According to the World Economic Forum (WEF), African countries will need to work together with the rest of the world towards actualising key priority areas essential to the continent’s economic development. Africa has some progress but there is still a long way to go, especially following the impact of the COVID-19 pandemic and the Ukraine-Russia conflict which have brought to light the unpreparedness of the African countries.
Focus on the below would be instrumental in helping alleviate Africa’s challenges:
1. Reaping the Potential Benefits of the Africa Continental Free Trade Area
The African Continental Free Trade Area (AfCFTA) is arguably the biggest project by the African Union (AU) since its launch of Agenda 2063 in January 2013. AfCFTA has a strong development focus, highlighting economic and social development as well as legal harmonisation. According to the WEF, AfCFTA holds significant economic promise for African countries. The harmonisation of laws will be significant in attracting investment and making it easier to do business in multiple African countries. Furthermore, it will aid African countries to speak in one voice in relation to trade negotiations with other regions.
2. Tuning into Africa’s Digital Transformation
According to World Mobile, the value of Africa’s digital economy is projected to grow to over USD 200 billion in the next three years from the current estimate of USD 115 billion. Professional investors are forecasting strong growth in the value of Africa’s internet economy, with mobile phones central to the expansion. A study by PureProfile, an independent research company, found that one in four investor managers expect Africa’s internet industry to increase by 51 percent in three years. This study had analysed investors responsible for an approximate USD 700 billion in assets under management.
Africa’s digital transformation has been rapid and expansive, spurring the birth and growth of indigenous start-ups as well as investment from big tech companies such as Microsoft, Google and Meta (Facebook).
3. Accelerating Africa’s Green Economy Transition Through Financing
There is a growing need for global collaboration to achieve a green transition. Despite having the least amount of carbon emissions, Africa is significantly impacted by climate change. Therefore, it is important for African countries to join the discussion as early as possible by being proactive on issues regarding legislation, especially in connection with renewable energy. Africa needs to ride these virtuous circles by ensuring that policymakers tap into the growing market for green, social, and sustainable (GSS) bonds to finance the green economy transition. The GSS bond market is estimated to have grown by over 300 percent in the course of 2020, reaching a record high of between USD 425 billion (Moody’s) to USD 500 billion (S&P) by end of 2020.
4. Addressing Africa’s Infrastructure Challenges
Infrastructure development is a key driver for progress across the African continent and a critical enabler of productivity and sustainable economic growth. Investment in infrastructure accounts for over half of the recent improvement in economic growth in Africa and has the potential to achieve more. However, inadequate infrastructure remains a major obstacle to achieving full economic growth potential. Given that Africa has some of the world’s fastest-growing economic hubs, meeting the demand for key infrastructure has been identified as a priority by governments across the continent, who have committed billions of dollars to infrastructure. Physical infrastructure covering transportation, power and communication through backward and forward linkages facilitates growth. Several infrastructure projects span across jurisdictions and the African Development Bank has played a vital role in funding these projects.
According to the African Private Equity and Venture Capital Association’s latest African Private Capital Activity Report, infrastructure investments also punctuated the deal value in 2021 totalling USD 1.8 billion and accounting for 25 percent of the total value of private capital investments.
5. Bolstering Africa’s Role in the Global Economy
Africa’s rapid economic and social change is expected to give the continent a bigger role in global affairs and economy. The WEF observes that Africa’s working-age population is growing faster than any other age group, providing a valuable opportunity for accelerated growth. However, capitalising on this potential will require bold transformative reforms. Africa, more than many other region, desperately needs to provide the education and skills necessary for the jobs of the future. In addition to a skilled workforce, notes the WEF, sustained growth will require that new job entrants are matched with new job opportunities. By 2035, more young Africans will enter the workforce each year than in the rest of the world combined. This will bring more opportunities, and its progress will be shaped by a fast-growing middle class with higher spending power and the growing integration of Africa’s markets.
Despite setbacks suffered from the COVID-19 pandemic and the Ukraine-Russia conflict, African countries continue to show resilience. The solutions to these crises must be a learning experience for African economies to enable them to adapt and come up with future solutions. Through integrated systems such as the free trade areas, this can be achieved coupled with proper governance which informs better policy-making decisions.