At first glance, it appears that 2023 will herald bad news for African markets.
High inflation in the US and Europe has led dollar-denominated interest rates to rise, so it is of little surprise that the Collins Dictionary word of 2022 is ‘permacrisis’. There continue to be Covid-19 controls in China, supply chain challenges from US–China competition and the Russia–Ukraine war, and a lack of global action on climate change. The bleak outlook is most pronounced in Africa, given high exposure in terms of sovereign debt and commodities, yet the least protection from value-added export markets, capital and tourism flows, as well as slow-responding international financial organisations.
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But, taking such a view as an investor would be a mistake, for two reasons.
First, African governments are more focused and co-operative than ever.
African governments are more focused and co-operative than ever.
Let’s take the Covid-19 impact. Due to a lack of vaccine supplies, only 23% of the African population is fully vaccinated and only 3% are boosted. But that has not stopped African governments, businesses and citizens launching successful new initiatives to address those barriers, conduct and transform business, and set the stage for growth. This is driven as much from within the continent as from beyond its shores.
Central to 2022 resilience and progress has been the African Continental Free Trade Area, which will accelerate in 2023. This year saw the first shipment of locally made car batteries and tea from Kenya to Ghana under the new zero-tariff arrangements, as well as the agreement of the investment protocol. Next year will see the conclusion of the competition protocol which will further harmonise investment policies across the continent, and possibly more. This will create new opportunities for smart investors.
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Telecoms will grow in Ethiopia based on new deals with Kenyan companies forged in 2022, shipping from Nigeria will strengthen based on completed infrastructure by Chinese firms in 2022. Investing in cross-African, sectoral and sub-regional markets will be an excellent, returnable proposition in 2023.
Second, investors must remember that Africa is not a country.
Investors must remember that Africa is not a country.
Yes, there were one or two coups in 2022 — but in a continent of 54 African countries where we’ve also seen peaceful elections in large economies such as Kenya and the agreement of a peace deal in Africa’s second-largest wheat producing economy, Ethiopia, there is no single story. Even the IMF’s overarchingly negative outlook on what it terms “sub-Saharan Africa” buries their own forecast that five African countries – Libya, Senegal, Democratic Republic of Congo, Rwanda and Niger – will be among the 10 fastest growing globally in 2023, and on average, their growth will out-pace pre-Covid levels. Investors would do well to consider African markets next year, even if they've never heard of them before.
But what about a debt crisis? Hasn’t Ghana issued too many bonds, Kenya borrowed too much from China? Hardly. The external debt volume of the entire African continent is equivalent to 11% of all external debt owed by low- and middle-income countries. That’s manageable in the complex international financial system we have now.
The external debt volume of the entire African continent is equivalent to 11% of all external debt owed by low- and middle-income countries. That’s manageable in the complex international financial system we have now.
That said, here’s where I get cautious: the international response is cause for concern, not Africa’s underlying fundamentals. If, as with Covid-19, the US, Europe and even China look after themselves first, that’s where Africans will face growth challenges and have to be resilient.
But in the end, we’ll bounce back. We always do.
Hannah Wanjie Ryder is the CEO of consultancy Development Reimagined and senior associate at the Center for Strategic International Studies Africa Program.
E-mail: hannahryder@developmentreimagined.com
Hannah's previous columns:
- Tackling Africa’s logistic gap is key to global supply chain resilience.
- The power of remote working is underutilised.
- Why it is time for innovation to go beyond IP.
This article first appeared in the December 2022/January 2023 print edition of fDi Intelligence.