Africa to tap vast services sector; Mauritius to leverage growth benefits
‘Unlocking the Potential of Africa’s Services Trade for Growth & Development’ is the focus of the UNCTAD report 2015, such that releasing the vast opportunities inherent in the services sector will enable African countries to enhance the prosperity of their peoples, while allowing Mauritius to reap related growth and employment benefits as the gateway to the emerging continent.(Image:unctad.org)
The Economic Development in Africa Report 2015, entitled ‘Unlocking the Potential of Africa’s Services Trade for Growth & Development’, represents a giant leap in creating the knowledge base needed for understanding the relationship between services and all economic activity in Africa.
The report also shows the need for better regulatory and institutional frameworks in Africa’s infrastructure services sector, and contains key data demonstrating how the services sector can enable African countries to boost the prosperity of their peoples.
Mauritius’ Minister of Foreign Affairs, Regional Integration and International Trade, Etienne Sinatambou, launched the United Nations Conference on Trade and Development Economic Development (UNCTAD) Report in Africa 2015.
“Mauritius is a good case in point on how consistent and effective government policies can enhance potential development opportunities in services to promote growth and job creation,” highlighted Etienne Sinatambou.
The report argues that because Africa’s infrastructure provision remains suboptimal and costly, the services sector, though a dynamic driver of growth in Africa in recent years, has not been able to deliver the kind of structural transformation that is urgently required to address the continent’s development needs.
Infrastructure services are critical to achieving the sustainable development goals being set by the United Nations for 2016–2030 and creating a platform for broad-based growth in Africa, the report notes. It goes on to add that some infrastructure services, such as water and sanitation, are directly linked to sustainable development targets central to achieving social development outcomes.
In addition, while services such as electricity, telecommunications and transport contribute to productivity, they also determine the competitiveness of African firms.
“Africa accounts for 15% of the world’s population but only 2.2% of global services exports, indicating tremendous untapped potential for the sector,” UNCTAD Secretary-General Mukhisa Kituyi said.
“The Economic Development in Africa Report 2015 underscores the need for African countries to tackle various regulatory and policy shortcomings, which explain these inefficiencies and impede Africa’s capacity to fully capitalize on the potential of its services sector,” the UNCTAD Secretary-General added.
The report notes that, during 2009–2012, the African services sector grew at 4.6% compared to 5.4% in the developing world. The fastest growing services subsectors were transport, storage and communications.
Overall, Africa’s services sector propelled a growth in the gross domestic product of 30 out of 54 countries during 2009–2012. Of the 45 countries where the share of services in output rose, 30 experienced a contraction in manufacturing from 2001–2004 to 2009–2012.
Some African economies have developed their services industries with relative success and are even outsourcing services to other African markets, the report notes. Examples include the financial and banking services industries of countries such as Mauritius and Nigeria, the commercial and cargo air transport industry in Ethiopia, Kenya and South Africa, the educational services industries of Uganda, the telecommunications services of Egypt, as well as the port services industries of Djibouti and Kenya.
An illustration in point is the case of Ethiopian Airlines, the fastest growing, largest and most profitable airlines in Africa, growing at an average rate of 20% to 25% each year since 2005. The company is a USD 2.3 billion African powerhouse, with a reported net income of USD 228 million in 2013-14, making it the most profitable carrier in Africa.
However, African countries by and large continue to grapple with building the necessary infrastructure to enable industrialization and economic growth.
Here, it is necessary to put in place clear and consistent regulatory and compliance frameworks to achieve efficiency in services. Infrastructure services regulation is also critical as a guarantor of interconnected factors such as access, affordability, investment requirements and quality control. The latter is significant in Africa, where networks are often quite limited in range and poorly maintained, but private providers may be reluctant to expand and upgrade.
However, with the trend towards greater regional liberalization of trade in services and deeper economic integration in Africa, it may become easier to prioritize the service sector as well as promulgate necessary policies to enhance its contribution to growth.
The Mauritian Foreign Affairs Minister pointed out that services are an important piece of the development puzzle and they are important in themselves, regardless of the level of development of a country, whether in Africa or beyond.
Finally, the focus of the government remains on how Mauritius, as a member of the African Union, will leverage its trade with the continent and the related employment and growth benefits. There is especially a need for greater policy coherence at the national, regional and international levels to address services sector and trade policy disconnects in Africa more broadly.