Africa’s economic outlook reveals both potential, uneven prospects

By Laureen Fagan - 4 February 2020 at 6:53 pm
Africa’s economic outlook reveals both potential, uneven prospects

For many African nations, the economic challenges remain enormous. Zimbabwe, for example, saw its extreme poverty rate increase by 5 percent in 2019, leaving a third of the nation – some 5.7 million people, according to World Bank – to deal with sharp inflation and shortages, all from the most vulnerable of all positions.

The drought in the southern part of the continent has led to power interruptions, particularly impacting the mining sector, and has damaged agricultural crops so severely that the World Food Program says half of Zimbabwe’s 8 million people are food insecure as the country enters its leanest months. Unemployment is high, and the country’s monetary policies and corruption, coupled with long-imposed Western sanctions, contribute to the crisis.

The drought and other economic impacts span across southern Africa, with a record 45 million people facing food insecurity from Mozambique and Madagascar in the east to Namibia in the west. Meanwhile, South Africa remains mired in economic crisis, with one columnist warning on Tuesday that it was “time to start praying.” Angola’s outlook remains muted at best, the Sahel nations to Somalia are crippled by conflict, and now even the best-performing nations face fallout from the China coronavirus epidemic and its economic ripple effects.

“We are looking mostly at a reduction in the number of Chinese people traveling aboard, the slowdown in imports along with domestic economic activity. And given the close ties, China’s close ties with the region, Asia would likely be most affected,” said Gerry Rice, the IMF communications director, last week.

Yet the African continent is not immune to either the public health or economic impact.

“Again, there is a risk that these spillovers could be larger and reach further. We just don’t know at this point,” Rice added. “We are looking at economic indicators on a real time basis. If global supply chains were systematically affected or global financial markets were significantly impacted by increasing uncertainty, then obviously the impact would be greater.”

Amid all the difficult news, the African Development Bank released its annual African Economic Outlook report. This year’s theme focused on education, training and the development of Africa’s ‘Workforce for the Future.” While it contains some good news, it too finds ominous trends for the continent’s economic growth.

Africa’s looming challenges

Atop the list is youth unemployment, which continues to grow at an alarming pace. There are 12 million college graduates entering the labor market each year but only three million jobs, again underscoring both the potential and the pitfalls of the African continent’s “demographic dividend” and what AfDB president Akinwumi Adesina called a “mountain” of unemployment.

“Given the fast pace of change, driven by the 4th industrial revolution – from artificial intelligence to robotics, machine learning, quantum computing – Africa must invest more in redirecting and reskilling its labor force, and especially the youth, to effectively participate,” said Adesina.

Education remains a challenge, but so too do many other things: security risks, climate change, infrastructure development, and especially financial inclusion and connectivity. Most of the continent remains below average in digital access, with vast differences between high-performing Tunisia and Gabon, and the limited access reported in Eritrea, Somalia and Burundi. The situation adds to the inequalities and uneven potential for Africa’s youth.

“Governments will need to invest in building the infrastructure needed to enable the development of appropriate skills,” the report warns. “This includes basic infrastructure, such as reliable and affordable power supply, transport infrastructure, and postal address systems – as well as digital infrastructure, such as high-speed internet, mobile virtual networks, and interoperable systems.”

Possibilities, potential pitfalls

There’s no question that the African Continental Free Trade Area (AfCFTA) will create economic opportunity, particularly in trade between nations on the continent that’s currently dwarfed by trade with Europe and Asia. Yet again, there are wide swings between the regional trade already achieved by the Southern African Development Community (SADC) or its West African counterparts in ECOWAS, and that within IGAD on the Horn of Africa. For parts of western Africa, the shift to a new common currency also has the potential to deliver economic benefits.

There’s also no question that increased investment on the continent, whether from key partner China or through the emerging Compact with Africa partnerships of Europe, is driving development. Yet the outcomes are uneven, and indeed that’s true within nations themselves where impoverished populations co-exist with powerful elites.

Further, there are no guarantees the external support will continue forever as other countries face their own difficulties at home, dealing with labor markets impacted by automation, an expanding list of climate catastrophes, and political leaders who embrace protective economic policies within a struggling global economy.

So East Africa continues its overall economic dominance with a regional 5 percent growth rate in 2019, and North Africa follows with 4.1 percent, according to the AfDB. West Africa, and particularly Central Africa, saw modest rises in their GDP last year, but again, the southern part of the continent saw its slow 1.2 percent growth rate contract to just 0.7 percent. The overall trends put the continent’s 2030 goal of eradicating extreme poverty, and the inequality that comes with it, far out of reach.

Benin remains a bright spot in terms of economic outlook. Kenya gets high marks for its investment in education. Djibouti and its ports are doing well, notably with a boost from Ethiopia. Yet the clock is ticking, changes are coming faster than many African countries are prepared to manage well, and their leaders need to take focused action to prepare for the future.

Images: World Food Program/Matteo Cosorich

 

 

 

Laureen Fagan

Laureen Fagan

Laureen is the editor of Africa Times

Laureen is a freelance journalist creating high-quality, informed content on international affairs, politics and technology. She has worked both in and out of newsrooms since 2000. She is a former paramedic with significant experience in community resilience and nonprofit community development initiatives, and maintains "a passion for action" on sustainability and climate change. She also is trained in conflict resolution and diversity, and has special interests in science and medical reporting, and culture and religion issues. Laureen received her MSJ from Northwestern University's Medill School of Journalism in the United States, and completed additional graduate study in theology at University of Notre Dame.

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