Connect with us

Chart of the Week

Visualizing Africa’s Free Trade Ambitions

Published

on

africa free trade AfCFTA

africa free trade

Visualizing Africa’s Free Trade Ambitions

A united African continent working towards common goals would be a major force on the global economic stage.

To this end, nations in the region have been working towards an ambitious plan to create the world’s largest trade area. The Gambia recently became the latest country to ratify the African Continental Free Trade Area (AfCFTA), helping the agreement reach critical mass to move forward.

Today’s graphic helps put the region – and the status of AfCFTA – into perspective.

The Patchwork Problem

One key to unlocking the region’s economic potential is making it easier for Africa’s 55 countries to trade with one another.

Currently, Africa is a patchwork of regulations and tariffs, and trade between countries has suffered as a result. For example, only 10% of Nigeria’s annual trade activity is with other African countries. This is a surprising given the country’s dominant economic standing and location firmly in the center of the continent.

As a whole, Africa’s intra-continental trade level hovers at just around 20%, while nations in Europe and Asia are at 69% and 59%, respectively. Clearly, there is a lot of room for growth.

What is AfCFTA?

AfCFTA is the biggest free trade agreement since the establishment of the World Trade Organization.

The objective of the agreement is to create a single continental market for goods and services, with free movement of business people and investments.

Last year, 44 African leaders signed an agreement to ratify AfCFTA, with half that number needed to move the agreement forward. Earlier this week, The Gambia was the 22nd country to announce that its government has ratified the agreement, meeting the threshold to officially put the wheels in motion.

We have witnessed a historic moment for the African Continent. AfCFTA is now set to become operational within
the month, creating a single continental market for goods
and services.

– Mark-Anthony Johnson, CEO, JIC Holdings

The good news for the agreement is that many of Africa’s largest economies – including Egypt and South Africa – are already on board. There is, however, one significant holdout.

The Elephant in the Room

Even though the threshold for pushing AfCFTA forward has been reached, Nigeria’s lack of commitment is still a major blow to the strength and credibility of the agreement.

Nigeria’s situation is complicated. The country’s economic prospects are bright, and Lagos is on a trajectory to become the world’s largest city over the next few decades. On the other hand, there is fierce opposition from labor unions, and the country is home to largest concentration of people living in extreme poverty in the world.

[AfCFTA is] an extremely dangerous and radioactive
neo-liberal policy initiative.

– Ayuba Wabba, President of NLC, Nigeria’s largest labor union

While the majority of African nations appear to be on board with the plan to enact AfCFTA, it remains to be seen whether Nigeria comes along for the ride or decides to go it alone.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading
Comments

Chart of the Week

Visualizing the Biggest Risks to the Global Economy in 2020

The Global Risk Report 2020 paints an unprecedented risk landscape for 2020—one dominated by climate change and other environmental concerns.

Published

on

Top Risks in 2020: Dominated by Environmental Factors

Environmental concerns are a frequent talking point drawn upon by politicians and scientists alike, and for good reason. Irrespective of economic or social status, climate change has the potential to affect us all.

While public urgency surrounding climate action has been growing, it can be difficult to comprehend the potential extent of economic disruption that environmental risks pose.

Front and Center

Today’s chart uses data from the World Economic Forum’s annual Global Risks Report, which surveyed 800 leaders from business, government, and non-profits to showcase the most prominent economic risks the world faces.

According to the data in the report, here are the top five risks to the global economy, in terms of their likelihood and potential impact:

Top Global Risks (by "Likelihood") Top Global Risks (by "Impact")
#1Extreme weather#1Climate action failure
#2Climate action failure#2Weapons of mass destruction
#3Natural disasters#3Biodiversity loss
#4Biodiversity loss#4Extreme weather
#5Humanmade environmental disasters#5Water crises

With more emphasis being placed on environmental risks, how much do we need to worry?

According to the World Economic Forum, more than we can imagine. The report asserts that, among many other things, natural disasters are becoming more intense and more frequent.

While it can be difficult to extrapolate precisely how environmental risks could cascade into trouble for the global economy and financial system, here are some interesting examples of how they are already affecting institutional investors and the insurance industry.

The Stranded Assets Dilemma

If the world is to stick to its 2°C global warming threshold, as outlined in the Paris Agreement, a significant amount of oil, gas, and coal reserves would need to be left untouched. These assets would become “stranded”, forfeiting roughly $1-4 trillion from the world economy.

Growing awareness of this risk has led to a change in sentiment. Many institutional investors have become wary of their portfolio exposures, and in some cases, have begun divesting from the sector entirely.

The financial case for fossil fuel divestment is strong. Fossil fuel companies once led the economy and world stock markets. They now lag.

– Institute for Energy Economics and Financial Analysis

The last couple of years have been a game-changer for the industry’s future prospects. For example, 2018 was a milestone year in fossil fuel divestment:

  • Nearly 1,000 institutional investors representing $6.24 trillion in assets have pledged to divest from fossil fuels, up from just $52 billion four years ago;
  • Ireland became the first country to commit to fossil fuel divestment. At the time of announcement, its sovereign development fund had $10.4 billion in assets;
  • New York City became the largest (but not the first) city to commit to fossil fuel divestment. Its pension funds, totaling $189 billion at the time of announcement, aim to divest over a 5-year period.

A Tough Road Ahead

In a recent survey, actuaries ranked climate change as their top risk for 2019, ahead of damages from cyberattacks, financial instability, and terrorism—drawing strong parallels with the results of this year’s Global Risk Report.

These growing concerns are well-founded. 2017 was the costliest year on record for natural disasters, with $344 billion in global economic losses. This daunting figure translated to a record year for insured losses, totalling $140 billion.

Although insured losses over 2019 have fallen back in line with the average over the past 10 years, Munich RE believes that long-term environmental effects are already being felt:

  • Recent studies have shown that over the long term, the environmental conditions for bushfires in Australia have become more favorable;
  • Despite a decrease in U.S. wildfire losses compared to previous years, there is a rising long-term trend for forest area burned in the U.S.;
  • An increase in hailstorms, as a result of climate change, has been shown to contribute to growing losses across the globe.

The Ball Is In Our Court

It’s clear that the environmental issues we face are beginning to have a larger real impact. Despite growing awareness and preliminary actions such as fossil fuel divestment, the Global Risk Report stresses that there is much more work to be done to mitigate risks.

How companies and governments choose to respond over the next decade will be a focal point of many discussions to come.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading

Chart of the Week

The Sum of Its Parts: The Smartphone Multiplier Market

Every day, 3.3 billion people rely on their smartphones to stay connected. The products and services enabling this—the smartphone multiplier market—is now worth $459 billion.

Published

on

The Sum of Its Parts: The Smartphone Multiplier Market

There’s a 60% chance you’re reading this article on a smartphone right now—a testament to how ubiquitous these devices have truly become in our lives.

We rely on smartphones every waking minute to stay connected. However, the various products and services—also known as the smartphone multiplier market—that allow us to use these devices in the first place can often be an afterthought.

Today’s chart uses data from Deloitte Insights to show just how sizable this ecosystem is becoming, and why it’s heating up as a battleground for big technology companies such as Apple, Alphabet, and Amazon.

The Smartphone Plateau

There are over 3.3 billion smartphone users in the world today.

The smartphone economy—estimated to pull in $944 billion in total revenue in 2020—is so massive that it rivals the GDP of countries like Indonesia and the Netherlands.

At the moment, the smartphones themselves contribute over half the market value. Despite the continued hype surrounding the release of new models, global unit shipments of smartphone devices appears to have reached a saturation point:

Smartphone Sales

There are two theories as to why shipments are leveling off. First, product innovation is more iterative today than in the past, which means there are fewer groundbreaking features to entice consumers into purchasing new devices. A second factor is that people are simply holding onto their devices for longer than in the past.

As device sales plateau, tech giants are diversifying efforts to find new ways to lure customers back in—and another related market is growing more lucrative as a result.

What is a “Smartphone Multiplier”?

When people think of the smartphone market, hardware likely springs to mind first, but an equally important part of the equation is the plethora of apps, services, accessories, and complementary devices that help us connect with the digital world.

The ecosystem of these products and services are known as smartphone multipliers. According to Deloitte, this ecosystem will drive $459 billion of revenues in 2020, an impressive 15% increase from the prior year.

The market can be broken down into three main categories:

CategoryMarket Value (2020e)Sub-categories
Content$312B
(68% of total)
$176B: Mobile ads
$118B: Apps
$10B: Music
$8B: Video
Hardware$111B
(24% of total)
$77B: Accessories
$25B: Wearables
$9B: Smart speakers
Services$37B
(8% of total)
$18B: Insurance
$12B: Repairs
$4B: Others
$3B: Storage

Largely driven by mobile advertising and app sales, content is by far the largest subcategory, accounting for 68% of revenues:

  • Mobile advertising surpassed TV as the largest advertising channel in 2019, partially thanks to the relentless growth of online video and social media, making ads virtually unavoidable on a smartphone.
  • Gaming apps are benefiting from the immense processing power of today’s smartphones—and will bring in over two-thirds of total app revenue in 2020. Apple’s app store brought in approximately $1.8 billion in sales between Christmas Eve and New Year’s Day alone.
    • If you’ve ever owned a pair of headphones or a powerbank, it’s easy to understand why accessories are the third-largest subcategory in the smartphone multiplier market. With more people ditching the cable for wireless headphones, this subcategory is also set to grow even more.

      The Next $1T Economy?

      In the U.S., 73% of adults go online several times a day or almost constantly, which makes it clear that they aren’t going to give up their smartphones anytime soon.

      As a result, smartphone multipliers will continue to evolve and flourish, presenting a unique opportunity for investors and businesses.

      Altogether, it’s expected that the smartphone multiplier market will grow between 5 and 10% annually through 2023, likely propelling the entire smartphone economy past the $1 trillion benchmark in the coming years.

      Subscribe to Visual Capitalist

      Thank you!
      Given email address is already subscribed, thank you!
      Please provide a valid email address.
      Please complete the CAPTCHA.
      Oops. Something went wrong. Please try again later.

Continue Reading
New York Life Investments Company Spotlight

Subscribe

Join the 140,000+ subscribers who receive our daily email

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Popular