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As we look ahead to 2024, Capital Markets Comment is pleased to welcome back Patrick Conley to outline ten things to watch for in Africa in 2024.
African is at a pivotal crossroads, characterized by a complex web of developments that shaping its political, economic, and security terrain. Following two decades of relatively stable economic growth and democratization, contemporary headlines regarding the continent increasingly focus on coups, debt crises, and mounting instability in some of its most prominent nations.
Here are ten things to watch in 2024.
- Erosion of Chinese Influence in Africa: China's influence in Africa confronts formidable challenges that may constrain its ambitions on the continent. A deceleration in China's domestic economic growth has prompted a shift in Beijing's priorities from extravagant expenditures aimed at securing influence in developing nations to addressing the recovery of outstanding debts. Most notably, China participated in multilateral negotiations that restructured a staggering $6.3 billion of Zambia’s debt to foreign creditors.Several African nations find themselves grappling with arrears stemming from loans associated with the Belt and Road Initiative (BRI), a flagship Chinese infrastructure development project in Africa that has been widely regarded as the linchpin of Beijing's endeavor to expand its footprint in Africa, Asia, and Latin America. At the BRI summit convened in October, President Xi Jinping unveiled a significant injection of $100 billion in fresh BRI funds while also acknowledging a shift towards "smaller" and "greener" undertakings. While China is poised to persist as a collaborative partner for African governments, it seems unrealistic to expect this spending will keep pace with what we have seen for the past decade.
- Surge in Investment across Lobito Corridor Countries: The announcement of an infrastructure partnership between the United States, the European Union, the Democratic Republic of Congo (DRC), Zambia and Angola are a significant development. This initiative aspires to interconnect valuable mines in the DRC and Zambia with Angola's Atlantic Port of Lobito. After years of ceding infrastructure projects to China, the Lobito Corridor represents a tangible commitment from Western powers to invest in pivotal infrastructure projects within Africa.The initiative seeks to enhance economic prospects for countries in the region by streamlining trade, reducing transportation costs, and augmenting accessibility to global markets. For instance, the heightened connectivity envisioned is poised to amplify exports of copper and cobalt from the DRC and Zambia, while further integrating oil-dependent Angola into global markets.
- Limited Impact of the African Continental Free Trade Agreement (AfCFTA): The African Continental Free Trade Agreement (AfCFTA) has garnered considerable attention as a prospective game-changer for intracontinental trade. Nevertheless, its complete impact is a gradual and evolving process. Despite 47 African countries having ratified the agreement, an array of impediments such as trade barriers, infrastructural deficiencies, and disparate regulatory frameworks continue to impede its effectiveness.Despite the implementation of AfCFTA, non-tariff barriers persist across numerous regions obstructing the fluid movement of goods. Additionally, the disruptive influence of the COVID-19 pandemic on global supply chains has served to decelerate the agreement's momentum. Achieving the full potential of AfCFTA necessitates sustained endeavors aimed at addressing these challenges and promoting the harmonization of trade policies among African nations.
- Spillover of Instability from the Sahel to Littoral West Africa: The resurgence of coups and economic turbulence in various West African nations, particularly within the Sahel region, has raised concerns of potential regional spillover effects. Armed incursions, frequently perpetrated by jihadist factions, are increasingly affecting the northern territories of coastal nations that had previously been unaffected such as Ghana and Cote d'Ivoire.This instability poses threats to economic activities and undermines governance during a period already marked by regional uncertainty. Ghana, until recently one of the continent's fastest-growing economies, has now become a focal point of widespread protests amidst a debt crisis and soaring living costs. Effectively addressing this spillover necessitates cross-border security cooperation, but the G5 Sahel alliance in the region has recently unraveled due to tensions between military- and civilian-led governments.
- Growth Resilience in East Africa: In stark contrast to other nations grappling with debt crises and economic challenges, East African markets, encompassing countries such as Kenya, Tanzania, and Uganda, have exhibited remarkable resilience during this period. Despite disruptions wrought by the COVID-19 pandemic and the Ukraine conflict, which have undermined economies elsewhere, these nations continue to attract foreign investments, buoyed by their political stability, infrastructure development, and the burgeoning middle-class.For instance, Kenya, with its diversified economy bolstered by robust technology and services sectors, has become a magnet for foreign investment in fintech and telecommunications. Neighboring Tanzania has also witnessed rapid expansion, attracting heightened foreign direct investment in sectors including mining and manufacturing. While other African regions strive to regain their economic footing, the presence of positive indicators suggests that East Africa remains an enticing option for investors interested in Africa’s economic potential but weary of current headwinds.
- Challenging Year Ahead for South Africa: Recent years have witnessed South Africa contending with a litany of challenges, including energy grid instability, elevated crime rates, youth unemployment, and deficiencies in basic service delivery. These issues are poised to be further compounded in 2024, with the country bracing for a closely contested election that could divert attention away from addressing these pressing concerns.The energy crisis, characterized by frequent power outages, has critically undermined the country's manufacturing sector, and deterred foreign investment. The African National Congress (ANC), which has presided over the nation since the end of apartheid in 1994, has struggled to effectively grapple with these deteriorating issues and faces the prospect of falling below the 50% threshold for the first time in the general election slated for May.
- Nigeria at a Crossroads: Under the leadership of President Bola Tinubu, Nigeria has embarked on necessary monetary reforms but has made limited headway in addressing pervasive security challenges. Issues such as banditry in the northwest, jihadist insurgents in the northeast, and separatist movements in the south endure as pressing security concerns undermining the state's legitimacy.The government's efforts to render the economy more appealing to foreign financiers constitute a pivotal component of sustainable development and the realization of Nigeria's potential as Africa's largest economy. However, these reforms will take time to bear fruit and if the security situation continues to deteriorate, the Tinubu administration may encounter increasing resistance to its policy agenda.
- Escalating Unrest in Egypt: Egypt’s economic performance and mounting youth unemployment may foreshadow heightened public discontent. The anticipated reelection of President Sisi to a third term this month could amplify public dissatisfaction, potentially leading to increased protests and unrest. Egypt's economic challenges and simmering political discontent underscore the imperative need for the nation to address structural deficiencies, foster inclusive growth, and generate employment opportunities for its burgeoning youth population to avert further instability.
- Ongoing Instability in Ethiopia: Ethiopia is grappling with persistent conflict involving an array of insurgent groups within its borders. The resolution of internal conflicts and the maintenance of regional stability stand as prerequisites for Ethiopia's long-term growth prospects and for fostering peace within the Horn of Africa.
- Electoral Instability:?Scheduled national elections in major African countries like Algeria, Ethiopia, Ghana, Senegal, and South Africa carry significant implications. These elections could either strengthen the political standing of incumbents, trigger backlash due to contested outcomes, or usher in new governments.?African elections often disrupt economic activities, impact investor confidence, and require heightened attention to political dynamics. Companies operating in nations heading to the ballot box should closely monitor these developments and adapt their strategies accordingly.?
