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The Booming Economies of the African States

by Samantha Greene / Jul 7, 2023 / 5m

The booming economies of the African states have been exceeding expectations since 2020. Despite all the difficulties and challenges, many countries on the African continent have been developing quickly and have shown impressive economic growth. 

In this post, we look at the leading African countries and the state of their economies today.

The fastest-growing economies: Africa

In 2020, seven of the ten global players with the highest GDP growth were located in Africa. These were Ethiopia, Uganda, Côte d'Ivoire, Egypt, Ghana, Rwanda, and Kenya, with economic growth of 1% to 3%.

Overall, the African continent coped incredibly well with the COVID-19 pandemic thanks to the coordinated actions of healthcare authorities. Their strategy to prevent transmission and mitigate community spread paid off, and the economies in most African states didn’t suffer as much as in first world countries.

The fastest-growing industries

Over the decade, the weight of digital businesses in the market capitalization of the continent has grown from 13% to 29%, while the production of raw materials and energy has fallen to 23% from 34%.

For example, Sub-Saharan Africa's top 200 index was up 13% in 2020. Over the past five years, digital companies have grown by 324%, compared to emerging markets, which have grown only by 67%. The global growth leaders include South African driving data integrator Cartrack (+76%), Zimbabwean digital banking holding CBZ, and Nigerian mobile operator MTN Nigeria (+58%).

The fastest growing economies in Africa have also seen some success in agriculture. As we wrote in our post on China-Africa trade relations, about 35% of the continent’s GDP comes from agriculture, but the sector is severely underdeveloped. With investments from China and ambitious trade deals like the one Kenya recently signed with the EU, African countries have managed to expand their businesses and substantially increase agricultural exports.

However, many problems remain, starting with high levels of public and private debt. The need for external financing is still significant.

The reasons of rapid growth

After the recession in 2020 (-1.3%), the growth for the following period was finally estimated at +4.3%. This was a notable upward movement from the initial numbers. Part of the growth in 2021 can be explained by the catch-up after the economic slowdown recorded in 2020 due to the global pandemic.

Apart from this rebound effect, Africa's growth in 2021 was actually very close to its pre-pandemic average (+3.0% vs. +3.2% over the period 2015–2019). According to the forecast, in 2022–2023 it will accelerate and reach 4.0%.

The surge in fuel prices has been good for local economies. The surge was largely spurred by rising energy demands, in particular from China. In addition, oil and base metal prices have already seen significant increases in 2021, and the upward trend was reinforced in 2022 due to the war in Ukraine and its inflationary consequences.

Due to population growth, which remains fast here, catch-up GDP per capita is much slower. Thus, there was +2.5% every year between 2015 and 2020 and only +1.1% globally. For this reason, Africa is not going to return to its pre-pandemic level of GDP until 2023, whereas most other regions were able to recover as early as 2021.

On the way toward the future and the best economy in Africa

Since 2021, the recovery has been largely driven by the countries with the most diversified economies, which are structurally better able to bounce back in the event of external shocks.

Such states as Ethiopia, Côte d'Ivoire, Rwanda, and Senegal show higher and more stable growth rates over a longer period because they are less subjected to fluctuations in commodity markets or tourist flows. These economies managed to maintain some dynamics in the midst of the pandemic and revealed +1.8% growth in contrast to the slowdown recorded everywhere else.

They also rebounded in 2021 with a fairly robust growth rate of 4.4%, which will continue to increase in 2023. At 5.1%, the growth of diversified local economies is estimated to almost return to the pre-crisis average. It’s predicted to reach 4.8% in 2023. Considering economic growth in Africa by country, six diversified economies are among the top 10 fastest growing economies in Africa in recent years, namely Senegal, Niger, Rwanda, Côte d'Ivoire, Benin, and Togo.

Still, it is worth noticing that between 2015 and 2019, the growth of states exporting extractive resources was relatively sluggish and no longer even covered population growth. Driven by higher commodity prices in the context of the global recovery, average growth in local oil-producing countries was 3.1% in 2021 and will pick up slightly in 2023.

Finally, in Africa, as elsewhere, countries heavily dependent on tourism have suffered the most from the health crisis in terms of intensity and duration. It was at a level of -7.7%. After a technical recovery in 2021, growth remained weak in 2022 and was only +1.4%. It should only pick up in 2023 at +3.4%, according to current forecasts.

International economists are urging local states to diversify their exports so that the continent can weather the economic turmoil caused by the COVID-19 pandemic and the war in Ukraine. They claim that more diversification will be useful for all countries. Still, each of them should take into account local features and abilities to ensure further economic growth.