2023 Paper 2 Flashcards
(5 cards)
With reference to Extract A, explain what is meant by a ‘regional trade agreement’ (5)
The African Continental Free Trade Area (AfCFTA) [Api could boost intra-Africa trade by 15% to 25% [Ap]. It will liberalise trade between African countries [K] as they agree to reduce trade restrictions between members [An]. Reducing tariffs will create more trade
With reference to Extract A, examine two causes of the high cost of transporting goods between African countries. (8)
The high cost of transporting goods between African countries is partly due to poor infrastructure. [K] Only
800,000 km of the 2.8 million km of roads in sub-Saharan Africa are paved, making road transport inefficient and costly [Ap]. Poorroads increase vehicle maintenance costs and travel time, making transportation expensive
Another reason is the inefficiency of African ports [K]. Cargo waits in ports for more than two weeks on average, significantly longer than in other regions [Ap]. Slow handling and higher costs make trade within Africa expensive and uncompetitive.
However, Chinese rail investments in the future could reduce costs [E].
Additionally, trade reforms like the African Continental Free Trade Area (AfCFTA) could reduce costs by improving trade flows and reducing tariffs
Discuss the impact of improved transport links between African countries on economic growth rates. (12)
The high cost of transporting goods between African countries is partly due to poor infrastructure. [K] Only
800,000 km of the 2.8 million km of roads in sub-Saharan Africa are paved, making road transport inefficient and costly [Ap]. Poorroads increase vehicle maintenance costs and travel time, making transportation expensive
[Ani
Another reason is the inefficiency of African ports [K]. Cargo waits in ports for more than two weeks on average, significantly longer than in other regions [Ap]. Slow handling and higher costs make trade within Africa expensive and uncompetitive. [An]
However, Chinese rail investments in the future could reduce costs [E].
Additionally, trade reforms like the African Continental Free Trade Area (AfCFTA) could reduce costs by improving trade flows and reducing tariffs
Improvements in transport links could significantly increase intra-African trade, which was only 18% of total exports in 2020 [Ap]. Enhanced rail and road networks would allow firms to move goods more efficiently across borders [K], reducing transportation delays and costs [Ap]. This would encourage greater exports, leading to higher aggregate demand and increased economic growth [An].
Additionally, lower transport costs could make African goods more competitive internationally, further stimulating economic expansion [An]
Level 3 KAA
However, the effectiveness of transport improvements depends on costs and utilisation [E]. Some Chinese-funded railways in Africa remain underutilised due to high operational costs, meaning firms continue to rely on road transport [E]. If infrastructure is too expensive for firms to use, its impact on growth may be limited
Assess two likely benefits of debt relief to Angola. Refer to Extract B in your answer. (10)
Debt relief allows Angola to reduce debt interest repayments, freeing up fiscal resources for public services [K].
Extract B states that Angola will gain an additional $6.9 billion in cash flow from stopping repayments for three years [Ap]. This means the government can invest in infrastructure, healthcare, and education, helping to reduce absolute poverty among the 17 million Angolans still facing severe hardship [Ap]. A healthier, more educated workforce will also boost productivity and long-term economic growth
Another benefit is that debt relief reduces Angola’s reliance on raising taxes [K], which could otherwise harm economic activity [K]. Angola’s borrowing level fell to 8.7% of GDP, improving its fiscal position and making government finances more sustainable [Ap]. Lower tax burdens could encourage investment and business growth, making Angola more attractive for foreign direct investment [An], particularly as the government plans to privatise state firms
However, debt relief could harm
Angola’s future borrowing ability [E].
Creditors may lose confidence in
Angola’s ability to repay debts, leading to higher interest rates on future borrowing [E]. This could increase the long-term cost of debt, limiting the government’s ability to finance development projects in the future [E].
The benefits of debt relief may be temporary [E]. Angola’s three-year suspension of repayments does not erase the total debt burden, meaning that once repayments resume, financial pressures could return
e) Discuss market-orientated strategies the Angolan government could use to improve development. (15)
One market-oriented strategy the Angolan government could use to improve development is privatisation of state-owned firms [K]. Selling shares in the state oil company would encourage competition and investment, making firms more efficient and reducing government spending on loss-making enterprises [An]. The finance minister of Angola has already pushed for privatisation of over 100 state-owned firms, though progress has been slow [Ap]. If successful, this strategy could attract foreign investors, generate government revenue, and drive economic growth [An]. Level 3 KAA
However, privatisation could lead to job losses if newly privatised firms focus on profit maximisation rather than employment [E]. While efficiency may increase, unemployment could rise if firms cut costs by reducing their workforce [E]. Additionally, if foreign firms acquire key industries, profits may be repatriated rather than reinvested in Angola, limiting long-term development benefits
Another market-oriented strategy is trade liberalisation, where Angola reduces trade barriers to increase exports and attract foreign direct investment (FDI) [K]. Since oil accounts for nearly all of Angola’s exports, diversification through trade liberalisation in industries such as agriculture or manufacturing could promote economic stability and reduce dependence on oil [Ap].
Additionally, the removal of exchange rate controls and Angola’s recent move towards a floating exchange rate has made its currency more competitive, encouraging trade and investment
However, trade liberalisation can hurt domestic firms that are unable to compete with cheaper foreign imports, leading to job losses and business closures [E]. Additionally, FDI may not be long-term, as foreign investors may withdraw if economic conditions worsen [E]. Removing government subsidies can also increase production costs for firms that relied on state support, reducing Angola’s ability to develop a strong manufacturing sector
