The IMF in its World Economic Outlook reduced its global growth forecast down from 6% to 5.9% but also increased the estimate for Africa to 3.7% from its initial projection of 3.4%. This is consistent with the view that the global recovery will be uneven and that Africa is a land of unlimited opportunities. When you consider the fact that Africa’s receipts of global investments have declined by 16% in 2020, this is a welcome economic prognosis for the continent.
Rich countries want to trade with Africa – Imperialism or Prosperity??
There has been growing interest from advanced economies to increase trade with Africa. Could this be because of the region’s largely untapped market and economic resources or is this imperialism disguised as trade relations?
Africa’s share of global trade, currently $760bn, is growing at a projected rate of 5%. The rate of both intra and inter African trade is expected to grow from 20% to over 50% as the AfCFTA has kicked in. Therefore, the continent is set to benefit from the twin effect of trade and investment flows. Some of the old stereotypes of international capital being the last vestiges of neo-colonialism is falling flat on its face. Some African policymakers are still trapped in the old ideology of infant industry protection and economic patriotism. This is fast giving way to internet penetration, innovation, and the fintech revolution.
African investors are also a restless bunch, with a median age of approximately 20 years, embracing cryptocurrencies and bitcoin. The continent has become a cryptocurrency frontier market. In Nigeria, it is believed that over $500mn of bitcoin assets are changing hands. Beyond that, African central banks in tandem with their global peers, are stepping up their game to understand, promote and develop their own digital currencies.
SSA: fringe player, market opportunity or Dark Continent
It is not by coincidence that many leading tech behemoths like Facebook, Twitter and more recently Google, are announcing ambitious investment plans for the continent. For instance, Google plans to invest $1bn in the region over the next five years. The question for investors and stakeholders is if you want to participate in this tech revolution or to be a spectator. If improved internet connectivity alone could lead to a multiplier effect on the African GDP of $180bn, you can imagine the impact and linkage effect of an additional investment of $150bn on the SSA GDP of $2.6trn in the next decade.
This edition of the FDC Afriscope highlights very interesting pieces on economic, political and social issues in the continent.
Do enjoy your read!