Africa and Europe have longstanding cooperation and strong economic and cultural linkages. The EU has the biggest foreign direct investment (FDI) stock in Africa and represents about one-third of Africa's exports. A high level of complementarity in socio-economic dynamics is driving their collaboration, reports the Boston Consulting Group (BCG) in an 11 May report.
With a young and quickly urbanising labour force and abundant natural resources, Africa is still struggling with the lack of industrialization and regional integration. Europe has an ageing population, mature markets, and industrial capabilities and capital.
The two regions are undergoing changes in their global positioning as a result of changing trade patterns and technological concentration. Both are net importers of finished goods and the trade imbalance, especially with China, is growing rapidly. It is the same for the services (including digital services), the deficit with countries including the US is growing.
Key Highlights:
- Strong economic ties: EU is Africa’s largest investor and key export market, with both regions having complementary strengths
- Shared global pressures: Both face trade imbalances and rising dependence on external suppliers and services
- Need for deeper cooperation: Geopolitical tensions and global competition are making stronger EU–Africa industrial collaboration more urgent
Furthermore, instead of producing value, Africa is still dependent on financing from outside. Europe is a world-class provider of capital, but provides limited value in the world's supply chains. In addition to the already established global trade relationship, there is considerable potential for Africa and Europe to develop local production and expand bilateral cooperation.
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This potential has always been there, but the policy environment has been improving in many African countries and the gradual strengthening of the economic fundamentals is beginning to put into a more positive environment the mechanisms for action, as well as the gradual increase in the demand from the European markets for diversification.
It is not only an opportunity, but also an urgent time-sensitive requirement for both regions in the light of the global shocks including the Russia-Ukraine war and the Middle East Crisis. Meanwhile, the corridor has become increasingly bruised and battered. Other geopolitical players are increasingly adopting more assertive approaches to gain influence, access and long-term presence in Africa.
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This means that in addition to the rules-based approach to the continent that it already has in place, the bar has been raised for Europe to engage more strategically and consistently on the continent.