Perspectives of Africa are often tainted by prejudices, misconceptions, or emotional optimism leading to false or imprecise conclusions. Naysayers have morbidly depicted the continent as a lost cause, while utopists have described its future as inevitably rosily.

Cascading crises and Regional Challenges

Today, global competition is being played out at a time of confluent shocks. “Poly-crisis” is the buzzword with the cascading effects of post-pandemic recovery, the war in Ukraine, and often with direct references to the situation in Africa. Undeniably, these crises are taking their toll on the continent’s progress with significant implications as per the following:

- Thirty million Africans were pushed to extreme poverty in 2021, and 22 million lost their jobs because of the pandemic.

- Economic disruptions from the crisis in Ukraine are expected to push an additional four million Africans into extreme poverty by the end of 2023. 

- The continent is estimated to lose an average of 5 to 15% of its GDP to climate change, and the climate financing gap for Africa is estimated to widen to 1.2 trillion USD from now to 2030.

- Imports continue to dwarf exports, particularly of manufactured goods.

-  Exacerbated indebtedness in the continent is rampant and has reached a critical point in numerous countries, with up to 59.9% of GDP in parts of Africa exhausting revenues for debt servicing.

-  Inflation rates surpass international averages creating significant economic and social problems.

-  Food shortages are increasingly problematic due to drought and desertification.

-  There is limited availability of usable land due to a lack of infrastructure or sufficient water.

- The cost of inter-Africa trade continues to exceed the cost of importing products from beyond the continent.

- Population growth is at very high levels, and 50% are below 25 years of age.

- Armed conflict and terrorism remain a problem plaguing an increasing number of countries, raising serious questions on the continent’s political, economic, and social outlook.

With these significant challenges self-evident, it is not surprising that the ‘Africa Rising’ optimism that dominated the first 15 years of this century seems to have dissipated. However, this perception is misleading, as African challenges are rife, and its opportunities are also abundant.

Opportunities

In 2022 alone, we had African partnership summits with the EU, Turkey, Japan, and the United States. This year there will be ones with Russia and India. After being appointed, the new Chinese Foreign minister took his first foreign trip to Africa. The cathedral of summit diplomacy is clearly a reflection of considered interest. Multiple reasons make Africa so coveted.

The African is a repository of the world’s most sought-after minerals and resources. Yet, it is an underserved market of almost 1.5 billion people and rising, where returns on investments are higher than global averages.

Furthermore, its countries are part of a free trade agreement that has the potential of making the continent the most significant common market for goods and services in the world. Also, perhaps more importantly, African countries are viewed as non-partisan in the ongoing great-power struggle. It is a continent where new allies can be won over or lost.

African economic growth was 4.8% in 2021, despite the effects of COVID-19. Recovery was well underway. However, Africa’s GDP growth fell to 3.8% in 2022 amid significant challenges imposed by the war in Ukraine. Yet, despite the slowdown, 53 of Africa’s countries posted growth last year.

Over the next two years, Africa is set to outperform the rest of the world in economic growth, with real GDP increases averaging around 4% in 2023 and 2024, significantly higher than the projected global averages of 2.7% and 3.2 respectively. Africa’s pre-Covid-19 top five performing economies are projected to grow by more than 5.5% on average in 2023-2024.[1] Six other African countries are expected to grow by an average of 6.5 to 9.5% in the 2023-24 period.[2] All five regions are expected to record positive growth. 

Cautious Optimism

My cautious optimism regarding the continent’s overall performance is premised on four assumptions I believe will hold true.

1.  African Youth:

Africa’s biggest cause for optimism lies in its youth. The continent is home to roughly 1.3 billion people, about 17% of the world’s population, 40% of whom are below the age of fifteen, making it by far the youngest continent in the world, demographically speaking. This poses a challenge. But the opportunities this young generation affords are beyond measure.

African startups and the status of venture capital (VC) on the continent. In 2022, 6.5 billion dollars were raised in total VC funding in Africa. That is an 8% increase from 2021. The region saw the highest growth in VC funding year to year from 2021. More than 1150 equity investors participated in the ecosystem last year; that is a 29% increase year to year. The success stories were not all in fintech, payment methods, and e-commerce; other success stores include the following:

- In Egypt, successful startups are helping farmers raise better crops and decrease waste during transportation.

- In Tunisia, a startup that uses artificial intelligence to automate transportation scheduling and predict locust outbreaks was sold to BioNTech for 680 million dollars.

- The largest funding series in 2020 went to a Kenyan startup that provides access to renewable energy in rural areas.

The ingenuity of Africa’s youth knows no boundaries. When I look at Africa’s youth, particularly all those young and brilliant minds in the startup space, I see a true embodiment of the phrase “African solutions for African problems.”

2.  Free Trade Area:

On trade, there is a tendency to decry the slow pace of negotiations of the African Continental Free Trade Treaty. However, the truth is that the pace has been sure and steady:

- In over three years since the treaty went into force (May 2019), African member states have already agreed on tariff reduction schedules for 88% of tariff items.

- In February 2023, three new additional protocols to the treaty will be adopted by leaders of the African Union on investment protection, property rights, and safeguarding competition.

- Last September (2022), a guided trade initiative began facilitating trade under the laws of the ACFTA in eight countries.

- A payment and settlement system were launched to enable users to make payments in local African currencies for cross-border goods.

-  An adjustment facility fund was set up to assist governments in addressing any short-term disruptions from free trade.

-  African Member States are currently negotiating an additional protocol to encourage women and youth to enter the free market and provide their small and micro enterprises with incentives that will allow them to integrate faster within the free trade area. 

- Suppose local demand is anything to go by. In that case, I suspect that the key sectors representing the highest return on investments under the ACFTA will be the automotive industry, pharmaceuticals, agriculture, and agro-industries.

3.  Investment in infrastructure:

To understand the imperative of investing in infrastructure, it should be noted that 600 million Africans still lack access to electricity. Only 43% of Africans have access to the internet.

The African Development Bank estimates that the continent’s infrastructure needs 130 to 170 billion USD a year, with a financing gap in the range of 68 to 108 billion USD. In other words, the continent spends about 2.5% of its collective GDP on infrastructure, which needs to increase quickly.

Governments are trying to find new ways to source the required financing. African countries have already begun issuing green bonds and security-indexed instruments to secure funding.

Africa’s infrastructure needs will also determine how the scramble for Africa plays out. Consider that African countries have begun issuing non-US dollar-denominated bonds in a bid to diversify their financing needs. Consider also that China alone has invested 23 billion USD in infrastructure projects on the continent between 2007 and 2020; that’s 8 billion USD more than the following eight top lenders combined.

4.  Natural Resources

On natural resources, the continent remains the source of over 70% of the world’s platinum group metals (PGMs), 60% of the world’s cobalt, 20% of the world’s gold and uranium, and 10% of the world’s oil, not to speak of the continent’s reserves of phosphates, copper, iron ore, diamonds, or tantalum. Suppose the world’s supply chains are moving towards inevitable segregation as a consequence of Sino-Western competition. In that case, this only means that the continent’s deposits could be an even greater impetus for growth or, of course, cause conflict depending on how they are managed.

A caveat

I am definitely not pessimistic about Africa’s future, yet I remain cognizant and well aware of the magnitude of the challenges before it. The continent is truly at crossroads. Having long usurped Africa’s treasures, the international community has an obligation to help.

However, Africa’s success and attractiveness will be best determined by adopting coherent and sustainable African development policies that address structural economic problems, determine strategic direction, and thus assure governmental and private sector partners of the sustainability of Africa’s positive direction.

Africa is rife with challenges to be met but also provides vast opportunities to be seized. Imperative synergies between international fairness and regional astuteness will determine where the fork in the road leads us.