Africa has been integrated into the global economy since colonial times—although at the lower end of value chains and largely as a supplier of raw materials. Africa has also mostly been a taker rather than a maker of the rules in the international system. The hyperglobalization of the last quarter century has highlighted the inherent excesses of a weakly regulated global system.
Multilateral rules are important for Africa, but the current institutions and norms reflect the views of the most powerful, who can steer outcomes to their own political and economic advantage. While developed countries often talk about the need for reform, those same countries are unwilling to cede the rules that have secured their beneficial position.
Africa’s agency has grown over the last decade or so, as the institutions that the continent created in the early twenty-first century have become more effective at coordinating Africa’s voice in multilateral forums. However, that voice is still marginal—a problem compounded by the fact that the continent’s fifty-plus countries do not all share the same interests, making a common voice difficult to achieve or subject to the lowest common denominator.
The urgency to rewire globalization is occurring at a time of heightened geopolitical rivalries. Rewriting the rules that have underpinned globalization invariably becomes caught up in the competing positions of not only the two major powers—the United States and China—but also actors such as the European Union (EU). Reform manifests itself in norm competition and new sites of contestation. Africa must navigate this environment as it pushes for its own concerns to be heard and reflected in global norm shaping.
Globalization has brought many opportunities to African countries, but African economies have not transformed enough away from dependence on raw materials, and thus many remain on the bottom rungs of global supply chains. This is not only the fault of the global superstructure; it also has to do with the policy choices that many African countries have made, especially in the last thirty years. But attempts over the last two decades to regulate some of the worst excesses of globalization have paid scant attention to the needs and constraints of developing countries. The rise of new challenges, such as climate change and the digital economy, and of frameworks to regulate them sharpens further the difficulties faced by African states.
The International Trade System
African countries have long decried some of the rules of the World Trade Organization (WTO). Their primary objections relate to unresolved issues from the Doha Development Round of multilateral trade negotiations and perceived inequitable sharing of benefits from tariff liberalization under the WTO. For example, while China’s 2001 accession to the organization accelerated the country’s economic growth, Africa’s share of global trade declined from 4.4 percent in 1970 to 2.7 percent in 2020.1
African countries remain committed to operating within the framework set by the WTO and the multilateral, rules-based trading system in general. African states’ commitment to this system is evidenced by their resolve to coordinate on common positions in the WTO to give themselves greater power in negotiations.
But there are also growing calls from various African actors for the WTO to work more for the continent. Over the last decade, the African Group at the organization has become much more vocal on WTO matters. In November 2019, the African Union (AU) requested observer status at the WTO; this status would allow the union to formulate common African positions on various policies, as mandated by its member states. At the time of writing, the request was still pending.
African support for the WTO was further buoyed by the February 2021 election of the first African WTO director general, Ngozi Okonjo-Iweala—although her position as the organization’s top bureaucrat requires her to seek consensus among member states rather than push for particular positions. This role has not precluded her, however, from calling attention to the plight of developing economies. For example, at the May 2021 Global Health Summit, convened by the European Commission and the Group of Twenty (G20) presidency, Okonjo-Iweala argued for greater equity in the global distribution of vaccines. This could be achieved by lowering supply chain barriers, maximizing existing production capacity, and tackling obstacles over intellectual property, access, and innovation.2
The Doha Round, Regional Agreements, and Plurilaterals
The Doha Development Round, initiated with much fanfare in 2001, was intended to promote development in poorer countries. While the death of the Doha round was finally confirmed in 2016, the issues that came to define it have not been forgotten by the developing world, not least Africa. The Doha round’s focus on development carried an aspiration that trade rules should be fashioned to achieve better developmental outcomes—lower poverty and inequality—rather than only for trade’s sake.
For developing countries, the Doha work program included two important elements: agriculture and nonagricultural market access. In agriculture, the 2001 Doha Declaration called for “comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support.”3 In the case of nonagricultural market access, many developing countries urged the removal of tariff peaks on individual products on which the developing world was competitive, rather than measures that looked only at average tariff levels. There were also significant tariff escalations for value-added products in developing countries.
None of these issues has been effectively addressed. African economies continue to face supply-side constraints, which have made it difficult for them to convert economic growth into meaningful developmental outcomes. Nevertheless, there is a strong case that global trade rules make it hard for African economies to benefit from their comparative advantages, of which agriculture is one. With the outbreak of the coronavirus pandemic and concerns about food security, the African Group at the WTO issued a statement in June 2020 on the implications of the coronavirus, reiterating the need for reform of the organization’s 1995 Agreement on Agriculture.4
As a developmental round, Doha was also expected to enable developing countries to move up the value chains of production. Developing countries require the space to implement policies that help them compete with the industrialized North and use trade as an instrument for industrialization and structural transformation. However, import barriers and the huge escalation in tariffs for finished goods in industrialized countries make this difficult. The WTO’s framework limits the policy space especially of middle-income countries.
In 2018, Africa created the African Continental Free Trade Area (AfCFTA), which became operational on January 1, 2021. While the area is still a work in progress, as states are negotiating agreements on different sectors incrementally, the objective is to deepen trade relations among African countries by building regional value chains. The AfCFTA is an opportunity for African states to exploit continental competitive advantages to try to leapfrog into higher areas of production value chains. Following the launch of the AfCFTA, a next key objective for the area’s secretariat is to create harmonized industrial policies across African countries by focusing on major products, such as agricultural goods, pharmaceuticals, textiles, and clothing.
The emergence of plurilateral agreements as the mode to continue global trade negotiations, given the impasse in the WTO, has had a mixed response from African countries. South Africa has been a vocal proponent of the view that expanding trade negotiations through plurilaterals to new-generation issues is unacceptable while some of the old-generation issues that are of concern to developing countries remain unresolved. South Africa sees the plurilateral approach as undermining the WTO’s principle of single undertaking—the idea that virtually every item in a negotiation is part of an indivisible package and cannot be agreed on separately. Most of South Africa’s interventions in various WTO groupings point out the need to avoid mission creep at the cost of developing countries, the importance of the organization’s consensual decisionmaking, and the need for greater equity to make it easier for African countries to participate.5
The African Group at the WTO has echoed South Africa’s position, stating that “the challenges facing the WTO will not be addressed if plurilateral work is prioritized over multilateral processes.”6 However, this is not a consensus among African countries, some of which participate in the organization’s joint initiatives on e-commerce; investment facilitation for development; domestic regulation; and micro, small, and medium-sized enterprises.
Special and Differential Treatment
The principle of special and differential treatment (S&DT), which gives the developing world particular rights, is a central element of WTO rules for developing countries. The African Group at the organization has repeatedly reaffirmed this aspect in its communications, arguing that S&DT “shall be an integral part of all WTO agreements” to “enable developing countries, in particular [least developed countries] in Africa, to effectively address their development needs in line with Africa’s industrial development priorities.”7
In its June 2020 statement on the implications of the pandemic, the African Group was unequivocal that “a clear articulation of special and differential treatment across various WTO agreements has to remain an integral part of trade agreements and negotiations.” The statement went further, arguing that S&DT provisions should be strengthened in areas that are critical to promoting public health, accelerating industrialization, modernizing manufacturing, promoting technology transfer, and closing the digital divide.8
Intellectual Property Rights
The international rules governing intellectual property have been framed to protect companies’ investment in research and development. However, intellectual property rights as they are currently designed place developing countries at a constant disadvantage, especially in areas such as public health.
A long-held core objection of African countries is the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Since the outbreak of the coronavirus pandemic and the subsequent development of vaccines to combat the virus, renewed objections to TRIPS have emerged. South Africa and India petitioned the WTO in October 2020 to temporarily waive all patents, trade secrets, industrial designs, and copyrights on coronavirus-related drugs, vaccines, diagnostics, and other medical technologies during the pandemic. South Africa and India argued that this was necessary to ensure that all countries could gain affordable access to critical medical supplies. The two nations maintained that the provisions of TRIPS should not be a barrier to sharing technology royalty free to produce the vaccines, medicines, and medical equipment needed to address the pandemic.9
South Africa and India’s rationale for proposing the waiver at the WTO was that other mechanisms available under TRIPS were not appropriate. Compulsory licensing would be far too onerous and requires a case-by-case approach. Making use of the flexibilities provided by TRIPS usually engenders much pushback from developed countries, such as the U.S. Special 301 Report, a congressionally mandated annual review of the global state of intellectual property. The South African–Indian proposal was aimed at enabling the building of local production capacity for pharmaceuticals in developing countries.
Another TRIPS-related concern of many African states, which are also least developed countries (LDCs), is article 66.1 of the TRIPS agreement. This initially accorded LDCs a ten-year transition period, which could be extended on request. There have been two extensions since the initial period expired in 2005. In October 2020, the LDC Group at the WTO submitted a request to the TRIPS Council for a further extension of the transition period. The request is for the period to be available to countries until twelve years after they graduate from LDC status.10 This proposal speaks directly to one of the points of tension between developmental status based on gross domestic product (GDP) and realities on the ground, where structural constraints continue to be pervasive.
The WTO Dispute Settlement Mechanism
Overall, the WTO’s dispute settlement mechanism (DSM) has not been useful for African countries because the mechanism’s structure is not suited to complaints brought by smaller nations. The DSM’s enforcement regime is based on the principle that retaliation rights have to be equivalent to the damage caused. Since a small country’s imports from a larger defendant may constitute only a minor share of that defendant’s total exports, it is very difficult to make the defendant comply with the mechanism’s rulings.
Indeed, African states have been involved in the DSM only as third parties. Their noninvolvement as principal parties is problematic not only because the structure works against them but also because their absence means that they are not involved in the development of jurisprudence and of obligations and interpretations that can support developmental aims.
The African Group at the WTO has been active in the impasse over the organization’s Appellate Body (AB). In a June 2019 communication, the group said that it did not support a position that linked reform of the DSM with the broader WTO reform agenda, and that proposals should seek to make it easier for African countries to participate in the dispute settlement system.11
In addition, the group made several recommendations regarding the transitional rules for outgoing AB members, the body’s terms of office, and the duration of cases. The group proposed that the number of AB members be increased from seven to nine and that the body’s composition take into account elements such as regional balance, gender representation, and multilingualism. It also objected to obiter dicta—opinions expressed by judges that are not essential to a decision and therefore not legally binding—as these may affect the rights and obligations of member states. The group stated that “under no circumstance should [the AB] pronounce on issues not raised by any parties to the dispute.”12
The existence of a DSM that is not accessible for the WTO’s smaller members undermines the mechanism’s legitimacy, because it highlights the inequity of a system in which only some have recourse to justice—and those tend to be the more powerful members. As with domestic judicial systems, it is essential that an international DSM is available not only to the bigger players, thus denying justice to the rest.
Global Governance of Data and Technology
Africa is a victim of the digital divide—the uneven access to, and distribution of, the internet and the digital economy. According to the GSM Association, 45 percent of the population of sub-Saharan Africa subscribed to mobile services in 2019. However, only 26 percent of the region’s population had access to a smartphone.13
The continent does not compare favorably with the rest of the world in terms of internet penetration. According to the International Telecommunication Union, 29 percent of Africans use the internet, against 51 percent globally.14 Although fifth-generation (5G) networks were introduced on the continent in 2020, they are currently available only in South Africa and Kenya. Where the internet is available, it is out of reach for many. In 2021, the Alliance for Affordable Internet reported that of the forty-five African countries it tracks, only fourteen met its standard for “affordable Internet.”15 Africans’ lack of connectivity will prevent them from acquiring skills such as digital literacy at a young age and decrease their competitiveness in modern industries.
To address Africa’s funding gap in information and communication technology (ICT), as much as $3 billion a year is needed. Notably, of the $7.1 billion committed to ICT investments in 2018, well over half—$4.8 billion—originated in the private sector. National allocations amounted to $1.1 billion, almost half of which was invested by China.16 Indeed, China has become an important player in the provision of ICT infrastructure to Africa. Beijing has integrated this role into its Belt and Road Initiative under the heading of the Digital Silk Road. The coronavirus pandemic has accelerated Africa’s interest in this initiative, and firms such as Huawei have a growing presence in most African countries. Chinese products and services are competitively priced and have contributed to African ICT solutions; for example, the M-Pesa money transfer system runs on Huawei platforms.
Without significant African companies operating globally in this sphere and without a focus on the infrastructure to take advantage of technology and digitization, African countries have largely concentrated on their domestic contexts. Nevertheless, as the big technology powers begin to tussle in the realm of data governance, Africa is a very attractive partner for the adoption of norms, infrastructure hardware, and access to related markets.
African Governance Frameworks
The AU adopted its Convention on Cyber Security and Personal Data Protection in 2014. The convention imposed obligations on signatories to establish measures to promote cybersecurity governance and control cyber crime, guiding states toward establishing their own cybersecurity and data protection laws.17 However, as of June 2020, only eight countries had ratified the convention and another fourteen had signed it, out of fifty-five AU member states. For the agreement to come into force, fifteen states are required to ratify it. The necessary political will to implement the convention is lacking in most African countries.
At the national level, the United Nations Conference on Trade and Development (UNCTAD) lists twenty-eight African countries that have legislation on data protection and privacy, and a further nine that have draft legislation.18 However, although legal frameworks may exist, they are not always appropriate in scope and relevance, while enforcement mechanisms are weak.19 Some laws are used to stifle political dissent rather than protect citizens. Furthermore, policymakers rarely have expertise in the digital economy, resulting in cyber laws that are poorly worded and unfeasible in practice.20
The EU’s General Data Protection Regulation (GDPR), which came into force in 2018, has been an important norm driver in this space. In many instances, African countries’ data protection laws do contain provisions that reflect the major principles and data subject rights covered by the GDPR. However, such laws are not as comprehensive as the European regulation and often exclude the right to data portability and accountability measures.21
Africa risks being left behind in both globalization and digitization unless it prioritizes investment in ICT. The continent’s significant infrastructure gap and capacity constraints mean that in the broader geopolitical battle among the United States, the EU, and China, Africa may be seen as a useful ally to be recruited by any side to advance its norms in this space. In the meantime, global rules on digital sovereignty, data privacy, cyber crime, and internet freedoms are likely to remain fragmented due to fundamental disagreements between the United States and China—and others, including the EU and Russia. African countries need to adopt a rational, long-term view of this battleground and collaborate with different actors when it makes economic sense to do so but be wary of siding with any one camp.
The Global Financial System
Africa’s limited voice in the Bretton Woods institutions is well noted. In addition, many global financial regulations are made by international bodies in which most African states are not represented because their financial institutions are not systemically important, even though the rules made have an impact on their operations.
The global financial system needs to be able to deliver in the following areas for Africa: financial inclusion, access to development finance to meet infrastructure requirements, a global financial safety net, an international framework for sovereign debt restructuring, and macroprudential regulations that do not unintentionally disadvantage Africans. To make progress on these issues, Africa not only needs a place at the table; it also needs to build influence and support for its positions—not an easy task in the current contested geopolitical environment.
The Bretton Woods Institutions
States with major decisionmaking power in the Bretton Woods institutions have dictated these bodies’ lending and macroeconomic policies and conditionalities. This has translated into loans tied to policy prescriptions that promote deregulation, privatization, and fiscal austerity, among others. Such policies are not always best suited to the development needs of client states, mostly middle- and low-income countries. This approach also disproportionately favors the national interests of key shareholders, for example on procurement policies in the World Bank.
Most discussions of reform of the Bretton Woods institutions center on the quota system that determines members’ voting power. However, for African states, the quota issue is less important than for other countries. This is because while the vote shares of low-income developing countries are protected from falling below a certain floor, African voices would not be significantly greater if quota shares were recalculated. More meaningful would be a third seat for sub-Saharan Africa on the board of the International Monetary Fund (IMF). The region currently has two seats and holds 4.59 percent of the fund’s voting power. South Africa has long pushed for a third seat for sub-Saharan Africa, but none of the other constituencies of countries on the board has supported this call.22
In the case of the World Bank, under considerable pressure from South Africa, the bank’s members finally agreed in October 2008 that its board would expand from twenty-four to twenty-five seats. The additional seat was given to sub-Saharan Africa and represents Angola, Nigeria, and South Africa. These three large economies have used their joint seat to focus on strategy and advocacy.
One area that could benefit Africans, especially communities, is greater accountability of the Bretton Woods institutions. The World Bank has an independent accountability mechanism, but this could be strengthened to make its findings binding on the bank. African governments may not consider this move favorably where they have vested interests, in particular in World Bank projects, but it would be crucial for affected communities where their rights have been negatively affected.23 The IMF, meanwhile, has no such independent accountability mechanism. Like the World Bank, the IMF is moving into areas such as climate change and inequality, which are becoming more intrusive in member states and thus warrant greater accountability from the fund as well as from individual governments.
Special Drawing Rights
Special drawing rights (SDRs)—an international reserve asset that supplements the official reserves of IMF members—have risen in prominence during the coronavirus pandemic as a way of helping developing countries deal with their liquidity constraints. African countries and institutions such as the United Nations Economic Commission for Africa (UNECA) have called for both an issuance of new SDRs and a more coordinated reallocation of SDRs from countries that do not require them to those in need of liquidity. Such support is necessary not only for low-income developing countries but also for middle-income economies.24
In August 2021, the IMF board approved a new SDR allocation of $650 billion, of which Africa is expected to receive about $33.6 billion.25 This is more than the continent would get from a reallocation of SDRs alone or directly from the IMF or multilateral development banks. Furthermore, the fund has indicated that it is exploring viable options for “voluntary channeling of SDRs from wealthier to poorer and more vulnerable member countries to support their pandemic recovery and achieve resilient and sustainable growth.”26 Most developing economies would prefer any voluntary SDR reallocation to be unconditional.
South Africa is part of the BRICS group, which also includes Brazil, Russia, India, and China. As such, South Africa participated in the creation of the New Development Bank (NDB), which provided competitive reform pressure on existing international institutions.
Four operational policies and practices set the NDB apart from all other major multilateral development banks: the use of country systems, rather than institutional ones, to manage funds or services; leveraging of local capital markets ahead of international markets; speedy loan-approval processes; and loans in local currencies. While provision is made for countries outside the BRICS group to join the NDB, the capital share of the founding members is not allowed to fall below 55 percent. The share distribution of capital stock in the bank not only signifies the equity of the contributing members but also represents each country’s direct representation in the bank’s decisionmaking processes.27 Only developing-country members have access to loans.
By providing developing economies with credible alternative financing, the NDB has put pressure on the World Bank and regional multilateral development banks to reform their governance structures, investment priorities, and operational rules. To date, this pressure has been limited, considering that loans are extended only to the NDB’s five member countries. However, in September 2021, the bank approved the admission of three new members: Bangladesh, the United Arab Emirates, and Uruguay.
In 2014, African nations established the African Monetary Fund (AMF), but it is not yet operational, as only twelve countries have signed—and not ratified—the fund’s founding treaty, short of the required fifteen ratifications. None of the big African economies, such as Egypt, Nigeria, or South Africa, has signed.28 The fund’s capital subscription will be $22.6 billion, and countries can take out loans equal to twice their contributions. Some African scholars have argued that with the AfCFTA now in effect, the AMF should receive renewed impetus, as it could enable more regional trade by providing countries with financial support to mitigate balance-of-payment challenges caused by expanded intraregional trade.29
South Africa was a key advocate of incorporating financial inclusion into the G20 agenda and of standard-setting bodies for the financial sector. South Africa is the only African member of the Financial Stability Board (FSB), which monitors and makes recommendations about the global financial system. In 2010, the board established six regional consultative groups to reach out beyond its membership to discuss the vulnerabilities affecting financial systems and ways to address them. Sub-Saharan Africa comprises one such group, which is co-chaired by the governor of the South African Reserve Bank. The bank has leveraged this platform to engage African countries on standard-setting issues. Political buy-in from other African countries has been difficult given the diverse range of issues dealt with by the FSB.
The Basel III regulations on international banking pose one of the biggest challenges to financial inclusion. Studies have found that “tightening prudential regulations could negatively impact access to finance, thereby conflicting with Sub-Saharan African economies’ financial inclusion goals.”30 While several African countries have adopted or are drafting reforms to comply with Basel III, the problem of financial exclusion remains. Reforms that comply with Basel III could have a negative effect on bank credit supply, simultaneously providing opportunities for nonbank financial institutions. Such bodies enable financial inclusion but come with risks.
The International Tax Regime
One of the biggest challenges facing African countries is their limited ability to generate domestic revenues. Low industrialization, high informality in the economy, and the dominance of the extractive sector in many countries mean that the tax base is very narrow and reliant on a few major taxpayers. In countries surveyed by the African Tax Outlook, published by the African Tax Administration Forum, on average 6.3 percent of large taxpayers generate 77.7 percent of tax receipts.31 Large taxpayers generally are or belong to multinational corporations, which are aggressive tax planners, meaning that they can take advantage of tax loopholes to minimize their tax burdens. African states often lack the capacity to deal with aggressive tax planning. But these difficulties should not obscure the fact that the international tax regime disadvantages Africa and developing countries in other regions.
Stanching Illicit Financial Flows
The prevalence of illicit financial flows (IFFs) compounds this problem. A 2015 UNECA report indicated that Africa was a net creditor to the rest of the world in terms of IFFs. Commercial flows, including tax evasion, trade and services mispricing, and abuses of transfer pricing by multinationals, comprised the largest proportion of IFFs, followed by proceeds from planning criminal activities and corruption.32 A 2020 UNCTAD report on IFFs estimated that $88.6 billion—the equivalent of 3.7 percent of Africa’s GDP—leaves the continent annually as illicit capital flight. This is compared with official development assistance of $48 billion and investment flows of $54 billion, on average, annually between 2013 and 2015.33
In 2012, UNECA established a high-level panel on IFFs from Africa. One of the panel’s objectives was to mobilize support for putting in place rules and regulations at all levels to tackle illicit outflows from the continent. The panel also sought to impress on the G20 the need for improved transparency and tighter oversight of international banks and offshore financial centers that absorb these flows.34
Since 2009, when the G20 called on the Organization for Economic Cooperation and Development (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes to ensure rapid implementation of the exchange of information on request, the world has made significant progress on tax transparency, which is essential to tackle IFFs. In 2014, the G20 adopted a new automatic exchange of information, which was intended to further bridge the informational asymmetry between taxpayers and tax authorities. These moves were potentially positive developments for African tax jurisdictions, because authorities’ access to information can play a deterrent role by increasing transparency, thus raising the costs of tax evasion.35
However, while these systems have addressed the supply side of the exchange of information, the demand side in Africa remains weak because the standards and processes required are quite onerous to implement. For example, the exchange of information on request requires a legal basis or mechanism in each jurisdiction, and the Global Forum assesses each jurisdiction’s framework and implementation in practice. Few African countries have made requests through the exchange, partly because of a lack of domestic capacity or technical expertise and associated costs. African countries were not consulted when the Global Forum developed these standards. In the case of the automatic exchange of information, jurisdictions provide such information on a reciprocal basis.
The OECD and the G20 should adopt a more flexible approach to standards, with reference to the capacities and concerns of African and other developing countries. Critically, to the extent practicable, the provision of information should not apply on a reciprocal basis to countries with limited capacity to collect information from their financial institutions. Waiving full reciprocity in exchanging information, at least for LDCs, would remove the burden from these countries of having to collect and compile financial information before receiving information from other jurisdictions. Without these flexibilities and an openness to acknowledging different levels of capacity among developing countries, such global initiatives do not address the fundamental problems that these countries face in protecting their tax bases.
The OECD/G20 Inclusive Framework
These developments overlapped with the initiatives of the OECD and the G20 to deal with base erosion and profit shifting (BEPS)—the practice of aggressive tax avoidance—after the 2008 global financial crisis. The stated objective was to create a fairer and more transparent tax environment. While welcome, these international initiatives have been shaped largely by the perspectives and positions of industrialized countries, which are home to most multinational enterprises.
In 2015, the OECD established the Inclusive Framework on BEPS, with the endorsement of the G20. Twenty-seven African states participate in the framework. The initiative’s two-pillar program of work on the tax challenges of digitization was initiated in January 2019. African states support the OECD’s proposed unified approach to addressing these challenges. However, they have several concerns on the substance, which is made harder by the lack of a proper data set to determine the proposals’ impact in terms of additional revenue to African countries. This difficulty is partly associated with weak African legal frameworks, which often do not compel companies to file financial statements and annual reports with company registries. This challenge is compounded by the difficulty of tracking digital transactions.
In October 2021, 136 of the 140 members of the Inclusive Framework announced a global tax agreement on both pillars. However, the new deal will not have a major impact on the tax revenues of developing economies. The agreement on pillar one will result in a poor reallocation of taxing rights to market jurisdictions such as those of African countries. According to Oxfam, the deal will affect only sixty-nine multinationals and only on “super-profits” above 10 percent of revenue. Fifty-two developing countries will receive about 0.025 percent of their collective GDP in additional annual tax revenue.36 Pillar one excludes extractives and regulated financial services; yet, the extractives sector is especially vulnerable to IFFs from Africa, accounting for more than half of such flows in 2015.37
Pillar two provides for a global minimum corporate tax rate of 15 percent. The AU has called previously for this rate to be at least 20 percent. The Independent Commission for the Reform of International Corporate Taxation has argued for the rate to be 25 percent, which would raise about $17 billion more for the world’s thirty-eight poorest countries than the 15 percent rate.38 Therefore, for Africa, the deal does not go far enough in addressing the historical legacies that place the continent and other developing regions at a disadvantage.
African countries are the most severely affected by climate change and often unable to deal with the scale of the challenges because of limited resources and capacity.39 With exceptions such as Nigeria and South Africa, which have high carbon footprints, most of the continent has limited greenhouse gas emissions but still has to deal with the negative effects of climate change. It is for this reason that Africa regards adaptation measures as far more important for its circumstances than mitigation actions.
African countries pay special attention to elements of historical injustice, recognizing that they did little to account for today’s cumulative climate change and yet are suffering from many of its impacts. The continent also looks at the climate crisis through a lens that focuses on the disproportionate vulnerabilities of its people, as climate impacts exacerbate inequitable social conditions. During the 2015 negotiations on the Paris Agreement on climate change, reference to Africa’s particularly vulnerable status, which had been included in earlier drafts, was removed from the final text of the accord, as there was no consensus on its inclusion. Since then, Africa has been trying to reinstate such recognition.
For Africa, the support of developed economies is essential to help the continent on its pathway to a green transition. Africa’s pledges under the Paris Agreement are mostly conditional on financial backing, capacity-building assistance, and technological support. Sub-Saharan Africa will require about $377 billion in financing for climate-mitigation investments and $222 billion for climate adaptation to achieve its commitments.40 The African Development Bank has estimated that $20–$30 billion a year will be needed for climate change adaptation in Africa to 2030. This figure could increase to $50 billion by the 2070s, based on projections of a world on track to reach an average global temperature rise of 3.5–4 degrees Celsius from preindustrial levels by 2100.
Africa wants the carbon space to pursue some of its economic development through existing and new fossil fuels. African countries consider it unjust for the international community to place immediate and stringent mitigation barriers on them without compensation and financial assistance. Africa has an abundance of fossil fuels, but the global move away from hydrocarbons may see Africa suffer new setbacks. Some 70 percent of African exports are derived from oil, gas, and minerals, accounting for about half of the continent’s GDP. Financial losses from stranded assets could amount to $2 trillion.41
Those African countries that have huge fossil fuel deposits will pay a price as the global economy shifts to greener, more circular energy methods. Such countries need to prioritize the assessment and management of stranded asset risks by planning their resources and economic diversification. Some of these countries are fragile and have limited capacity and will thus require regional and international support.
African countries have three major preoccupations in global discussions of climate change. First, apportioning responsibility must be linked to African states’ contributions to global warming. For Africa, the principle of common but differentiated responsibilities and respective capabilities within the United Nations Framework Convention on Climate Change (UNFCCC) is of primary importance, although it has become a highly contentious issue among the convention’s members.42 This is especially critical as some 600 million people across Africa do not have access to electricity.43
Second, African countries want negotiators to adopt a global goal on adaptation, which the developed world does not. In general, much less finance is available for adaptation than for mitigation. For example, in 2018, the European Investment Bank’s adaptation portfolio amounted to $432 million, compared with $5.3 billion for mitigation.44 But many African countries will need to adopt adaptation measures, such as nature-based solutions to dealing with floods or erosion. Multilateral development banks need to recalibrate their support so that more adaptation financing is available for developing economies. Furthermore, the convention recognizes only small-island and developing states and LDCs as “particularly vulnerable” to climate change. There is a link between this status and the allocation of adaptation finance. This is one reason why the African Group of Negotiators wanted the continent to be considered particularly vulnerable.45
Third, climate finance poses major concerns for African states in terms of definition and access. In 2020, the African Group of Negotiators set out their definition of climate finance. Loans and green bonds, which need to be paid back at a higher interest rate than that applied in developed countries, are not considered climate finance as they are revenue-generating instruments. Support from developing countries should also be excluded. Africa considers these voluntary flows, which should be separated from the obligations clearly identified and agreed on in the UNFCCC and the Paris Agreement.46
Barriers to access to climate finance include unnecessarily complex requirements in obtaining funds, low levels of institutional support from the UNFCCC in undertaking assessments of climate change needs, and knowledge deficiencies that arise from the complex nature of climate finance.47 An example of this complexity is that only accredited institutions can access the Green Climate Fund directly. Only thirteen African countries have accredited entities, yet seven of the ten countries most vulnerable to climate change are in Africa, according to the African Development Bank.48 The accreditation forms require compliance with standards such as fiduciary norms; anti–money laundering structures; environmental, social, and gender policies; and complaint mechanisms. Many poorer countries find meeting these standards hard.
These and other concerns all pose critical questions for African countries as they battle to ensure that the climate space works for their economic recoveries while not being caught between geopolitical rivals that see Africa as a possible partner to advance their own climate ambitions.
For Africa, a rewired globalization is one that has a beneficial developmental impact. Africans have a role to play in this rewiring. Africa has the world’s youngest population and by 2050 will have a population of 2.5 billion—a quarter of the global total.49 These demographic trends will have significant political, economic, and social impacts not only on the continent but also on the world.
Over the last decade, Africa has sought to build up more agency in participating in and influencing global norms and regulations. It has tried to do so by developing a collective continental voice on various issues. However, African states, given their economic and political diversity, do not have a single overarching view of what is required to reengineer globalization. To the extent that continental structures exist to provide coordination or technical capacity, African states may articulate common positions on global platforms. Yet, Africa’s limited economic heft means that the continent is often sidelined in critical global debates.
More effective agency to take advantage of Africa’s participation in various forums requires boosting technical and policy capacity in individual African states. This is essential if globalization is to incorporate changes that will address some of Africa’s developmental deficits. Influencing globalization reform will require African states to use a mix of strategies: pushing for reform within existing institutions while identifying autonomous paths of action where possible. In addition, Africa will need to cultivate cross-regional coalitions where appropriate.
African nations are committed to global multilateral processes but have significant divergence on existing rules and issues. Africa’s engagement on trade is an example of both of these approaches: working within the WTO on intellectual property rights and the DSM while driving an ambitious continental free-trade area. The latter came in the wake of paralysis at the WTO, the failure of the Doha Development Round, and the rise of plurilaterals and regional trade agreements.
In the case of data and technology governance, Africa’s key priority is to increase African citizens’ connectivity through investment in digital infrastructure while recognizing cybersecurity challenges and issues of data privacy and digital sovereignty. African states have developed a continental strategy that is intended to foster greater cooperation on cross-border data protection, open standards, and a single digital market but have been less vocal in global forums. If Africa acts on the strategy, the continent should be in a stronger position to influence global debates on topics such as data governance.
The global financial system is one element of globalization where Africa has limited scope to explore other options, given that the continent is very integrated into that system. Its rewiring is crucial. Several African priorities are on the table in various global financial forums, most notably financial inclusion—but also access to development finance for infrastructure, a global financial safety net, an international sovereign debt restructuring framework, and macroprudential regulations.
One of the continent’s biggest developmental challenges has been its excessive reliance on external sources of finance because of a limited domestic tax base. It is for this reason that Africa has been a vocal proponent of a global regime that reduces illicit financial flows from the continent and tax avoidance by multinational corporations. To this has been added the challenges presented by the global digital economy. Many African countries are participating in these global deliberations, but their slow pace is tempting some to opt for unilateral measures, such as introducing a digital sales tax.
In the medium term, climate change will have the single largest impact on Africa’s developmental trajectory. Adaptation is the crucial factor in dealing with the effects of climate change in Africa, given the continent’s relatively small carbon footprint. African states have worked to coordinate in global climate negotiations. Because dealing with this issue involves a strong technological dimension, it has become intertwined with geopolitical rivalries between the West and China. This can be to Africa’s advantage in terms of advocating reform of the climate finance architecture and the rules governing it, providing more concessional loans, and increasing development finance for adaptation. In addition, Africa’s trump card is that it is home to many of the essential elements necessary for low-carbon technologies.
Revamping globalization will also necessitate a new set of principles. The ethics of globalism have to be attuned to fairness, greater equity, and transparency. Indiscriminate consumption will have to be reduced and replaced by a circular economy. Enormous wealth accumulated by the top 1 percent will have to be tamed. A more equitable distribution of income that addresses globalization’s losers must be on the agenda. Multinational corporations’ accumulation and policy capture will have to be reined in.
An inability to rewire globalization may mean a world that becomes much more fragmented, less able to manage transnational challenges, and more polarized. It will also be a world where an inability to deal effectively with the scourges of inequality, poverty, and climate change will impact the well-being of the privileged, who have lacked the boldness to recognize that the status quo will not hold forever.
Elisabeth Sidiropoulos is the chief executive of the South African Institute of International Affairs, an independent foreign policy think tank based in Johannesburg.
The author would like to thank Cyril Prinsloo and Yarik Turianskyi, colleagues at the South African Institute of International Affairs, for their assistance with the sections on trade and data and technology governance, and Neuma Grobbelaar for her useful comments on an earlier draft.
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