In their latest report, the World Bank forecast a 3.2% growth for Sub-Saharan Africa’s economies in 2018. This is a slight increase of 0.8% from last year, reflecting a modest recovery, supported by improved domestic demand, stabilized commodity prices, slowing inflation and easing monetary policy. However, this growth was slightly weaker than expected, as Africa continues to be hampered by negative per capita income growth, weak investment, and a decline in productivity growth.

Slow growth for the big three

Interestingly, Africa’s big three economies seem to be weighing the region down in terms of growth. If Angola, Nigeria, and South Africa were to be excluded from Africa’s total projected growth, then the region’s growth rate would actually be higher, at 5%. In the coming year, the World Bank predicts South Africa will expand by only 1.1%, Nigeria by 2.5% and Angola by 1.6%. In its ‘Foresight Africa 2018 Report’, Brookings maintains that “These large economies are at risk of a lost decade unless policymakers implement significant reforms to shift the growth model away from excessive reliance on oil in Angola and Nigeria and, in the case of South Africa, to overcome structural problems—many inherited from the apartheid era.”

Most of 2018’s top performers in Africa are non-commodity intensive economies that make the top 10 list for the fastest growing economies. The list is led by Ghana (8.3%), Ethiopia (8.2%), Côte d’Ivoire (7.2%), Djibouti (7%), Senegal (6.9%), and Tanzania (6.8%). 

What about Ghana?

Having recently returned from a trip to Ghana where we hosted our 2nd West Africa Business Leaders Forum in Accra, the energy and optimism is undeniable and a far cry from its recent past affected by sustained periods of absent electricity and a stalled economy. As the highest growing economy last year, it is fair to say a new political party has brought about a sense of bullishness and urgency that seems to be gaining attention from international markets and interest from global investors. With ambitious infrastructure projects in rail, roads, aviation and ports to diversification initiatives set to transform the economy from a reliance on commodities to an industrialized State, Ghana certainly has the hallmark of a country with signs of success and one to watch in 2018. Whether or not it can turn this positivity into material change for the country is still yet to be seen. 

Heavily indebted

One of the biggest issues that could set the entire region back is ongoing debt issues management. Brookings notes that public debt is approaching critical levels in some countries. In 2017, debt was at 56% of GDP on average, an increase of 16% when compared to 2013.  Excessive external borrowing is likely to negatively impact growth in many countries, especially if there is a lack of forward-looking budget management.

Additionally, should the global interest rate rise, and developed countries decide on stricter monetary policies, then the debt of African nations will become more expensive and foreign exchange rates will become even more unfavorable.

Is it easy to do business in Africa?

Another interesting World Bank publication that outlines Africa’s prospects for the upcoming year is the 2018 ‘Doing Business’ Report. This report, which surveys 190 countries annually, focuses on regulations that encourage business activity and those that restrict it, helping foreign investors assess the ease of doing business in particular nations. These regulations include obtaining construction permits, registering property, getting credit, trading across borders, and enforcing contracts.

In this year’s report, Africa once again performed positively, with Nigeria, Djibouti, Zambia and Malawi being among the top 10 reformers. Nigeria moved up 24 places to the 145th position. It is also noteworthy that of the 264 reforms implemented globally, 83 (more than one-third) were put into practice in Africa.

Mauritius was again the highest ranked African country, followed by Rwanda and then Morocco. Overall, the top 10 highest ranked African economies in the rankings have been the same over the years. In addition to those listed above, other countries to feature include Botswana, South Africa, Zambia, Seychelles, Lesotho, Namibia and Tanzania. Kenya did especially well in this year’s Africa rankings, moving up to fourth place.

African nations that are leading the way

The World Bank’s ‘Doing Business Report’ for 2018 outlines three major reasons for Africa’s top performing countries. Firstly, politics plays a major role – the country’s senior leaders need to advocate strongly for business reforms. This is evident in countries like Nigeria, Rwanda, Botswana, and Morocco. The next year or two will likely see more business reforms being prioritized, as Kenya, Angola and Zimbabwe have welcomed new presidents; South Africa shows signs of new leadership emerging; and Nigeria prepares for its 2019 elections.

Secondly, Africa’s top performers have very high Country Policy and Institutional Assessment (CPIA) and Ibrahim governance index scores. Nations like Namibia, Rwanda, Botswana, Seychelles, Mauritius, and Tanzania all score very well in these indices. Thirdly, Africa’s leading economies market themselves well. Kenya, for example, has hosted a number of high profile global events over the past two years, including the 14th United Nations Conference on Trade and Development (UNCTAD) Summit and the 10th Summit of the Trade Ministers of the World Trade Organisation (WTO).

New year, new leaders

One thing that really stands in Africa’s favor, though, is the recent developments in leadership that I mentioned previously. Changing political leadership in South Africa, Zimbabwe, Kenya, Angola and Ghana can hopefully bring renewed confidence and increased investment, not just in those countries but in the entire continent. If this leadership can prove that Africa is a continent of opportunity and prosperity, rather than one of uncertainty and red tape, then I think the prospects for Africa as a whole are definitely looking up.