Africa, despite facing economic challenges, is showing glimmers of hope in 2024 with a surge in its top-performing economies. According to the International Monetary Fund (IMF), six of the world’s top-10 performing economies this year are expected to emerge from Sub-Saharan Africa.
While the substantial contributions of South Africa and Nigeria are experiencing slower growth, collectively, these emerging economies are making a meaningful impact on a continent grappling with poverty and inequality.
Bloomberg Africa Economist Yvonne Mhango commented on the brightening prospects, stating, “Sub-Saharan Africa’s growth prospects are brightening. Eight of the region’s top-10 biggest economies will grow by a strong 5% on average.”
Among the standout performers are Ivory Coast, projected to grow at 6.6%, and Tanzania at 6.1%. These countries have succeeded in diversifying their economies and attracting foreign investments, contributing significantly to the region’s positive outlook.
The IMF predicts an overall moderate growth improvement for the region, with the GDP expected to rise to 4% in 2024 from 3.3% in the previous year. While Nigeria and South Africa may not experience rapid growth immediately, both countries have initiated reforms that could yield long-term benefits.
Nigeria is set to achieve approximately 3% growth this year and the next, driven by aggressive measures undertaken by President Bola Tinubu, aimed at reforming the foreign-exchange regime and eliminating costly fuel subsidies.
South Africa, on the other hand, is on the path to overcoming its energy crisis, with expected growth rates of 1.8% and 1.6% in the coming two years, an improvement from a meager 0.9% in 2023.
Razia Khan, Chief Economist for Africa and the Middle East at Standard Chartered Bank, highlighted the significance of these reforms in the region’s growth, stating, “Reforms matter, and this will be the crux of the growth turnaround that we expect in both South Africa and Nigeria.”
Despite potential political uncertainty due to upcoming elections, analysts believe that these developments are vital for the continent’s economic progress. The African National Congress may lose its absolute parliamentary majority, but it is expected to remain the largest party in government, with minimal policy impact.
While optimism is growing, caution remains regarding Africa’s immediate outlook. The region’s growth is rebounding from a low base, resulting from setbacks during the pandemic. Many countries continue to grapple with heavy debt burdens, triggering defaults in several nations, including Ghana, Zambia, and Ethiopia.
Moody’s Investors Service has expressed concerns about elevated debt-refinancing risks and anticipates slower growth in China, impacting the demand for African commodity exports. African countries face rising debt-to-GDP ratios, reaching levels not seen since the early 2000s, which led to debt forgiveness for the poorest nations.
Moody’s Sovereign Risk Group’s Aurelien Mali noted the challenges, stating, “They need to access external funding at a moment when you have a wall of maturities coming due.”
While there are significant eurobond maturities expected in 2024 and 2025, African countries have been largely locked out of the market since the US Federal Reserve began raising interest rates. Analysts do not foresee market access opening up for most African sovereign issuers this year unless there is a significant reduction in interest rates.
As long as interest rates remain high, countries in Africa and frontier markets worldwide will remain vulnerable in meeting their obligations. With uncertainty surrounding the pace of rate cuts by the US Federal Reserve, the economic challenges faced by these nations continue to persist.
