WILLIAM GUMEDE | Africa must seek alternatives to counter Trump's tariffs, or face economic ruin

With US President Donald Trump’s sweeping tariffs, development assistance cuts and marginalisation of African countries, leaders will have to make a bigger effort to trade with each other, deliver on a much-talked about continental free trade and find alternative trading partners quickly, or the continent will face economic disaster.

There are fears that Trump's tariffs will override the African Growth and Opportunity Act (Agoa), that has seen African manufacturers exporting goods, textiles, steel, and agriculture products to the US duty-free since 2000. Agoa expires in September .

Most African economies are structurally unstable because they are single-commodity economies. Their economies are closely intertwined with one dominant former Western colonial power or emerging market trading partner, such as China, making them vulnerable to global trade volatility. If the single-commodity global price tanks, the African economy goes down with it. Similarly, if the dominant trading partner experiences economic turbulence, the dependent African country’s economy is heavily affected.

But many African countries lack state, administrative, market and policy capacity to manage external economic shocks to their economies, such as Trump’s tariffs.

African countries will have to move quickly to diversify their economies and their global trading partners and trade more with each other.

Lesotho, a small landlocked nation surrounded by South Africa, has already declared a two-year national state of disaster in response to rising unemployment caused by the impact of steep US trade tariffs. In April the US administration introduced a 50% tariff on goods from Lesotho, which crashed the country’s textile industry, one of its largest employers.

When announcing the emergency measure, Lesotho deputy prime minister Nthomeng Majara reported that the country’s unemployment rate had hit 30%, with thousands losing their jobs in recent months. The Lesotho state of disaster will remain in effect until end-June 2027, and the government will implement measures to soften the economic blow, seek international support and try to prevent domestic social fallout. Lesotho had previously enjoyed duty-free access to US markets under trade agreements like Agoa.

This week Botswana declared a public health emergency as a direct result of the impact of the US administration's sweeping development assistance cuts to the country, the price of medicines forced up by US tariffs and shrinking national income after global diamond prices plunged. Botswana experienced high medicine inflation, shortages of drugs, lack of medical equipment and forced cuts in government medical personnel.

Most African countries trade with non-African countries more than they trade with their neighbours. In 2021, the African countries signed the African Continental Free Trade Area (AfCFTA) pact designed to unify 1.4-billion people in Africa's 54 nations into a single market. There is a real danger that Trump could negotiate trade deals on a bilateral basis with individual countries, which could undermine AfCFTA and agreements individual African countries have with each other.

The Africa continental market is relatively small. African countries have a combined GDP of around $3-trillion (R53.03-trillion), which is about the size of France’s economy.

Though the majority of African countries signed the AfCFTA, many lack the political will to implement the rules because of protectionism, fearing opening their markets to neighbours will undermine their domestic economies. South African tile manufacturer Italtile this week warned that South African companies are losing market share in Africa because of high tariff barriers by many African countries against South African products.

Tanzania only recently lifted a ban on agricultural imports from South Africa. Botswana has not completely lifted all remaining restrictions on vegetable imports from here and Namibia in 2024 imposed a ban on South African citrus and vegetables.

Many African countries are poorly governed. Many simply do not have the state capacity to adopt, internalise and implement the AfCFTA rules, even if they have signed up to these

Many African countries are poorly governed. Many simply do not have the state capacity to adopt, internalise and implement the AfCFTA rules, even if they have signed up to these. A significant numbers of African countries are run by military rulers who took power through coups. Another group is ruled by personal-rule and others by autocratic liberation and independence movements, meaning the overwhelming majority of African countries do not have the state, market integrity and rule of law consistency to implement AfCFTA rules.

At least a third of African countries are ravaged by conflicts. Implementing AfCFTA rules in such circumstances is not possible.

The administrative, financial and policy regimes of most African countries differ starkly, making it difficult to coherently implement continental trade rules. Administrative red tape at borders strangle the free movement of goods and people. Levels of corruption in African countries are high. To register a company, or get a government service or permit is impossible in many countries without paying a bribe. Governing elites in many African countries demand shares in foreign companies which want to invest, or contracts or bribes, driving up the cost of doing business.

Appointments to most African public sectors and state-owned entities are not based on merit, but on political, ethnic or regional affiliations. This means public sectors and SOEs often lack the capacity, competence and honesty needed to function effectively.

African countries lack adequate physical infrastructure. According to the African Development Bank, the continent needs $100bn (R1.77-trillion) annually to plug its infrastructure investment shortfall. But African countries also lack connecting infrastructure between countries. Africa is the continent which is the most infrastructure underdeveloped, lacking rail networks, roads and water transport connections.

Infrastructure inherited from the colonial period has remained the same, or has been neglected or destroyed by conflicts. Very little new infrastructure has been built since the end of colonialism. Furthermore, new infrastructure has also been neglected or destroyed by conflicts.

In recent years, China has built new infrastructure in African countries where they have mineral interests. However, such infrastructure is often constructed from Chinese-owned mines to ports — to get Chinese products acquired from the African country as quickly as possible to the coast for export back to China, to get products out before African regimes change, conflict breaks out or before local political disruptions.

Chinese-built infrastructure corridors are not always integrated with the African country’s infrastructure network. Worse, in some cases such infrastructure, often built quickly is often not durable.

Most African countries do not have extensive private sectors, and are dominated by the informal sector. Sadly, many African political leaders are ideologically opposed to the private sector, believing the state should provide all services. Many populist African liberation-movement governments are ideologically opposed to free trade as a principle.

Lack of respect for the rule of law and property rights undermine investment in many African countries. Cases in point include Mali, when in December last year military leaders issued a warrant of arrest for Canadian mining company Barrick’s CEO Mark Bristow and also arrested three senior executives from Resolute Mining, an Australian company operating in Mali. In addition, Burkina Faso's junta threatened to strip foreign companies of their mining permits and Niger moved to nationalise a uranium mine operated by a French firm.

Administrative red tape in many African countries to register businesses, poor infrastructure and endemic corruption, makes it difficult for formal businesses to thrive. As a result, many African countries have a large but failing state, a huge informal sector and small formal private sector.

Trade between African countries is also undermined by deals often being settled in US dollars. Monetary policy in some African countries is managed poorly, with many not having independent central banks and political leaders and parties often using central banks as their personal piggy-banks.

It is important that African countries trade with each other in local currencies. African countries will have to manage monetary policy responsibly if they want to successfully settle contracts in each other’s currencies.

African parties, governments and elites must end anti-market, anti-trade and anti-business ideological positions. In the meantime, countries already part of the free trade area could step up their trade with each other

African countries will have to diversify their non-African trading partners. Trade agreements with Western countries or emerging markets are often uncompetitive. Too many times, African countries strike agreements based on ideology, past solidarity and ruling party or leader self-interest, rather than what is best for their countries.

Very few African countries have industrial policies and long-term development plans to plot how to move up the industrial scale from poor developing to wealthy industrial nations within specific timelines. Slogans, outdated ideological rhetoric and grand visions divorced from domestic and international reality often replace pragmatic, evidence-based and data-driven policies. Lacking industrial policies and long-term development plans, they therefore cannot strike trade agreements to accelerate their industrial development.

The AU must play a more pro-active role in resolving African conflicts, whether in countries or between countries. Merit should be introduced into African public services to make them more competent. African governments must genuinely reduce corruption in their public services and SOEs. Rule of law and sanctity of property rights must be enforced and good neighbourly behaviour must be enforced.

African parties, governments and elites must end anti-market, anti-trade and anti-business ideological positions. In the meantime, countries already part of the free trade area could step up their trade with each other. African countries must cut red tape and genuinely make their country more investor-friendly.

They must come up with domestic and regional industrial policies, with special economic zones to establishing mineral, oil and agriculture processing, value add and beneficiation. They must also consider bartering with each other, providing products and services that are needed, in return for products another country needs. African countries must actively look for alternative industrial, emerging market and developing country trading partners.

Africans must trade on the basis of what is in their best economic interests, not on outdated ideology, past solidarity and leader or ruling party interests, as have been the case in many African country trade agreements.

• William Gumede is Founder, Democracy Works Foundation and author of South Africa in BRICS (Tafelberg)

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