How a Unified Economy Can Improve the African Space Sector

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Some Economic Community Of West African States (Ecowas) leaders have come to an agreement to retire and replace the CFA Franc with a common currency, Eco. The goal behind the decision is to strengthen the pillar of Sub-Regional trade unity with eyes on integration.  

This is followed by the low share of internal trade in Africa, despite numerous regional trade agreements that have led to tariff removal within the trading blocs. A host of shortcomings limit trading activities across the continent. Some of those limitations are in equipment and technologies, tariff barriers, red tape and insufficient infrastructure. Tariff barriers remain high outside areas covered by some of the multilateral agreements. Enhancing trade integration between African countries could yield large economic gains. This idea motivated the latest initiative for integration, the continental free trade area. When African countries eventually start to operate a unified trade area premised on the continental free trade agreement, tariff barriers will reduce and transfer of currency between them would be easier and boost trading in the continent. But in the meantime, only sub-regional trade agreements work, and this is affecting the space sector.

African space institutions purchase equipment for space launches and technology from countries outside the continent. The purchasing power of local currencies while trading creates an imbalance across the continent, even giving some countries more spending power over others.

Whether the adoption of a single currency will serve to the advantage of the African Space Industry is a concern for many researchers and space enthusiasts. While space exploration is expensive and difficult, it also generates distinct, diverse and far-ranging economic impacts including economic expansion in cities and surrounding regions, acceleration of technological advances and growth of new industries and scientific fields. This economy will definitely benefit from a unified African economy, and help African countries to compete globally.

The African space industry has enjoyed massive growth over the years with an estimated worth of over USD 7 billion. The sector is expected to grow by about 40%  to exceed USD 10 billion in 2024.

With African countries participating in a variety of notable space technology initiatives, investment in space science and technology has grown, thanks to earth observation development in programmes in Algeria, Nigeria, Egypt, South Africa and Gabon and investment in satellite telecoms in Angola and Congo. Over US$3 billion has been spent on Space projects in Africa since 1998 according to a study of Business and Market Analysis of the African Space Industry.

In comparison to other sectors, the space sector has fared relatively well since 2008 despite economic crises, thanks to its specificities as a key strategic sector i.e national imperatives and institutional research and development funding. It includes many commercial activities that have been derived over the years from the space sector’s research and development missions. Information technology products and services, such as satellite television and GPS receivers which are benefits of space launches and programmes have also reached mass markets gathering profits. But a single trade area can make it even better.

The African Continental Free Trade Area (AfCFTA), the largest free-trade area in the world since the formation of the World Trade organization signed an agreement on March 21, 2018, is estimated to boost intra-African trade by 52 per cent upon commencement. The trade area will impact upstream and downstream negotiations in the African Space Industry, allowing for more effective and financially fulfilling bilateral and multilateral trade agreements.

The AfCFTA intends that African nations and businesses import, export and trade within the continent and tap from the vast possibilities of the African Market. Before the trade area, other African countries are more likely to trade at higher rates for manufactured goods as many African economies rely heavily on exporting raw materials, and for three-quarters of African nations, commodities account for at least 70 per cent of their exports. This affects many African economies because raw materials are especially prone to frequent price fluctuations, so reliance on commodities risks economic volatility and unstable business environments. 

With the free trade area, Africa will have a single market, deepening the economic integration of the continent, aid the movement of capital and people, and facilitate investment. This will also facilitate the achievement of sustainable and inclusive socio-economic development, gender equality and structural transformations within member states. It will enhance the competitiveness of member states within Africa and in the global market. Africa will enjoy industrial development through diversification and regional value chain development, agricultural development and food security. This implies a solid backing that would ensure that nations involved are able to direct their funds towards necessary outlets.

While the government of African nations do not bear the full weight of funding space programmes, (other funds come from selling research, usage of satellites, satellite televisions, telecommunication plans etc), countries in Africa that have higher skills to sell, or machinery that others lack, will be able to trade easily and help in the advancement of other African countries, at a more affordable rate. Skilled expertise on the continent will be more accessible and affordable for all countries.  

A unified economy will also be of great benefit to the private sector. For instance, in June 2020, a satellite television company in Nigeria attempted to increase tariffs and met stiff resistance from users and lawmakers, due to economic challenges. Pricing in a unified economy becomes easier, and businesses can operate in a more unified rate/pricing system for their products and services across the continent. 

Economic impacts may vary depending on the country and the level of its specialisation (e.g. applications versus manufacturing), so would the success of the Space industry in the new economy vary.  The need to justify expenditure on space-related endeavours, such as Earth observation satellites, competes with other pressing expenditure needs, such as the provision of food, houses, jobs and commercial development. The economy may be unified, but the activities in it will enjoy diversification.

The new eco currency intends to serve as a protection for smaller economies, such as Sierra Leone against financial crises, but what happens when nations with larger economies dominate the monetary policies and profit from the projected benefits?  How do they then manage to fund their space programmes while competing with larger countries/economies?  However, the African Continental Free Trade Agreement is implemented to ensure members remove tariffs from 90% of goods, allow free access and aid negotiations on the liberalization of trade into commodities, goods and services. Smaller economies will instead enjoy protection from larger economies.

As the AfCFTA and its promise of a unified economy intensify and is awaiting full operational status due to the coronavirus pandemic, African countries continue to struggle through different waves of inflation, unstable exchange rates, and unequal access to global economies. In the future, a unified economy will impact Africa and put the continent on a global development pedestal, and this will greatly impact the African Space Sector. 


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