European Union Debt Crisis- Lessons for Africa
As a continent, Europe currently is the largest economy on Earth and the richest region as measured by assets. And as for Africa, with its 54 fully recognized sovereign states, it is one of the world’s most populous continents, with more than 1 billion people. The continents economy is forecasted to grow by more than 10% yearly for the next 10 years.
As we have seen over the past few years, the 2008 financial crisis in the U.S lead to an economic crisis within the European Union (EU). In December 2008, EU leaders met and agreed on a €200bn- stimulus plan to help boost European growth following the global financial crisis but this did not help since Spain, Italy, Portugal, the Republic of Ireland and Greece could not reduce their budget deficits. After these countries reported a sovereign-debt crisis, and sending shock waves throughout the Eurozone, the continents leadership stood apart about best solution and a way forward. Looking at the European Union, what lessons can Africa learn from it about forming an economic union, building strong economies and forming unified leadership?
Having struggled to free itself from colonialism, Africa is seeking to create a new image: grow the African economy through global trade, and most importantly, through intra-Africa trade, with Africa’s trading blocs playing a key role.
The Eurozone debt crisis can teach Africa significant lessons about increasing trade with Africa itself. The European integration model can be used by Africa in establishing a one currency continent. Currently there are great speculations on formation within Southern African Development Community (SADC) countries to allow access and usage of the same currency. The South African Rand in Zimbabwe, Lesotho, Swaziland and Namibia is an example of this type of slow currency integration.
Some of the significant things that have made the European integration a success are the treaties, laws and regulations that govern the economic union. For Africa to create laws and regulations that promote free trade between its countries, key trading blocs like the African Union, SADC, Community of West African States, Common Market of Eastern and Southern Africa, and Southern African Customs Union will have to constructively collaborate with each other to review and establish new rules and regulations that will encourage increased trading within Africa. Cooperation between these trading blocs must also ensure that African countries minimizes raising household and government debt levels, trade imbalances, structural systems problem, and monetary policy inflexibility, which were the major causes of the current EU economic meltdown.
To ensure that intra-regional trade is beneficial, African countries will have to focus on exporting products that gives comparative advantage. For example, countries such as Botswana and the Democratic Republic of Congo are principle exporters of copper and diamonds, and thus can increase the export of these goods to other countries.
Africa is still a large exporter of agricultural products and imports many of its manufactured products. The growth of the continent can be better achieved through diversified economic structures. Though it is in a recession, the European economy is still strong, diversified and have competitive industrial structures its manufacturing sector represents 1 out of every 4 private-sector jobs
To increase trade between African countries, for primarily economic and social development, regional economic integration of free trade must be established between the countries. The African Union, working with all the continents six key trading blocs, must spearhead Africa’s development and integration. Programme for Infrastructure Development in Africa is playing a crucial role in interconnecting, integrating and transforming Africa’s infrastructure in transport, energy, ICT, and transboundary water networks. The programme will spend close to $80 billion by 2020 in developing Africa’s infrastructure. Just like within the Eurozone, African leaders are struggling with regional integration for supporting the continents economic development.
With great lessons that can be learnt from the success and mistakes of the EU, to unleash intra-African trade and for Africa to take its rightful place in the global arena, the continent needs strong political leadership and policies. Africa is the least integrated continent in the world, with low levels of intraregional economic exchanges and the smallest share of global trade. Africa’s governments and heads of state need to serve as champions. They must set the tone, keep the momentum alive and provide critical national leadership by working together and showing an unwavering commitment to integrated policies, projects and goals that will take Africa to the next level.








