To help African countries deal with the impact of COVID-19, the Commission recently announced that it would implement an extensive aid package worth in excess of EUR 3.25 billion – further proving its commitment to the region in challenging times.
An evolving partnership
At the launch of its new Africa strategy, the Commission noted that its partnership with Africa was evolving, “going beyond development, humanitarian and security concerns, to include a broader and more diversified engagement”. The EU and its 27 Member States provided EUR 19.6 billion in development aid to Africa in 2018.
To cement ties between the regions, the Commission has carried out several high-level meetings with the African Union (AU) in the last few years and both unions noted recently that a joint declaration on policy goals would be announced at the EU-AU Summit in Brussels, hopefully still taking place later this year.
AU member nations have noted that their primary needs included support in terms of safety and security on the continent as well help in implementing the African Continental Free Trade Area (AfCFTA), which requires massive investment in infrastructure in order to be successful. Further, AU Chair Cyril Ramaphosa said in his inaugural speech in early 2020 that the AU needed “African solutions to African problems,” setting the tone for a deepening relationship with Europe that was balanced and to the benefit of all. The Commission acknowledged Ramaphosa’s comment, saying that Africa wanted to take the future into its own hands, and that Europe needed a strong Africa.
Europe and Africa as strong allies make sense when considering the impacts of COVID-19 on both regions, as well as recent global trade tensions, such as the China-US trade war and Brexit, which have led to a shift in the world’s trade relationships. These changing patterns and unprecedented developments have motivated major players to forge new and strengthened partnerships to open up new avenues for trade, investment and collaboration.
Trade
Trade and investment between the EU and Africa has always been good, mostly due to the strong historic ties between the two regions, as well as synergies in certain sectors, and a sense of familiarity. Europe is one of Africa’s principal M&A investors. According to Refinitiv data (and leaving out United Kingdom-sourced deals), there were 77 completed M&A deals in Africa with Europe-based buyers (based on ultimate parents) in 2018, and 75 completed deals in 2019. In 2018, M&A inbound deals from Europe into Africa were valued at around USD 1 billion, rising to around USD 3 billion in 2019.
Europe is also one of Africa’s largest trading partners. According to research from Baker McKenzie and Oxford Economics, AfCFTA’s USD 3 trillion Opportunity, African nations currently tend to trade more with Europe (35%) and Asia (31%) than with their neighboring markets. According to the EU, in 2018, total trade in goods between the 27 EU member states and Africa was worth EUR 235 billion.
Once implemented, AfCFTA is expected to streamline intra-African trade across the continent and reduce dependency on foreign investment. It is also hoped that the development of intraregional trade in Africa will contribute to increased peace and security in the region – successful free trade across borders will depend on decreased interregional conflict. While the launch of the AfCFTA, planned for the beginning of July this year, is now on hold due to the impacts of COVID-19, most acknowledge the postponement is unlikely to hinder the implementation of the agreement in the long run.
The EU has been positive about AfCFTA from the beginning and is one of its main supporters. It has noted that it will have contributed EUR 72.5 million to the implementation of AfCFTA by the end of 2020. The EU has many of its own free trade agreements in place around the world and as such, it is considered to be a natural partner to support the AU in AfCFTA’s implementation. It has also assisted in the negotiations and with technical expertise and studies. Because of its experience in this area, the EU is the obvious partner to help with, for example, the practicalities around the harmonization of the classification of the goods and the schedules on tariff concessions.
Digital transformation
The implementation of AfCFTA is also expected to offer a wider platform on which to develop Africa’s digital economy. African ICT, in general, remains underdeveloped due to poor access to electricity, infrastructure and low broadband penetration, but demand is increasing and there is a growing reliance of African consumers on technology across multiple platforms. As such, the EU-AU Digital Economy Task Force was launched in 2018 to work on pillars of connectivity, eSkills, digital entrepreneurship and eServices in Africa. Its recommendations were presented in 2019 with the aim of guiding EU support on creating a single digital market in Africa and these recommendations were recently incorporated into the AU’s Digital Transformation Strategy for Africa.
To further drive digital transformation, the Africa-Europe Innovation Partnership was launched in 2019 to help synergize African and European innovation ecosystems by connecting incubators and accelerators, fostering technology transfer and enhancing capacity building. The Partnership operates under the premise that “innovation happens when people from different backgrounds and perspectives blend together.”
Power
The extent of Africa’s power deficit must also be addressed and increasing electricity generation, whether on-grid or off-grid, is the focus of a number of initiatives. Access to energy is a challenge in Africa and the African Development Bank’s New Deal on Energy for Africa has set as its target universal access to electricity across Africa by 2025. According to AfDB, to achieve this, 160GW of new on-grid generation and some 75 million new off-grid connections will be needed, through a mix of conventional and renewable energy sources. Initiatives by the EU, Power Africa and other multilateral and development finance institutions have already played a role.
The EU and Africa have partnered on addressing Africa’s access to power for some time. The Africa-EU Energy Partnership was established in 2007 as a framework for strategic dialogue between the two regions and was aimed at sharing knowledge, setting priorities and developing joint programs on the key energy issues and challenges. Last year, recommendations for speeding up investments in the energy sector in Africa and stimulating sustainable growth and job creation were presented at the annual meeting of the Africa-Europe High-Level Platform on Sustainable Energy Investments. The group issued recommendations on areas such as policy and regulations, project implementation, financing, capacity-building, distribution, transmission and generation, power pools, energy efficiency and clean cooking.
The EU’s Africa strategy outlines the evolution of an exciting new global partnership that has been years in the making. Where there has been a tendency in some parts of the world to build barriers and turn inwards to solve problems, this newly strengthened, collaborative relationship highlights the fact that global challenges, whatever they may be, can be much more successfully resolved together, rather than alone.
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