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African finance leaders are forging closer economic ties with Caribbean countries to bolster trade between the two regions, which is projected to be worth nearly $2 billion annually in the coming years.
The African Export-Import Bank (Afreximbank) last month announced a $1 billion “oil service” financing agreement with Guyana, which would pave the way for partnerships between Guyanese businesses and oil companies from African countries. The South American country, which is culturally part of the Caribbean, is a founding member of the Caribbean Community (CARICOM) bloc of nations.
Afreximbank President Benedict Oramah, announcing the plan during a meeting in Guyana, said companies from Ghana, Egypt, and South Africa, are “ready and willing” to support Guyana’s fast-growing oil industry, adding that “Afreximbank is there to underwrite the marriage.” The nation is projected to produce 1.7 million barrels per day by 2035, which would make it the world’s fourth-largest offshore oil producer.
In January, ministers from Benin and CARICOM met in the West African country for the first time for talks on trade and investment. Speaking on the sidelines of the event in the port city of Cotonou, Dominica’s foreign affairs minister, Vince Henderson, told Semafor his country was keen on partnering with Benin on the sustainable use of ocean resources.
“The blue economy is very critical for us,” he said. “Being on the Atlantic with Benin makes it only sensible for us to work on our cultural exchanges that will translate to economic benefit for our people.”
Henderson also said Benin and Dominica have waived visa requirements to ensure ease of movement between the countries, adding that his country would partner with Benin as part of the Caribbean island’s plans to develop financial technology systems.
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African officials have in recent years moved closer to building a trade bloc with the Caribbean that would create a market of 1.3 billion people with a combined GDP of around $3.5 trillion.
In October, the African Union and CARICOM signed a memorandum of understanding aimed at boosting investment and collaboration between countries in the two regions. The African Development Bank signed a similar agreement with the Caribbean Development Bank in 2022.
Research published last year by the International Trade Centre (ITC) and Afreximbank estimated that trade between Africa and the Caribbean could rise to $1.8 billion per year by 2028 — up from around $700 million — if value addition and improved logistics are prioritized.
Alexis’s view
The strengthening of economic partnerships between Africa and the Caribbean is part of a wider push among Global South nations to forge mutually beneficial relationships in an increasingly multipolar world. The same forces led to the expansion of the BRICS group of nations in recent years, beyond Brazil, Russia, India, China, and South Africa.
The trend also fits in with a desire among emerging economies to profit from their natural resources. The plans for Afreximbank to support the development of Guyana’s oil sector is a perfect example. It has the potential to benefit the South American country and a number of African nations, too, bypassing Western multilateral lenders that are reluctant to back fossil fuel initiatives.
Guyanese President Mohamed Irfaan Ali, in a BBC interview last year, pointed to the “hypocrisy” of “those who destroyed the environment through the industrial revolution and are now lecturing us.” Referring to Guyana’s vast reserves of forests and their role in absorbing carbon dioxide from the atmosphere, he added: “Even with our greatest exploration of the oil and gas resource we have now, Guyana will still be net zero.”
Ali articulated the irritation often expressed by policymakers in Africa — a continent responsible for just 4% of annual global carbon emissions — who want to monetize their oil and gas reserves. A marriage between the two regions — which have links through the history of enslaved Africans — offers another path to economic development in an increasingly fractured world, in which countries need alliances beyond the US, China, and the European Union.
Room for Disagreement
Africa and the Caribbean have some of the lowest indicators in the world for transport infrastructure, logistics quality, and customs efficiency, according to the World Bank, which limits trade between the regions.
The bank’s 2023 Logistics Performance Index, which rated the performance of regions out of five, rated both sub-Saharan Africa and the Caribbean as having an overall score of 2.66 points, well below Europe, with 3.40, as well as East Asia and Pacific, with 3.13.
The View From BARBADOS
Nigerian tech entrepreneur Iyinoluwa Aboyeji, the founder of early stage investor Future Africa, moved to Barbados in 2022 for two years. He told Semafor the Caribbean island is attracting increasing numbers of African businesses, in part due to its tax regime, including an absence of capital gains tax and incentives for domiciling intellectual property, along with a visa system that offers permanent residency through qualifying investments.
Aboyeji said partnerships benefit African companies because it is easier to access the US market through a Caribbean firm. And the fact that countries in the region are led by the descendants of Africans also helps. “There is also a cultural affinity and friendliness for Africans. It’s very welcoming,” said Aboyeji.
Notable
- The concept of “Global Africa,” which sees the continent and its diaspora working together for shared economic prosperity, is gaining traction, wrote Lennox Yieke in African Business.