Brexit isn’t just a British problem. The United Kingdom is the third-largest economy in the EU and it can’t be disengaged from continental markets without an abiding impact on the economies of the remaining states: it’s simply too big to drop without creating a wave of disruption. So imagine the size of that disruptive wave if the EU’s largest economy, Germany, was to be leaving instead: without Germany, it would be hard to imagine any future for the European Project. And if you flip that hypothesis on its head and drop it twenty six degrees latitude, you’ll get some understanding of the raw, tectonic significance of Nigeria’s decision last week to join the African Free Trade Union (AfCFTA): Nigeria is by far the biggest economy in sub Saharan Africa, it is Africa’s Germany and without it the future of the new African Free Trade Union would have been in serious doubt.
Happily that’ no longer the case, and with Nigeria now having signed up the only Sub Saharan country still to join the new Union is Eritrea. Perhaps Boris Johnson might consider sending a negotiating team there while their options are still open…
AfCFTA is now the biggest Free Trade Area in the World, and its system of reduced tariffs and better-aligned trading arrangements is widely predicted to further kick start a sector already showing signs of sustained economic growth. Not only does Sub Saharan Africa currently have the fastest growing economy in the world (Ghana), it has an aggregate GDP of projected to reach £2 Trillion by 2025 and a burgeoning middle-class population capable of fuelling a rise in average household consumption from £86 Billion in 2015 to £1.9 Trillion by 2030.
In the pre-AfCFTA world, a mere 16% of international trade took place between African countries (according to research conducted by the African Development Bank), with most of the continent’s wealth being exported to overseas investors and trading partners. AfCFTA is set to change this disproportionate balance of trade and these changes will come all the quicker with Nigeria on board. The new Free Trade Area opens up enormous Nigerian markets to other African countries and puts them in a much stronger position to negotiate with overseas trading partners (China springs to mind).
And that’s not all, something else happened last month that will further ease integration for Africa’s economies and it came from a surprising source: Facebook.
The Silicon Valley Leviathan announced that from next year it will enable payments to be made through its messaging platforms using the snappily named Libra cryptocurrency. No less than 139 Million of Facebook users are resident in Sub Saharan Africa and the widespread availability of this new cryptocurrency will be a commercial emollient to what is still one of the least banked regions in the world, which fact alone makes it a hugely attractive market for mobile cash payments.
And that’s no small thing: the World Bank reported last year that the cost of remitting payments in Africa was at least 20% higher than any other part of the world. Next time you’re minded to send a stiff letter (or e-mail) to your bank manager, bear in mind that sending $100 from Accra to Lagos currently costs an average of $10 and that 10% can make all the difference between turning a profit and making a loss for businesses conducting intracontinental trade. With the sector so significantly unbanked Western Union obviously hasn’t been slow to seize its opportunity.
So the Libra and other cryptocurrencies inevitably following in its wake will have a real potential to change all of this for the better, and from now on these changes will happen within the framework of a dynamic new market alignment that has the resolve and ambition to make its own rules.
Western Union had better watch out.
The SLC Impact Fund aims to build on the opportunities offered by sub-Saharan African Markets and deliver long term capital growth as well as income distribution: working to solve social and environmental challenges and at the same time deliver sustainable profits for investors.
I am very proud of Red Ribbon’s association with the SLC Impact Fund and excited too by the opportunities offered through the Fund’s impact investment strategies: strategies that deliberately set out to challenge outdated thinking that social and environmental issues can be addressed by focusing exclusively on short term financial returns and ignoring social and environmental cost.
The sub-Saharan African Economy has grown by 4.6% since 2000 and now has the fastest growing economy in the world, soon to be part of the biggest single market anywhere on the planet so Nigeria’s accession to that community has to be a good thing.
I’ll be watching future developments with interest.