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Re – Africa rising and borrowing

McKinsey sees African fintech rising eightfold to $30billion

McKinsey & Co, the world’s leading consulting firm, is projecting that fintech revenues in Africa could reach $30bn in 2025 which is eight times higher than current levels. This is why private equity firms are valuing African startups in the space at astronomical levels. This optimism is based on the potential of financial inclusion in the frontier region. The great news notwithstanding, Africa’s debt service burden is raising eyebrows and remains a major cause for investor concern.

Africa went a borrowing, and could now be a sorrowing?

Africa faces looming debt crisis amidst worsening global headwinds. Before COVID-19, the debt profile of African countries had risen sharply nearly a decade after the IMF and the World Bank launched the HIPC initiative that slashed the debt burdens of some 30 low-income countries on the continent. By 2021, Africa’s external debt had accelerated by more than 150% to exceed $1trillion from less than $400billion in 2009. As global monetary tightening is expected to keep interest rates elevated, African countries’ debt is projected to rise to record highs, pushing debt servicing costs above the revenue. With fiscal cliff already quickening in several SSA countries, many African countries may begin to default on their loans.

Policy imperatives and political imponderables

Admittedly, democracy is being increasingly entrenched in Africa. However, there is widening expectation gap and waning appeal of democracy among Africans. For example, Chad, Mali, Guinea and Sudan have had successful military takeovers, and the juntas were surprisingly welcome with fanfare by the citizens. African countries are battling with several political imponderables that are masking policy imperatives. But choices must be made between serving the interest of a few persons who are using the guise of democracy to impoverish the masses and pursuing people-centric policy reforms that will save Africa from the impending state crisis. Protests are erupting already in some countries while the bubbles are set to burst in several other countries.

African gas, a panacea for Europe’s energy challenges?

The outbreak of war in Ukraine unmasked the Euro zone’s vulnerability to energy crisis due to its over dependence on Russian gas. Now the EU wants to cut its Russian gas imports by two-thirds by the end of 2022, putting a large market share up for grabs. For 2022, Europe needs an estimated 200million tonnes of gas imports, as it can only meet approximately 40% of its total demand. African gas-producing countries like Nigeria, Mozambique, Angola and Ghana, with their vast gas reserves and growing production capacity, are well positioned to fill the gap needed to address the EU’s ongoing energy crisis. Mozambique has concluded plans to ship its first cargo of liquefied natural gas to Europe.

This edition of the FDC Afriscope highlights very interesting discussions on economic, political and social issues in the continent.

Do enjoy your read!