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Africa outlook 2023: Multiple challenges, but enormous potential

The region’s debt is estimated to be around $636 billion, more than the combined GDP of over 40 Africa countries

by The Brief
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The year 2023 is likely to bring several challenges for the African region, but beyond the headlines of bad politics, Africans will continue with business-as-usual innovating and designing products that respond to the challenges.

What is the way out of the continent’s shackles of Debt?

Sub-Saharan Africa’s external debt payments to keep rising

Africa’s debt will continue to be a headache in 2023. Unless there is genuine co-operation between Africa’s lenders, transparency from African Governments and prudence in managing public resources.

The region’s debt is estimated to be around $636 billion, more than the combined GDP of over 40 Africa countries, whilst this is only 11% of the global debt, servicing debt comes at a price, most Governments had to cut priorities towards funding education and healthcare to save costs, building revenue to catch up with existing debt loads.  Various initiatives towards addressing Africa’s debt haven’t achieved results.

Africa must borrow to finance Africa’s development programs; they must do this responsibly. Exploring alternative sources of affording capital, including engaging sharia compliant Islamic Finance, the new wave of impact investors as well as climate finance, working with stakeholders to reduce corruption and encourage domestic capital investment in the continent, particularly from local pension funds which manage over $350 billion in assets. African countries should also leverage the Diaspora remittances which remained consistent, supporting families, and providing the much-needed currency reserves for governments, Diaspora remittance to the continent last year at $53 billion was way over development aid, but Governments must do more to channel remittance beyond domestic use to sustainable investments.

From the East, West, South and North, Africa is a country

Countries in the Eastern Africa region experienced high inflation pressures due to several disruptions caused by a range of internal and external shocks: adverse weather conditions, high borrowing costs, conflicts and tensions, currency volatility and disruptions in the supply chains. There is a strong likelihood that some of these factors will continue to affect growth prospects in 2023.

All eyes will be on Ethiopia, and the implementation of the peace agreement between the Federal Government and the Tigray People Liberation Front (TPLF). Rebuilding the Infrastructure of the Tigray region will be an expensive undertaking for everyone.

Private geopolitical interests are in essence the benefactors of the tensions at DRC border regions in the east. While people are displaced en masse, artisanal mining and shady/illegal resource extractions continue apace with what amounts to slave labour. If this is not managed, escalation of the conflicts would affect millions of people and disrupt business in the region.

Countries in the Horn of Africa including Somalia, some parts of Ethiopia, Northern Kenya, South Sudan will require urgent food supply to address the ongoing drought caused by adverse weather conditions.

Regional hopefuls include Tanzania which has attracted investor confidence under the leadership of H.E Samia Suluhu. Opportunities in the country’s infrastructure sector, the Uganda – Tanzania crude oil pipeline project and the natural gas projects have received a nod from Investors.  The recent announcement lifting a ban on political party rallies is a good step to reaffirms the country’s political stability.

Mozambique, endowed with Liquefied Natural Gas estimated to be around 180 million cubic feet is going to be a significant country for energy investments, the country’s LNG gas will plug into the energy demand gap in Europe.

Kenya faces an uphill task ahead, with early warning over public debt which at 64.2 % of the GDP will be tough to manage. However, the new administration has rolled out an economic plan which aims to address some of Kenya’s challenges. The plan promises to increase revenue collection, improve agriculture production by supporting Farmers, encourage entrepreneurship by supporting the youth and SMEs access affordable financing through an enterprise fund ‘Hustlers’ Fund.

For South Africa, the 2024 national elections in the country and the lead up through 2023 will be a critical area to watch for investors. It is looking increasingly likely that the ANC will drop below the 50% mark in the election, ushering in a new era of coalition politics.

Top presidential election candidates in Nigeria

Nigeria’s economy according to World Bank estimates will grow at 3.2% in 2023, with inflation expected to drop to 17%. The focus for most Nigerians will be on the forth coming General election of February 2023. The battle to lead Nigeria is down to a three man’s race led by Mr Bola Tinubu – All Progressives Congress (APC) Atiku Abubakar of the People’s Democratic Party (PDP) and Labour Party’s Peter Obi.

Nigerians will go to these polls grappling with the same problems they have had for decades, too much wealth and nothing to show for it. A decade ago, the APC under President Buhari vowed to transform the economy, investing in the country’s infrastructure, diversify Nigeria’s economy to wean it off its over dependence on crude oil and most importantly protect the lives of Nigerians from Boko Haram.

The issue of insecurity is still persistent in Nigeria, from the insurgent-based conflict in the north-east, to socioeconomic instability in other parts of the country, Nigeria’s security challenges prevent real development from taking place. China-Nigeria bilateral relations are also taking a hit because insecurity is preventing the country from fully integrating with the BRI initiative.

It is crucial to note that the insurgency plaguing north-eastern Nigeria spills into regional Sahel countries like Chad, with multinational task forces in conjunction with foreign militaries confronting the insecurity problem, little success has been recorded while insurgent extremists seem to be becoming more brazen in their exploits.

Regional integration promises to transform Africa’s fortunes in line with the global Agenda 2030 and the continent’s vision 2063

The AfCFTA is one of the 15 Flagship Programmes of the Africa Union Agenda 2063, a blueprint and master plan for transforming Africa into the global powerhouse of the future.

According to Prof. David Luke, (LSE) the greatest promise of the AfCFTA is that the nature of the trade is composed of value-added goods. One of the main rationales is to drive Africa’s industrialization through trade. So far, 65% of Africa’s exports to other continents are extractives, while less than 35% of intra-African exports are extractives.

How will victory look like for Africans in 2023?

To make 2023 count for Africa, governments prioritise reducing sovereign debt and improving financial stability, attracting sustainable investment, improving the business environment for domestic and international investors, leveraging diaspora remittances to create jobs, and addressing foreign reserves shortages.

Agnes Gitau is the Executive Director for the UK & EU, Eastern Africa Association, an industry body that supports Trade and Investments flows into the Eastern Africa Region.

The author acknowledges contribution from: Prof David Luke LSE, Dr Rory Jubber (UCL), Ovigwe Eguegu – Policy analyst Development Reimagined and Alex Mwai of GBS Africa

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