Africa's Free Trade Area Could Lift Millions out of Poverty
From socialist dictatorships to free trade, the prospects for African growth are looking better than ever.
Alexander C. R. Hammond —
In recent months, African nations have been in the process of creating, signing and ratifying the African Continental Free Trade Area (AfCFTA). The agreement is one of the largest trade liberalisation efforts since the founding of the World Trade Organization in 1995.
Last Sunday, at the 31st African Union (AU) Summit in Nouakchott, Mauritania; the total number of AfCFTA’s signatories reached 49 out of 55 African Union (AU) member states. So is free trade becoming mainstream in African politics?
If all 55 AU nations ratified the proposed agreement, AfCFTA would create a trading area with 1.2 billion people and a cumulative GDP of $2.5 trillion. It aims to improve trade within the continent by immediately removing tariffs on 90 per cent of goods, with the remaining 10 per cent of tariffs on “sensitive goods” phasing out over time.
Being able to trade freely with one’s neighbours is vital for economic growth. In 2016, just 18 per cent of Africa’s total exports were traded within the African continent. In Europe and Asia, intra-regional trade accounted for 69 per cent and 59 per cent of total exports respectively.
Under the AfCFTA, the UN Economic Commission on Africa estimates, intra-African trade could increase 52.3 per cent by 2022. It could double again, after the final 10 per cent of tariffs are removed. If adopted, the AfCFTA has the potential to revolutionise African trade and add billions to the continent’s GDP.
Quality of government could also improve through competition to create welcoming and stable business environments.
For the AfCTFA to be implemented, 22 countries must ratify the agreement. So far, six have done so. Unfortunately, prior to last weekend, the AfCFTA did not have the support of the continent’s two richest nations. Whilst Nigeria remains reluctant to cooperate, South Africa, the continent’s largest economy, has finally signed the agreement.
Admittedly, the AU has a long history of failed promises and meaningless acts. If AfCTFA succeeds, it will signify an important shift away from the socialist policies of Africa’s past. As Professor George Ayittey, the president of the Free Africa Foundation, explains:
Most African nations took the socialist route after independence… In many places in Africa, capitalism was identified with colonialism, and since the latter was evil and exploitative, so too was the former. Socialism, the antithesis of capitalism, was advocated as the only road to Africa’s prosperity… and in its wake followed economic atrophy, repression and dictatorship.
Africa’s socialist experience started in Ghana, the first African colony to gain independence in 1957. Kwame Nkrumah, the man many consider to be the “Father of African socialism”, pursued “complete ownership of the economy by the state”. Nkrumah encouraged Africans to “not rest content until we demolish this miserable structure of colonialism and erect in its place veritable paradise”.
Ahmed Sekou Touré of Guinea in 1958, Modibo Keita of Mali and Leopold Sedar Senghor of Senegal in 1960, Kenneth Kaunda of Zambia in 1964 and Agostinho Neto of Angola in 1975 were just some of the leaders who followed Nkrumah’s example.
“Predictably, in one country after another, economic ruin, dictatorship and oppression followed with deadly consistency… In Africa, socialism was implemented through the one-party state apparatus. The state would own everything and direct economic activity,” explains Ayittey.
Compare Africa’s past with its present. The AfCTFA is championed by Paul Kagame, the AU’s Chairman and President of Rwanda. Kagame describes himself as an avid free-trader and a disciple of Lee Kuan Yew, the first leader of the independent free-trading nation of Singapore. He is not alone: Mahamadou Issoufou, the President of Niger, noted that mobilising his peers to sign the agreement was easy as “most leaders already wanted to create a free-trade area in Africa”. The AfCTFA will mean “more integration (and) more growth for the whole continent,” Issoufou has declared.
Beyond the AfCFTA, overall trends across the continent indicate shifting attitudes towards free enterprise.
As Marian L. Tupy of the Cato Institute notes, “Africa’s love affair with socialism persisted until the 1990s, when, at long last, Africa started to reintegrate into the global economy”. According to the Economic Freedom of World report, Africa’s economy is becoming freer – its economic freedom score is now equal to the world average in 1996.
Tupy continues: “Trade relations with the rest of the world were somewhat liberalised (after 1990), and African nations started to deregulate their economies, thus climbing up the rankings in the World Bank’s Ease of Doing Business report.”
Despite this trend towards liberalisation, many African nations continue to be rife with corruption, ruled by dictators and face persistent poverty. But the AfCTFA and the desire of 49 nations to pursue intra-African free trade is a symbol that attitudes in what was once described as “The Hopeless Continent” are changing.
From socialist dictatorships to free trade, the prospects for African growth are looking better than ever. Let’s hope this deal adds billions of dollars to the continent’s economy, lifting millions out of poverty.
PHL Could Hit Single-Digit Poverty Years Ahead of Schedule
“Better labor market conditions and slower inflation in the country could turn the administration’s single-digit poverty incidence aspirations into a reality two years ahead of schedule.
This was according to the latest Macro Poverty Outlook for the Philippines, released by the World Bank on Monday. It estimated that poverty incidence in the country could decrease to 9.3 percent in 2026 from 12.2 percent this year and 17.8 percent in 2021.”
AI Is a Great Equalizer That Will Change the World
A positive revolution from AI is already unfolding in the global East and South.
Zion Lights —
Summary: Concerns over potential negative impacts of AI have dominated headlines, particularly regarding its threat to employment. However, a closer examination reveals AI’s immense potential to revolutionize equal and high quality access to necessities such as education and healthcare, particularly in regions with limited access to resources. From India’s agricultural advancements to Kenya’s educational support, AI initiatives are already transforming lives and addressing societal needs.
The latest technology panic is over artificial intelligence (AI). The media is focused on the negatives of AI, making many assumptions about how AI will doom us all. One concern is that AI tools will replace workers and cause mass unemployment. This is likely overblown—although some jobs will be lost to AI, if history is any guide, new jobs will be created. Furthermore, AI’s ability to replace skilled labor is also one of its greatest potential benefits.
Think of all the regions of the world where children lack access to education, where schoolteachers are scarce and opportunities for adult learning are scant.
Think of the preventable diseases that are untreated due to a lack of information, the dearth of health care providers, and how many lives could be improved and saved by overcoming these challenges.
In many ways, AI will be a revolutionary equalizer for poorer countries where education and health care have historically faced many challenges. In fact, a positive revolution from AI is already unfolding in the global East and South.
Improving Equality through Education and Health Care
In India, agricultural technology startup Saagu Baagu is already improving lives. This initiative allows farmers to increase crop yield through AI-based solutions. A chatbot provides farmers with the information they need to farm more effectively (e.g., through mapping the maturity stages of their crops and testing soil so that AI can make recommendations on which fertilizers to use depending on the type of soil). Saagu Baagu has been successful in the trial region and is now being expanded. This AI initiative is likely to revolutionize agriculture globally.
Combining large language models with speech-recognition software is helping Indian farmers in other ways. For example, Indian global impact initiative Karya is working on helping rural Indians, who speak many different languages, to overcome language barriers. Karya is collecting data on tuberculosis, which is a mostly curable and preventable disease that kills roughly 200,000 Indians every year. By collecting voice recordings of 10 different dialects of Kannada, an AI speech model is being trained to communicate with local people. Tuberculosis carries much stigma in India, so people are often reluctant to ask for help. AI will allow Indians to reduce the spread of the disease and give them access to reliable information.
In Kenya, where students are leading in AI use, the technology is aiding the spread of information by allowing pupils to ask a chatbot questions about their homework.
Throughout the world, there are many challenges pertaining to health care, including increasing costs and staff shortages. As developed economies now have rapidly growing elderly populations and shrinking workforces, the problem is set to worsen. In Japan, AI is helping with the aging population issue, where a shortage of care workers is remedied by using robots to patrol care homes to monitor patients and alert care workers when something is wrong. These bots use AI to detect abnormalities, assist in infection countermeasures by disinfecting commonly touched places, provide conversation, and carry people from wheelchairs to beds and bathing areas, which means less physical exertion and fewer injuries for staff members.
In Brazil, researchers used AI models capable of predicting HER2 subtype breast cancer in imaging scans of 311 women and the patients’ response to treatment. In addition, AI can also help make health resource allocations more efficient and support tasks such as preparing for public health crises, such as pandemics. At the individual level, the use of this technology in wearables, such as smartwatches, can encourage patient adherence to treatments, help prevent illnesses, and collect data more frequently.
Biometric data gathered from wearable devices could also be a game-changer. This technology can detect cancers early, monitor infectious diseases and general health issues, and give patients more agency over their health where access to health care is limited or expensive.
Education and health care in the West could also benefit from AI. In the United States, text synthesis machines could help to address the lack of teachers in K–12 education and the inaccessibility of health care for low-income people.
Predicting the Future
AI is already playing a role in helping humanity tackle natural disasters (e.g., by predicting how many earthquake aftershocks will strike and their strength). These models, which have been trained on large data sets of seismic events, have been found to estimate the number of aftershocks better than conventional (non-AI) models do.
Forecasting models can also help to predict other natural disasters like severe storms, floods, hurricanes, and wildfires. Machine learning uses algorithms to reduce the time required to make forecasts and increase model accuracy, which again is superior to the non-AI models that are used for this purpose. These improvements could have a massive impact on people in poor countries, who currently lack access to reliable forecasts and tend to be employed in agriculture, which is highly dependent on the weather.
A Case for Optimism
Much of the fear regarding AI in the West concerns the rapid speed at which it is being implemented, but for many countries, this speed is a boon.
Take the mobile phone. In 2000, only 4 percent of people in developing countries had access to mobile phones. By 2015, 94 percent of the population had such access, including in sub-Saharan Africa.
The benefits were enormous, as billions gained access to online banking, educational opportunities, and more reliable communication. One study found that almost 1 in 10 Kenyan families living in extreme poverty were able to lift their incomes above the poverty line by using the banking app M-Pesa. In rural Peru, household consumption rose by 11 percent with access to phones, while extreme poverty fell 5.4 percent. Some 24 percent of people in developing countries now use the mobile internet for educational purposes, compared with only 12 percent in the richest countries. In lower-income countries, access to mobile phones and apps is life-changing.
AI, which only requires access to a mobile phone to use, is likely to spread even faster in the countries that need the technology the most.
This is what we should be talking about: not a technology panic but a technology revolution for greater equality in well-being.
“High growth and large decline in inequality have combined to eliminate poverty in India for the PPP$ 1.9 poverty line. (Here we use the PPP$ 1.9 line [2011 prices] rather than the PPP$ 2.15 line at 2017 prices because the former closely corresponds to the official India Tendulkar poverty line.)
The Headcount Poverty Ratio (HCR) for the 2011 PPP$ 1.9 poverty line has declined from 12.2 per cent in 2011-12 to 2 per cent in 2022-23, equivalent to 0.93 percentage points (ppt) per year. Rural poverty stood at 2.5% while urban poverty was down to 1%.”
India’s Good Fortune: How the Country Is Tackling Energy Poverty, Increasing Growth, and Building the Future
Energy poverty and many other problems will soon be things of the past for India.
Zion Lights —
Summary:Over the past two decades, India has made remarkable strides in multidimensional poverty reduction. This comprehensive measure, which considers factors like education and infrastructure alongside income, paints a more accurate picture of poverty. Additionally, India has achieved significant progress in areas such as child mortality, sanitation, access to clean water, and electricity, signaling a positive trajectory for improved living standards and environmental outcomes in the country.
Just two decades ago, life in India looked bleak. Between 2005 and 2006, 55.1 percent of the Indian population—the equivalent of 645 million people—suffered from multidimensional poverty, and in 2004, 39.9 percent of Indians lived in extreme poverty.
Multidimensional poverty measures the percentage of households in a country deprived along three factors: monetary poverty, access to education, and basic infrastructure services. That captures a more thorough picture of poverty.
Multidimensional poverty dropped from over half of the population to 27.7 percent (370 million people) in 2014. In 2019–21, the proportion of people suffering from multidimensional poverty declined further to only 16.4 percent of the total population, or 230 million people. Although the pandemic slowed some aspects of poverty alleviation, the percentage of people in multidimensional poverty has continued to drop significantly year on year in India.
It’s also worth considering extreme poverty, which is defined as living below the international poverty line of $2.15 per day. Using this measure, the number of people living in extreme poverty in India declined from more than half of the population (63.1 percent) in 1977 to only 10 percent in 2019.
Moreover, child mortality declined from 43.4 percent in 1918 to only 3.1 percent in 2021. The number of people without adequate sanitation has dropped from 50.4 percent to 11.3 percent, and the proportion of people without adequate drinking water has fallen from 16.4 percent to just 2.7 percent. As well, more people in the country have access to clean cooking fuels than ever before, from 22.3 percent of people in 2000 to 67.9 percent in 2020.
India has also been tackling environmental concerns. The population of the greater one-horned rhino, which has a “vulnerable” conservation status, has increased from 40 in 1966 to over 4,000 in 2021. Air pollution is one of the world’s largest health and environmental problems, and in low-income countries, it is often the leading risk factor for death. Although there is still work to do, the death rate in India from air pollution decreased from 1990 to 2019 by 42 percent, from 280.5 deaths per 100,000 people to 164.1 deaths per 100,000.
In 2017, Indian Prime Minister Modi launched a plan to electrify more households, targeting over 40 million families in rural and urban India, or roughly a quarter of the population. The plan was called “Saubhagya”—literally, “good fortune” or “auspiciousness.” Although the country did not meet its target as quickly as planned, access to electricity in India has been increasing.
The term “access to electricity” does not have a universally accepted definition, but general usage takes into account the availability of electricity, safe cooking facilities, and a minimum level of consumption. According to the International Energy Agency, “access to electricity” involves more than just connecting a household to the grid; it also requires households to consume a certain minimum amount of electricity, which varies based on whether it is a rural or urban household.
According to the UNDP report, 97.9 percent of Indians had access to electricity between 2019 and 2021. Only 50.9 percent of Indians had access to electricity in 1993. The country has achieved immense progress. In 2018, Prime Minister Modi stated that every village in India had access to electricity.
Climate change is likely to be costly to the Indian subcontinent. Heatwaves have already led to an increase in deaths in India, particularly since a large share of the population is employed in outdoor labor like farming and construction.
India aims to reach net-zero emissions by 2070 and for 50 percent of the power-generation capacity to come from clean energy sources by 2030. The energy transition for India will take time, and the country will need fossil fuels to meet its energy needs for many years yet, but the future is looking promising.
Last year, for example, India brought an indigenous reactor design online at the Kakrapar Atomic Power Project Unit 4. India has 22 working nuclear reactors, which produce about 3 percent of the country’s electricity. India has ambitious plans to build more reactors—aiming to commission a new reactor every year.
The fact that a large country can more than halve multidimensional poverty in only 15 years is a cause for celebration, but India’s foresight of meeting future increasing energy needs is also something to be applauded. Energy poverty will soon be a thing of the past for India. Increased electricity will lead to further poverty alleviation, economic growth, and improved living standards, which in turn will lead to better air quality and environmental outcomes. These are good fortunes that we can all celebrate.
