What Can We Expect From Africa This 2020?

It’s not easy to predict what’s in store for Africa this 2020. This is so because Africa is a large, diverse continent – what’s true for South Africa or Mauritius may not be the case for Rwanda or Somalia. The challenges to Africa remain the same as they have always been.

We look at some of the threats to the African economy this year:

Falling Oil Prices

African countries such as Nigeria are among the biggest oil producers in the world. Countries like Sudan too are important oil producers. Any fall in oil prices would have a damaging impact on al government plans as the earnings from oil wealth are critical to the running of these economies.

Slowdown in Europe

Europe is one of the biggest buyers of Africa’s natural resources. Slowdown in countries such as France and Germany could have a seriously negative effect on Africa’s commodity exporting nations. This has caused a plenty of worry to the African business partners who have formed a partnership business with several companies in Europe.

Slowdown in China

It is clear that the Chinese economy will grow at a much slower rate in 2020. China has emerged as the most important business partner for a majority of African nations. The hunger in China for African commodities seemed insatiable. However, the decline in China’s growth rate has effectively put a dampener on commodity prices. So the African business partners of Chinese companies are understandably anxious.

The Ebola Outbreak

Ebola has not just been a dreaded killer of people; it has always destroyed entire national economies. The damage caused by the Ebola outbreak to countries in western Africa such as Sierra Leone, Guinea and Liberia is incalculable. Ebola has played havoc with the transportation, cross-border exports and trade, reduced foreign investments to a trickle, damaged supply chains, and definitely put an end to tourism – which is one of the biggest currency earners for these countries. We hope the Ebola outbreak is put under control as soon as possible, because it has already caused too much damage, anything more than this would be unbearable.

General Africa Forecast 2020

So, based on the threats to the economy of the African continent, we make the following forecasts about Africa’s economic prospects this 2020.

In general, we expect more foreign investment in countries such as South Africa, Nigeria, Kenya and Mauritius, better governance across the continent and we expect 2020 to be without any major cross-border conflicts in Africa, to be a year of peace and hopefully, one of prosperity.

More foreign direct investment and remittances are expected from the major cash rich Asian countries such as Japan, China and South Korea. The focus of the international community will be on funding infrastructure projects across the African continent, and to foster better trade relations between neighbors.

Much of the foreign money will go into commodities, but we do expect more money to go into manufacturing projects in Africa as well, with over 800 or more greenfield projects in manufacturing or services being funded across Africa with foreign direct investment – which is impressive. We expect European, American and Asian countries to seek out business partners in Africa for a more effective utilization of their investment.

A lot depends on commodity prices. If an improvement in global commodity prices is seen towards the second half of the year, which should happen if the global economy picks up speed, we expect the growth rates of African economies to pick up momentum as well.

African nations are expected to focus on socially inclusive growth or more equitable development. The United Nations, the World Bank and a host of international organizations will be actively involved in helping African nations improve governance, specifically focusing on areas such as gender equality, child mortality and societal improvement. Governance will be the BIG item on every African nation’s agenda this 2020.

We expect a further opening of the financial sector in Africa. We expect African insurance companies and pension fund to be allowed to make investments abroad. We expect far bigger investments in infrastructure, services and farmlands in the African continent by sovereign wealth funds, pension funds and insurance companies of richer and more developed countries, made possible by the freeing of the African economy and clamping down on corruption in a major way.

Finally, we expect the African economy to grow by 5% this year, which is a decent growth rate, considering that the rest of the world is slowing down.

Conclusion

We would love to hear from our African readers, or those looking for business partners in Africa about their opinion on how the African economy is likely to fare this 2020. Do keep the comments coming and let’s have a great discussion.