The Africa-South America Bilateral Trade Potential (Dr. Cisse)

The Africa-South America Bilateral Trade Potential (Dr. Cisse)

Since 2006, the Africa-South America (ASA) Summit aims to boost bilateral cooperation, but its roadmap remains vague to this date.

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Pangea, the Transatlantic Slave Trade, developing economies, post-colonial political systems, export of primary goods as main revenue, … Despite the confounding similarities, relations between Africa and South America are few and far: some trade agreements exist mainly on a country-to-country basis, but no global framework of cooperation exists between the two continents.

A divisive trade gap still separates Africa and South America. Since 2006, the Africa-South America (ASA) Summit aims to boost bilateral cooperation, but its roadmap remains vague to this date.

Are those continents complementary or antipodal ? What are the economic opportunities between them ? We involved Afrikonomics’ editor in chief Dr Cisse to bring some insight into our research.

The ASA Summit

Dr Cisse:Economic ties between Africa and South America are still an underrated topic. The leadership of Northern and East-Asian countries, and the profound social changes in Africa and South America of the 20th century all led to bounded international strategies. Today, with enough political autonomy and economic stability, both regions can dedicate resources on strategic international development. The ASA Summit best illustrates the will of those two regions to create a new pole of influence.

Since 2006, countries of Latin America and Africa get together for the Africa-South America (ASA) Summit. The first edition of this triennial event was organized in 2006 in Nigeria. The Abuja Action Plan was adopted, engaging both regions to follow a closer cooperation scheme. Strategic projects were also suggested to spark the cooperation : the creation of the energy commission for South America and Africa, a South American-African bank, a network of universities, and the proposal of relating South America to Africa by means of communications. The permanent secretary of ASA was created to handle the logistics.

During the second (2009, Venezuela) and third editions (2013, Equatorial Guinea), Venezuelan president Hugo Chavez galvanized the participating countries into joining forces to become a major pole of influence and a counterpower to the imperial ways of Northern countries. More projects were launched and more logistics were applied, but according to the African Union:

“Not much has been achieved so far in this partnership […] The partnership is inclined towards political solidarity, perhaps because of the shared historical background of the two sides. However, concrete projects could be realized and Africa needs to define its core interests and propel the partnership towards economic sustainability.”

This statement from Africa’s top representation is a sorry acknowledgement that both regions are inclined to work with each other, yet the how? and why? isn’t that obvious after all.

When looking at the facts, the distance between Africa and South America is wider than it shows on the map : Routes between the two continents are scarce and moreover, they export a lot of the same primary goods. Where’s the win ?

Building the Africa-South America bridge

Dr Cisse:Transportation and communication routes between Africa and South America are scarce : Traditional sea routes go from South to North, from the mineral exporters to their buyers. Undersea telecommunications cables directly linking South America and Africa are almost non-existent. The same scarcity can be observed with airlines’ flights. A lot of intercontinental infrastructure is needed to guarantee full cooperation between the two regions.

While ASA countries work on the logistics of their cooperation, infrastructures must be built between the two regions to pave the road for enhanced collaboration. In June 2015, Angola Cables announced the installation of telecom cables in the South Atlantic linking Angola and Brazil. That will merely be the third South Atlantic cable route, compared to the +20 North Atlantic cable routes :

atlantic cable routes

atlantic cable routes

The airline traffic is also way denser over the North Atlantic than in the South, with just a few airlines directly linking South America and Africa. A strong similarity between aviation and shipping networks clearly shows on the following maps:

world air traffic

world air traffic

world sea traffic

world sea traffic

Those maps illustrate the weak trade capacity between the two regions. The closest points between South America (Brazil) and Africa (Senegal) are 1600 miles apart, a shorter distance than the 2100 miles between the United States and Europe. If the ASA countries wish to reinforce their cooperation, multiplying the routes linking the two regions would be a big leap forward.

Identifying trade opportunities

Dr Cisse:Africa and South America probably have the thinnest connections that exist between two continents. They compete on primary goods exports, thus very few routes (air, sea, telecoms) directly link the two continents. The dream of developing a South-South pole of influence is a bit ingenuous, as the work necessary to fulfill this ambition is pharaonic.

Trades between the two regions increased significantly in the past decade, surging from $7.2 billion in 2002 to $39.4 in 2011. A major free trade agreement has also been established between the countries of MERCOSUR and SACU. While encouraging, those facts do not weigh much in the trade balance of each regions: in 2013, South America exports to Africa represented 2.2% of South America total exports, and African exports to South America represented 3.6% of Africa’s total exports. Why such low trading figures ?

On their own, Africa and South America are not major producers of metal/ore/hydrocarbon. They provide one third of the world’s bauxite and one half of the world’s copper, but for other minerals, they contribute to ⅕ or less of the world’s production (Worldbank, 2014). Even together, they do not represent a pole of influence per say.

For agricultural goods, both regions’ top exports include coffee, cotton, tobacco, sugar, maize, wine and grapes. They also heavily export products they could trade : cocoa-based products from Africa, soy-based products and meat from South America. On the other hand, most South American countries are net exporters of agricultural goods while most African countries are net importers: could this be a lead for enhanced cooperation ?

agricultural imports exports

agricultural imports exports

While most of the world’s industrial centers are located in Northern and East-Asian countries, South America (with Brazil leading the way) is also heavily industrialized, way more than its African counterpart. Industrial technology transfers from South America to Africa could be another lead for enhanced cooperation…

manufaturing value added world

manufaturing value added world

Dr Cisse: “The underlying issue is geopolitical”

Making a comprehensive analysis of the possibilities of an African-South American cooperation goes way farther than this. The leads presented above demonstrate that there is no easy answer, the two continents being poorly connected (the worst condition for trade) and not complementary on all economic levels.

Dr Cisse:The underlying issue is geopolitical: Most assets of both continents are already allocated to their existing trading partners, who also control most of the technology, distribution networks and trading currencies. Any disruptive strategy led by the two continents would only distress international forces and activate their defense mechanisms. For the time being, Africa-South America will become a new pole of influence only if it finds a way to enhance the global economy altogether, instead of merely serving its own regional interests.

The next edition of the ASA summit was scheduled in May 2016 in Ecuador, but it did not happen, and no official announcement explained it. No comment.

Further reading : Africa and Latin America: A Common History, A Common Cause