The following article is a summary of Dr Martyn Davies’ presentation at Deloitte’s recent Africa in 2019 Outlook Conference, which took place in Johannesburg. South Africa-based Davies is managing director for emerging markets and Africa at Deloitte.
At the 2018 Africa Outlook conference key trends unfolding on the continent at the time included divergent regional growth in Africa, the growing China-Africa play, as well as the Trump administration’s limited engagement on the continent. Other topics closer to home included the “Ramaphoria” effect, as well as political developments in neighbouring Zimbabwe.
Since then, a number of developments have taken place on the continent, giving rise to a set of new thematic issues that are set to have an impact on business in 2019.
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 Utilisation 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.
Fast GDP growth, but what does it mean?
Five of the top 10 fastest-growing economies in the world in 2019 are in Africa, and four in sub-Sahara Africa (SSA). Yet, for GDP growth to produce the structural changes needed across the continent, it needs to be inclusive and qualitative in nature. In 2019, it is important that more focus is placed not only on quantity (high growth) but also on the qualitative nature of growth.
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.
Maturing emerging markets – demography is destiny (for growth)
Growth in an economy is underpinned by the working-age population. Africa is well positioned in this regard with a large young population base, which is set to expand going forward. What is left is to ensure that enough jobs are created to leverage the continent’s demographic makeup.
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.