Africa is the poorest continent, because of low economic freedom, low literacy, high levels of corruption, and bad transportation networks. The only country in Africa that has high levels of economic freedom is Botswana, which is a sparsely populated desert country. It went from poverty to prosperity in just one generation due to its free market economy. But much of Africa has stagnated since independence, as their governments steal from productive citizens, embezzle foreign aid into rulers’ own pockets, and prevent free markets from developing, by either having the government control key industries, or keeping the economy controlled by businesses run by cronies of government officials. Countries like the Congo, Chad, Somalia, and Burundi made little progress since independence in 1960, even as Latin America and Asia got much richer.
But 2024 is expected to be a good year for Africa, in terms of economic growth — especially in Tanzania and Ivory Coast, which have better business climates than most African countries, and will see economic growth of 6% to 7% (Tanzania and Ivory Coast do not have good business climates, but unlike most of Africa, they don’t have simply awful business climates, either):
Six of the top-10 performing economies in the world are forecast to come from Sub-Saharan Africa in 2024, according to the International Monetary Fund.
Their smaller size won’t be enough to make up for less-stellar performances by South Africa and Nigeria, which together account for two-fifths of Africa’s $2 trillion economy. But collectively, they are helping to make a difference in a region that remains severely challenged by poverty and inequality.
“Sub-Saharan Africa’s growth prospects are brightening,” said Bloomberg Africa Economist Yvonne Mhango. “Eight of the region’s top-10 biggest economies – which together account for another 40% of regional GDP – will grow by a strong 5% on average.”
These include Ivory Coast at 6.6% and Tanzania at 6.1%. The two countries have done a good job of diversifying their economies and attracting foreign investment.
As a result, the IMF sees regional growth improving moderately to 4% in 2024 from 3.3% in 2023. And while the two heavyweights aren’t likely to deliver quicker output in the near term, both Nigeria and South Africa are pursuing reforms that may yield benefits over time.
The IMF sees growth in Nigeria picking up to about 3% this year and next, while South Africa is projected to expand by 1.8% and 1.6% over the two years, up from a tepid 0.9% in 2023….Nigerian President Bola Tinubu has embarked on aggressive measures to relax the country’s foreign-exchange regime and remove costly fuel subsidies….Still, analysts remain cautious on Africa’s outlook in the immediate future. The pick-up in growth is coming from a low base after the setbacks suffered by the region during the pandemic, straining public finances and leaving many countries struggling with heavy debt burdens.
Those have already triggered defaults in Ghana, Zambia and Ethiopia, with the IMF warning other nations remain at risk, and access to foreign capital markets is effectively closed.
Moody’s Investors Service has a negative outlook on the credit of African sovereigns because of elevated debt-refinancing risks, and because it expects slower growth in China to dampen demand for the region’s commodity exports.
Aurelien Mali, senior credit officer at Moody’s Sovereign Risk Group, notes that Africa’s ratio of debt to gross domestic product has risen to 60% on average. That’s back up to the crisis levels of the early 2000s that galvanized debt forgiveness for the poorest nations.
“Many of these countries have been running twin deficits — fiscal deficits and current-account deficits — in the post-Covid period,” he said. “They need to access external funding at a moment when you have a wall of maturities coming due.”
Moody’s estimates about $5 billion of eurobonds will come due in 2024 in Sub-Saharan Africa, with more than $6 billion in 2025. That doesn’t count debts coming due to bilateral creditors like China or multilateral lenders including the IMF and the World Bank.
Nigeria’s 3.1% economic growth rate may not sound bad. But Nigeria’s population growth rate is around 3%, and due to increased crowding and urbanization, Nigeria needs economic growth of at least 4% just for its citizens to not get poorer in terms of living standards. So Nigerians are effectively getting slightly poorer. Nigeria and South Africa have Africa’s largest economies, both over $400 billion in PPP terms.
Ethiopia has a bad business climate, with its government running an abnormally large share of its economy (controlling banks, telecommunications, and much of its transportation sector). But its business climate is no longer among the worst on Earth, as was the case a generation ago, so its economy is expected to grow 6.2%, due to the improved (if bad) business climate. And Ethiopians, unlike most peoples, can sometimes run government-controlled businesses competently. Ethiopian Airlines has long been one of the few competently-run government airlines in the world, and was so even during the brutal communist Derg regime.
Ghana is prosperous compared to most of Africa, but defaulted on its debts anyway, and had a currency crisis. So its economic growth rate, which was 6% or more for years, is expected to be only 2.7% in 2024. Putting aside recent economic turbulence, its business climate is better than most of Africa.
