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Envisioning Africa’s economic prospects

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Envisioning Africa’s economic prospects
The potential of women and the youth in Africa remains untapped. Image credit: Leon Louw for WhyAfrica

Envisioning Africa’s economic prospects

Africa is a continent of great opportunities, but financing is needed to unlock opportunities.

Africa has a young workforce, great renewable energy potential, rich natural resources and incredible biodiversity.

According to African Development Bank President Dr Akinwumi Adesina, Africa remains the second-fastest-growing region in the world after Asia.

According to Adesina the continent’s expected 3.7% economic growth in 2024 will be increasing to 4.3% in 2025. The African Development Bank Group, which launched its African Economic Outlook Report (https://apo-opa.co/4aUEW5r) in May, states that 15 countries in Africa achieved real growth rates of at least 5% and that half of the world’s 20 fastest-growing economies are in Africa.

In a recent presentation titled “Envisioning Africa’s Economic Prospects” Adesina warns though that achieving strong economic prospects and resilience will require overcoming some significant headwinds, including tackling climate change and rising debt, and through critical global financial reforms.

Envisioning Africa’s economic prospects
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Structural change of economies (Envisioning Africa’s economic prospects)
As Africa’s economic resilience is bolstered, unlocking its economic prospects will require the following:

  • Structural change of its economies,
  • Raising the productivity of agriculture
  • Providing enough electricity
  • Accelerating infrastructure investments
  • Supporting faster pace digitalisation
  • Unleashing economic and job opportunities for women and youth
  • and driving industrialisation through greater mobilisation of the private sector.

Across Africa there are great success stories like the African Agricultural Transformation (TAAT) program, which has helped 13 million farmers to increase crop productivity. In Ethiopia, the distribution of 65 metric tons of heat-resistant wheat has led to self-sufficiency in wheat production, covering 2.2 million hectares.

In his presentation Adesina acknowledged challenges such as youth unemployment, poverty, debt vulnerability, and political instability, but dispelled perceptions of Africa as a risky investment destination.

He referenced a 14-year Moody’s Analytics study showing Africa’s low infrastructure loan default rate at 1.9%, compared to between 4.6% and 12.4% in other regions around the world.

Credit ratings and challenges (Envisioning Africa’s economic prospects)
Adesina is a proponent of an independent African credit rating agency to counteract misperceptions that lead to underinvestment due to excessive risk premiums.

Quoting the United Nations Development Program, Adesina said fairer credit ratings for African countries could save at least USD75-billion annually in debt service payments.

“The trajectory for Africa will be much stronger as we tackle these challenges, as well as improve security and expand more concessional financing and private sector financing,” he emphasised.

Mobilising more private sector investments (Envisioning Africa’s economic prospects)

The African Development Bank is mobilising more private sector investments into Africa. The bank supported the USD24-billion LNG (Liquified Natural Gas) project in Mozambique, which will provide more than USD66-billion in revenue for Mozambique and make it the third-largest exporter of LNG in the world.

Other significant development projects supported by the bank includes the USD19.5-billion Dangote Refinery Complex in Nigeria, the largest single-train refinery in the world and the largest ammonia plant globally, and the USD13-billion OCP phosphate company in Morocco, the largest phosphate fertilizer plant in the world.

Africa is important in the energy transition as the continent hosts large deposits of key minerals. The bank estimates that Africa’s natural capital stood at USD6.2-trillion in 2018, with mineral and fossil fuel resources alone valued at USD290-billion and USD1.05-trillion respectively.

Tapping the youth and women’s potential (Envisioning Africa’s economic prospects)

Adesina says Africa must work out how to tap the potential of its youth, turning this asset into an economic dividend. “We are supporting universities of science and technology, expanding training in science, technology, engineering and mathematics, centers of excellence in biotechnology and material sciences, as well as technical and vocational training,” he says.

He adds that the African Development Bank will be focusing heavily on women. “Our flagship initiative, Affirmative Finance Action for Women in Africa (AFAWA), is de-risking financial institutions to lend to women. It is working with 169 financial institutions in 43 countries and has so far approved USD1.7-billion in financing for 18,300 women-led businesses. Our goal is to mobilise USD5-billion for women-led businesses.”

Envisioning Africa’s economic prospects

Envisioning Africa’s economic prospects
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