A couple of months ago Germany announced that it would establish migrant centres in five African countries: Ghana, Morocco, Tunisia, Egypt and Nigeria. In its sights are skilled workers with vocational or academic training, researchers, scientists and managers, including financial professionals.
While the initiative has attractions for those directly involved, it will undoubtedly exacerbate Africa’s brain drain, diverting qualified professionals away from services in their own countries to fill those in developed countries. This not only affects the services African people receive, but also the continent's ability to develop trade in those services, where Africa’s record is already poor.
On the rise
Trade in services is a significant part of global trade and had an upward trend until truncated in 2019 and 2020 by Covid-19. The uptrend resumed in 2021, however, and services are becoming a larger proportion of human transactions, increasingly cleverly combined with goods to offer much greater value than used to be the case.
According to the United Nations Conference on Trade and Development (UNCTAD), in 2021 global trade in services was valued at US$6.1 trillion, about 6.3% of world GDP and 21.4% of overall trade. With a growth rate of 14.6%, the 2022 trade in services figure is expected to hit US$7 trillion. Developed and developing economies account for 73% and 27% of global exports of services, and 67% and 33% of imports, respectively. As is the case in many other areas, Africa makes only a small contribution to these figures.
Even though Africa doubled its trade in services between 2005 and 2019, by 2021 it still only accounted for 1.7% of global exports and 2.8% of global imports of services. That's not much, given that the continent makes up 17% of the world’s population. Africa’s share of global trade in services mirrors its 3% share of global GDP. This cannot be said to be a good performance.
Africa does not do nearly enough manufacturing and this may be due to inadequate infrastructure
High-level skills
There are various categories of trade in services. Trade in high-knowledge intensive services requires high-level skills and includes manufacturing, construction, engineering, financial services, telecommunications, information technology and medical services. Another category is the non-market sector, which includes public administration, community, health and education services.
There is also trade in traditional services such as transportation, travel, maintenance and repair services, which account for more than two-thirds of Africa’s services exports.
You might wonder why the continent's share of trade in services, especially exports, is so small. There are several reasons. One may simply be a lack of focus on trade in services. UNCTAD data shows that the African nations with the smallest shares of exports of services are the commodity-dependent ones. For instance, services account for less than 10% of total exports of Algeria, Angola, Equatorial Guinea and Nigeria.
Another reason may lie in the type of services trade exports countries are engaged in. Traditional services depend a lot on a number of factors where the continent is weak. For instance, transportation and travel are driven by manufacturing and tourism. Africa does not do nearly enough manufacturing and this may be due in part to inadequate infrastructure.
Most of the shipping containers that carry imports into Africa leave the continent empty. Tourism in many parts of Africa is stunted by insecurity and strife, also leading to less trade in these services. These and other factors mean that, to grow its share of global trade in services, Africa must export more high-knowledge intensive services, rather than the professionals crucial to their development.
The continent is presently witnessing what is arguably its worst period of brain drain
Building the skills
Exporting services that require high level skills would require not just building but retaining those skills. While Africa has been pretty decent at building skills, it has failed to retain them. The continent is presently witnessing what is arguably its worst period of brain drain, with software developers, engineers, healthcare professionals, finance professionals and creatives leaving for other parts of the world leaving its own services badly depleted. How, then, can Africa hope to export high-knowledge intensive services?
One way to improve the continent's services sectors would be to promote the idea of circular migration: where workers would gain experience beyond Africa before returning to their home countries to contribute to growth and development. Unfortunately, though, this rarely happens.
In Nigeria, a bill is currently making its way through parliament which proposes to make it mandatory for medical doctors trained in this country to practise here for at least five years post qualification before they can take jobs in other countries. The initiative is a step in the right direction but a rare initiative.
To increase the size of Africa's trade in services, deliberate effort must be put into growing its ability to create and trade in services, by increasing the focus on such trade, developing the infrastructure to support services and taking action to retain skilled citizens.
