How globalisation is impacting opportunities in Africa and beyond

Globalisation can be defined as, ”The growing interdependence of the world’s economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information. Countries have built economic partnerships to facilitate these movements over many centuries.”

Since one of four global economic shocks (black Swans) emerged in 2020 with the Covid-19 pandemic, followed by the Russia-Ukraine war (2022), the attack on Israel by Hamas (2023) and the introduction of tariffs on most developed and developing countries by the Trump administration (2025), the debate continues on whether globalisation has slowed down, or is even reversing.

In the South African context, loadshedding has put a spotlight on the energy crisis, and the recent focus on the emerging Southern African “gas cliff” has further exacerbated the continental energy crisis.

Modern trade theory places international trade as one of the most critical drivers of economic growth and development. The principles of free trade permits countries to specialise, using their resources more efficiently and integrating into global value chains (Krugman et al., 2018). What remains in balance is whether Africa can still utilise trade as a driver of growth and, and the policies required or most viable for its development.

Globalisation and the UN Sustainable Development Goals (SDG)

The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by the United Nations in 2015. This was a worldwide attempt to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. Goal 8 is to: Promote sustained, inclusive, and sustainable economic growth, full productive employment, and decent work for all.

From 2000, before the heavily outbreak of the Covid-19 pandemic in 2020, the number of workers living in extreme poverty has declined dramatically, despite the lasting impact of the 2008 economic crisis and global recession. In developing countries, due to globalisation of these countries, the middle class now made up more than 34 percent of total employment – a number that has almost tripled between 1991 and 2015. However, as the global economy continues to recover, we are seeing slower growth, widening inequalities, and not enough jobs to keep up with a growing labour force.

According to the International Labour Organisation, more than 204 million people were unemployed in 2015. The Covid-19 pandemic as well as the effects of the Russia-Ukraine and Middle East conflicts, had a massive impact on the prospects that the Sustainable Development Goals (SDGs) can be met by 2030. Of the 17 goals, particularly in areas like poverty, health, and education, huge setbacks took place. Other goals have limited progress, such as reduced child mortality, the overall outlook shows significant challenges remain, requiring massive investment and scaled-up action to achieve the 2030 Agenda. The pandemic and military conflicts aggravated existing inequalities. Global poverty increased, and stalled efforts to build resilient and equitable societies.

Given the latest shock to the world economy, namely the introduction of higher import tariffs by the Trump administration and the cancellation of the Agoa agreement for South Africa a serious question also develops if a lack of globalisation will enhance the inability for the world to reach the SDGs by 2030.

The World Economic Situation and Prospects 2025 report of the UN reports that global economic growth is forecast at 2.8% for 2025 and 2.9% for 2026, unchanged from the rate of 2.8% recorded in 2023 and estimated for 2024. Positive but slower growth forecasts for China and the United States of America will be complemented by modest recoveries in the European Union, Japan, and the United Kingdom of Great Britain and Northern Ireland and robust performance in some large developing economies, notably India and Indonesia.

These growth rates are much lower than the global average of around 3.4% during the period 2110-2020. This submissive expected economic performance echoes ongoing structural challenges such as weak investment, slow productivity growth, high debt levels, and demographic pressures, especially in African economies.

Many developing countries are still grappling with the prolonged blemishing effects of the pandemic and other recent shocks. Despite the arrival of the 4th Industrial revolution where green transition and technological advancements hold the potential to boost growth, these benefits that accrue seem to be disproportionately concentrated in developed economies. The developing world faces significant obstacles in activating financing to invest in critical infrastructure, technology, and human capital and in moving up manufacturing and services value chains.

The current stance of globalisation

Trade as a measure of globalisation, given the above setbacks, is also experiencing pressure. The World Bank projection for global trade beyond 2025 summaries prospects as follows:

•  Sharp downturn in merchandise trade volume growth by just 0.9% in 2025. This significant downturn from growth in trade volumes in 2025 of more than 4.0%, is mostly reflecting the impact of tariffs and uncertainty.
•  World trade volumes had a provisional boost due to rapid increases in US imports ahead of tariff increases in the first half of 2025. These trade volumes are expected to be offset by lower demand later in the year and into 2026.
• The growth in uncertainty of trade policy is bearing on business confidence, investment, and supply chains.
• Regional imbalances are expected with Asia to be the main driver of trade growth. North America and Europe's expectations turned to the worst and have shifted negatively or are expected to shrink.
• Services trade: Growth in commercial services trade is expected to slow to 4.0% in 2025. 

Prospects for Agoa and African trade

The German Institute of Development and Sustainability (IDOS) in an analysis on the effect of Trump tariffs on Sub-Saharan Africa (SSA) trade found in a study named: “Killing Agoa softly? The impact of Trump’s tariffs for Sub-Saharan Africa” will have some adverse effects on trade and employment of certain sectors for targeted SSA economies, such as Lesotho, Madagascar, Chad, Botswana, Nigeria, South Africa, Mauritius, and Malawi. There will, however, be limited aggregate impact on Agoa-eligible countries with overall exports declining by up to 1.1% and real gross domestic product (GDP) unchanged. Most affected sectors include wearing apparel, leather products, and other manufacturing. South Africa, however, looks at motor vehicle exports. During 2023, South Africa exported 400 000 vehicles to over 100 countries – 22% of which were destined for the US, worth $1.88 billion. The sector is one of South Africa’s largest employees, this could result in job losses and reduced industrial output, further weakening the economy.

Agriculture is another sector at risk. South Africa has exported large quantities of citrus, wine, and macadamia nuts to the US under Agoa. Without duty-free access, these products will become more expensive for American consumers, potentially leading to declining sales or encouraging American buyers to source their produce elsewhere.

The German study argues that for the SSA countries, the risks are intensified by limited fiscal space and growing debt liabilities. This underlines the importance for SSA countries of,"continuing to build more resilient and diversified trade structures, deepening regional integration through the African Continental Free Trade Area (AfCFTA), and pursuing value chain upgrading.”

Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education

*** The views expressed here do not necessarily represent those of Independent Media or IOL

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