The global
economic crisis sparked by the Covid epidemic in 2020 and Russia’s invasion of
Ukraine in February this year has heightened the possibility of countries’
commercial integration deteriorating. Deglobalization of commerce is a term
used to describe this phenomenon.
The
epidemic wreaked havoc on supply networks all around the world. As a result,
businesses in certain sophisticated economies have begun to prioritise bringing
previously outsourced production back home – or closer to home. This is expected
to prevent current – and future – supply-chain interruptions, providing a
consistent and dependable supply of commodities.
Following
the outbreak, Russia’s invasion of Ukraine has increased worldwide supply
shortages. It’s also fueling expectations that corporations would become less
reliant on global supply networks. This is especially true for businesses in
Europe and the United States.
This
tendency risks putting extra burden on African economies, on top of the current
economic misery caused by the conflict in Ukraine’s skyrocketing food and
gasoline prices. Africa faces grave dangers as the globe becomes more
deglobalized. The findings of a recent World Bank analysis corroborate this. It
reveals that reversing globalisation through value chain reshoring has the
potential to throw another 52 million people into extreme poverty.
The people
of Sub-Saharan Africa would be the most affected. Africa would be a worse place
as a result.
In the
1990s, global trade integration (trade’s share of global GDP) accelerated, then
decreased after peaking in 2008, when the financial
crisis triggered an economic slowdown. The fast expansion of global value chain
commerce is directly linked to the spectacular rise in global trade integration
throughout the 1990s and 2000s.
Connecting
to the global economy is critical for the continent’s growth and development.
This is due to the fact that it allows businesses to specialise in specialised
jobs. As a result, even if they lack the competitive edge to create a full
product domestically, they may integrate into sections of a global value chain.
Furthermore,
increased engagement in global value chains gives African businesses better
access to money, technology, and other inputs they need to improve their goods
and diversify their portfolios.
This is
crucial because African businesses incur much greater expenses, limiting their
ability to compete in regional and worldwide markets. Small and medium
companies (SMEs), which are the backbone of many African economies, are
particularly hard hit by these expenses.
