, then return to the desired African destination to complete a transaction.

And yet, trade is well-recognised as the trigger of development.

Legacy Africa

Prior to being skipped by the Industrial Revolution, Africa was one of the main centres and pioneers of global trade, with the eastern coastlines of the region successfully developing into hubs of technology, innovation and commerce through barter trade.

As this model of trade around spices and other then much-valued commodities was upended by violent colonialism and value-grabs, the modern capitals of commerce such as London and New York grew out of an Industrial Revolution powered by trade.

On Thursday in South Africa, Vice President and Finance Minister, Ndaba Gaolathe, reminded business leaders about Africa’s legacy in global trade and the hope for continental growth.

“Africa is a civilization with memory. “Long before colonial borders divided us, we built cities, we governed empires, we traded across the oceans and we mapped the stars. “Ancient wisdom cries out in the streets, as Proverbs 1.20 says, and Africa has always had this core. “We are not inventing the African economy, we are restoring it,” he said at the Africa Unlocked conference monitored virtually by Mmegi.

In fact, African leaders recognised the importance of trade to the continent’s development, and as early as 1963, the Organisation of African Union, a forerunner to the African Union, passed a resolution to set up a Continental Free Trade Area, introduce Transit Facilities and African Trade Fairs, and to set-up what they called an African Payment Union.

By facilitating trade through infrastructure and logistics within the continent, supported by a continental financial union, African states could power each other’s growth and create a continental eco-system for growth. No longer would Africans export their raw materials (together with their jobs) outside and buy back costly finished products (at the cost of their foreign exchange reserves and currency strength).

That it took 55 years for the African Continental Free Trade Agreement (AfCFTA) to come into effect in 2018 may be read as part of the “strategy versus execution” weakness on the continent. After all, the European Union took about 36 years to achieve the same and about 10 years to establish their single currency, the Euro.

Africa – with 55 states, many with different legal and sovereign systems, varying forms of governance, more basic human development challenges and the “strategy versus execution” paralysis – was always going to face challenges.

The shifting global trade winds however mean the space to kick the challenge down the road no longer exists.

Calls are growing for an African approach to leapfrogging in terms of development.

“Since the 1960s, when most African countries gained independence, they have followed the so-called 'international best practice', as defined by others, in managing their economies,” said outgoing Afreximbank president, Benedict Oramah in Abuja. “Today, that 'international best practice' has kept our people and economies where we were 60 years ago. We have nothing to show for it “We remain fragmented, atomistic economies that do not trade with one another, as we were 60 years ago. “We remain raw commodity exporters, with these commodities largely traded by others, not us, as was the case 60 years ago; and we remain the poorest economies on earth, worse than we were 60 years ago.”

Afreximbank, with assets of over $40 billion, has taken the lead role in powering the continent’s development by leveraging trade as a tool for growth.

Hands on

Established by the African Development Bank in 1993 and owned by African governments, including Botswana, Afreximbank disbursed about US$17.5 billion in trade finance in 2024, and is on course to double intra-African trade financing to US$40 billion by 2026.

The bank was established as a ‘first-responder” to African economic crises, being borne out of the flight of Western banks from the continent in the 1990s. That period was also the time when Bretton Woods institutions, whose largest shareholders are Western governments, were imposing structural adjustment programmes in Africa, as a condition for more funding.

“Africa is at a crossroads where we have to be intentional about our aspirations,” said Afreximbank senior executive vice president, Denys Denya. “As Afreximbank, we intervened during the commodity supercycle with counter-cyclical products, then during COVID-19 and also during the Ukraine energy crisis. “As the world is in a cloud of uncertainty, Afreximbank will be there to support the continent’s aspirations. “We can look to the future knowing that we have been here before and we have prevailed.”

The bank counts amongst its successes in powering African trade and industrialisation, deals such as a $4 billion facility for the Dangote Refinery and Petrochemical Industry that now is helping to cut petroleum imports into Nigeria by about $10 to 12 billion US dollars annually, the Rufiji dam and hydropower plant in Tanzania, a $2.9 billion facility to an Egyptian electricity project and a $750 million facility to help Ghana restructure its debt.

Closer to home, Afreximbank has confirmed its interest in funding the long-awaited Mmamabula-Lephalale railway line, a key bulk commodity link expected to cost $627 million (P8.7 billion) in its first phase.

The bank says one of its key roles is to reduce the “African premium,” or the higher interest African states pay when they access external debt due to the perception that the continent is a risky borrower.

Negative perceptions about the continent and the resultant premium charged by international lenders on these perceptions, are another reminder that the continent cannot wait any longer to affirm its financial sovereignty.

In fact, Afreximbank estimates that biases in international credit rating methodologies cost Africa an estimated US$75 billion in extra interest in 2023 – a sum that could finance 80 percent of the continent’s annual infrastructure needs.

Afreximbank itself was recently downgraded by Fitch, following a misunderstanding over the treatment of exposures to some poorly performing loans issued to governments. The trade bank says Fitch ignored the methodology Afreximbank applied to the loans and also brushed aside the fact that its loans are made under the Preferred Creditor Status locked in by the treaty establishing the bank.

In Abuja, in the breakaway meetings and tea time discussions, delegates whispered conspiratorially about how a higher risk premium to Africa benefits external financiers’ pockets, while also entrenching the status quo where the continent is unable to free its financial muscle to compete more effectively in the world.

Africa’s share of global trade was estimated at 3.3% last year, down from 3.5% in 2009, comprising mainly unprocessed products going out for value addition. Intra-African trade, meanwhile, was measured at 14% of Africa’s total trade, indicating the potential for improvement.

The argument is that by redirecting these products into the continent and value adding them here, this could kickstart tertiary economic development as well as the associated job creation, knowledge and capacity building.

By establishing value chains within the continent, countries with one resource or the other, can trade seamlessly and at a lower cost amongst themselves, helping to power each other’s growth, industrialisation and development.

Africa can stand as an economic ecosystem or power on its own strength. Africans can move from being “hewers of wood and drawers of water” to the West.

New tools

Afreximbank and other supranationals are fast-tracking the policy and platform architecture Africa needs for the new global economic realities. One important tool is the Pan-African Payment and Settlement System (PAPSS) which is a cross-border, financial market platform enabling local currency payment transactions across Africa.

PAPSS works in collaboration with Africa’s central banks to provide a payment and settlement service to which commercial banks and licensed payment service providers across the region can connect. The platform, led by Afreximbank, in partnership with the AfCFTA Secretariat and the African Union Commission (AUC), is integrating the 42 payment systems that exist in Africa, enabling real-time payments in local currencies.

Prior to the operationalisation of PAPSS, the continent was estimated to be losing $5 billion annually through external intermediaries and currency conversions, a situation that was also limiting inter-African trade.

In Abuja last week, at the Afreximbank Annual Meetings, officials launched the PAPSSCARD, which enables fast, secure, and affordable retail payments across African borders.

Another novel initiative fast gaining traction is the development of an African credit risk assessment agency, an effort led by the African Union and supported by other continental supranationals. The African Credit Ratings Agency or AfCRA is scheduled to be launched by September 2025, addressing the long-held concerns of African states that the existing Western agencies suffer from inherent bias in assessing African economies.

“Studies have presented evidence that international credit ratings agencies are biased against African countries, and it has been presumed that credit rating analysts have preconceived opinions about rated entities, which ultimately filter through to the resulting ratings,” an African Union document reads. “African governments seek sovereign credit ratings in order to access global capital markets in pursuit of their broader objectives, including fostering deeper local capital markets, raising capital for public infrastructure projects, attracting foreign direct investment, and supporting private sector access to global capital markets. “However, there is increasing dissatisfaction about the influence, approach, and methodology of the three international CRAs in assessing credit worthiness.”

Criticisms include that rating agencies are quick to downgrade African countries but slow when upgrades are due; that they fail to accurately account for risk perception; that they don’t consult adequately with stakeholders; and that they lack independence and have a subjective basis for rating opinions.

Governments have also claimed that the agencies have significant influence on domestic policy direction as their rating assessments and risk factors in their methodologies incline towards austerity measures. The pessimistic approach of analysts based outside Africa has a bearing on negative biases in assessments of subjective risk factors, exaggerating credit risk.

In an era of deglobalisation and trade wars, African countries face further pressure on their sovereign credit ratings and will likely pay an even higher premium on the funding they are able to access to power their development.

Looking within

In Abuja, the call was for greater mobilisation of African capital to support both intra-continental trade and the broader upliftment of Africa’s economy.

An irony, however, exists in this regard.

According to Samaila Zubairu, the CEO of Africa Finance Corporation, a continental multilateral, the continent has more than $4 trillion in non-banking assets, but the pension and insurance funds, central banks and others holding this capital prefer to invest outside the continent.

The result is that in the search for blue-chip, risk free assets outside the continent, African holders of capital are not only denying their own continent funds for development, but using their resources to power growth in developed markets such as the United States and the European Union.

Additionally, these holders of capital are unintentionally applying the same risk premium to their home continent that they accuse international financiers and credit ratings agencies of applying to Africa.

The dilemma is that continental multilaterals such as Afreximbank and others whose mandates are solely focussed on the continent, frequently find themselves searching for funding outside Africa and facing the risk of ratings’ downgrade or being charged higher interest rates.

“We do have in a number of countries very large African pension funds, which of course money that has been contributed by our pensioners,” Misheck Mutize, Lead Technical Expert for the African Union - African Peer Review Mechanism Credit Ratings Programme told Mmegi in Abuja. “We have a very young demography in the continent. “So you can be sure that the average person contributing to pensions over the next five, 10, 15, 20 years will still be doing that.”

Despite the continent’s comparatively young population being a key source of capital funding for its own development for decades to come, African multilaterals are fighting for resources in Western markets, where they face historic bias and risk premiums.

“These pension companies, what are they allowed to invest in?” an analyst who follows the trends said in an interview with Mmegi in Abuja. “In a lot of instances, you will find out that they are largely restricted to government bonds, meaning they borrow that money back to the government to fund whatever. “In certain instances, they will even buy treasury bonds, US treasury bonds, European treasury bonds, meaning essentially they are lending the money to the US and to Europe to continue developing the US and Europe.”

He added: “Insurance companies are some of the biggest aggregators of capital in the world, right? “So if you are paying your insurance premium for a multibillion gas project to a Swiss insurance company or an American insurance company, essentially what it means is that part of the return you should have gotten from that project, you've essentially given it to those foreign companies who then do what they want with it. “They use it to buy US Treasury bonds and then lend money to the US government.”

Living hope

Still hope springs eternal on the African continent. From the stirrings of the 1960s, to the institutions and policies established by various multilaterals and supranationals, to the funding efforts of visionary entities such as Afreximbank, Africa is well-placed to tackle the geo-fragmentation and global upheaval of today.

In South Africa, the Public Investment Corporation – a union backed entity with more than R2.7 trillion in assets – has an ambitious and aggressive model of investing outside South Africa and into the continent. Here at home, its equivalent, the Botswana Public Officers Pension Fund, and the Botswana Development Corporation, are both expanding their investment mandates into Africa.

Where the pioneers of intra-African trade such as Kwame Nkrumah faced opposition from their peers in prioritising continental economic growth over politics, today’s leaders are unapologetic about the continent standing on its own feet in the world.

“In the 21st century, platforms will outpace pipelines and we must own them,” Gaolathe said on Thursday. “Trade must be part of this transformation. The Africa Continental Free Trade Area should not, is not, cannot just be policy. “It is Africa's greatest infrastructure project. With 1.4 billion people under one market, we must now build the bridges. We must build the trade corridors.”