Deloitte recently hosted the 2019 Africa in 2019 Outlook Conference in Johannesburg, South Africa. A focus area was how Africa can improve on its ability to execute economic growth. Our Director, Rene Stegmann, attended on behalf of Relocation Africa. Below are some highlights from the conference.
US-Africa strategy countering China
At the end of 2018, United States (US) National Security Advisor John Bolton unveiled the Trump administration’s new Africa strategy. Known as the Better Utilization of Investment Leading to Development (BUILD) Act, the policy move aims to ensure US competitiveness on the continent where extensive engagement has already been made by China. How this geostrategic competition between two great powers plays out for the continent is a key question.
Growing debt in Africa
African economies have witnessed rising debt levels as the continent continues to make use of borrowed funds to finance infrastructural development. With a significant sum of financing flowing from China, the average debt-to-GDP ratio on the African continent has risen to 57%. What is important, however, is not the amount, but the serviceability of the debt in question. African economies need to ensure that acquired infrastructure is used productively to create returns that can service the debt from which such infrastructure originated.
The year of politics
In 2019, 24 countries across the continent will hold a major election (presidential, general, legislative), which is significant given that the economies of frontier markets tend to be influenced by domestic politics. The outcomes of these elections will shape the future for many economies on the continent.
Nigeria and South Africa – will 2019 be a year of structural reform?
Nigeria and South Africa, two of Africa’s largest economies currently experiencing “structural limbo”, are in need of renewed growth drivers. It remains to be seen whether or not the requisite political will exists to reinvigorate growth in both economies.
Referred to as the “African miracle” Ethiopia’s leadership has undergone significant restructuring to ensure that the economic changes currently taking place are supported by new political thought and leadership. Growth in Ethiopia has been driven by investment in fixed capital, giving rise to powerful domestic industries responsible for job creation. The future development of Ethiopia poses an interesting case study for the continent. Looking forward, 2019 is set to be the year of uncertain sentiment, most notably due to global trade tensions and protectionist strategies and their potential effect on the global economy. However, not all global crises are felt equally across geographic regions, as was the case with the 2008 global financial crisis.
Private capital as a force for development in Africa
Productive infrastructure is vital for development to take place in Africa, however, access to funding continues to be a significant issue facing multiple economies across the continent. According to figures published by the African Development Bank (AfDB), infrastructure needs across the continent amount to US$130bnUS$170bn a year, with a corresponding funding gap in the region of US$67.6bn-US$107.5bn. Furthermore, tightening fiscal conditions across the continent mean that the existing funding gaps will not be covered by government expenditure, placing infrastructure investment under stress. The introduction of private players in the infrastructure funding space, however, has been a significant development, particularly where infrastructure is concerned in countries in need of growth.
Intra-African trade – trade between African countries – currently accounts for 18% of overall trade on the continent, indicating the high degree of opportunity that still exists for the further integration of African economies. To this end, it is paramount that the necessary funding is available to develop African economies as well as support their ability to trade with each other. While private capital can be key enablers of such development, countries hoping to attract more private capital need to focus on developing growth incentives and an industrial base to drive investment.
To view the conference report, click here.
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