By Yinka Adegoke
Last year, Africa had
some of world’s fastest-growing
economies and 2020 won’t be very different. A
few of the countries on the top 10 list may have changed but the IMF, World
Bank and other institutions all expect above global average GDP growth.
The
top performers will be South Sudan (8.2%), Rwanda (8.1%) Côte d’Ivoire (7.3%),
Ethiopia (7.2%), Senegal (6.8%), Benin (6.7%) and Uganda (6.2%) along with
Kenya, Mozambique, Niger and Burkina Faso all expecting 6% growth.
While
these countries help push up Africa’s overall average economic growth rate
forecast to 3.8% (or 3.6% for Sub Saharan Africa), these averages are weighed
down closer to the global average (3.4%) by the two largest economies, Nigeria
(2.5%) and South Africa (1.1%).
Nigeria’s
outlook has improved after a strong end to 2019, but most economic watchers
believe it needs to grow much faster to pull large chunks of its 200-million strong
population out of poverty.
Economic
reform has been slower than expected since February 2019’s presidential
election. South Africa’s meager growth rates are exacerbated by its ongoing
electricity crisis and overall political stasis. Its leaders will likely spend
part of the year dreading an inevitable debt downgrade.
Since
2020 is seen as the start of a new decade, Brookings Institution’s annual Foresight
Africa report looked at the average economic growth forecasts
for the next five years till 2024. This predicts Senegal (8.3%), Rwanda (7.9%),
Niger (7.3%), Uganda (7.2%) and Mozambique (6.9%) as the five fastest
growing over that period.
While these forecasts
are promising, most economists and investors are paying more attention to how
the reality of climate change will impact their economic prognostications.
Brookings highlights
research which shows lowered crop yields, lower labor and agricultural
productivity and damage to human health due to climate change will
significantly decrease GDP in Africa.
Global temperatures
rising as much as 3°C by 2100 would have a disproportionate impact on Africa
with aggregate GDP potentially dropping by as much as 8.6% after that year.
But on a more hopeful
note Brookings analysts say there’s a $16 billion opportunity if African
countries fully
implement the African Continental Free Tree Agreement (AfCFTA).
In the ideal scenario
where there’s a 100% liberalization of tariffs across African member states
under the agreement, the continent’s aggregate GDP would jump to $3 trillion by
2030 from $2.1 trillion today. In this scenario there would be a 33% increase
in intra-African exports and 1.2% increase in employment.
One less optimistic economic highlight from the
last few years has been growing concern about Africa’s
rising debt and this continues into 2020.
Most of the worry has
been about Eurobond debt with African countries issuing some $26 billion in Eurobonds
in 2019 more or less equivalent to 2018. Or, put another way, Africa issued
more Eurobonds in 2018 and 2019 that it did in all the years combined from 2003
to 2016.
While African Eurobonds have been great for
international investors seeking higher yields away from US treasuries, “the
scale of issuance keeps prompting questions about default even though it
amounted to just 1% of Africa’s 2019 GDP ($2.4 billion),” writes Charles
Robertson of Renaissance Capital.
But of
course, Africa is not a country and there will be trouble spots if care is not
taken. – Quartz Africa
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