Africa in 2023. What economic prospects for the continent?
2022 ends with the ongoing NATO Russia war fought in Ukraine, the inflation of food prices that has invested Africa; the disastrous destabilization of West Africa by Islamic terrorism linked to France’s geostrategic plans to maintain control of the former colonies; unresolved conflicts from Western Sahara to the Congo and the cold wars France vs Russia, United States vs China. Will this negative trend be interrupted in 2023?
But the most significant and, unfortunately, negative data is the end of the “African Dream” created by 20 years (1996–2016) characterized by sustained economic growth with some double-digit countries, strengthening of democracies, new economic and political partners dictated by the nascent multipolar world, decreases in conflicts. A twenty-year period that ended in 2017 where a negative trend hit the Continent due to the political incapacity of its ruling class which brought Africa back into poverty, subjection to foreign powers, coups d’état, civil wars.
Will this negative trend be interrupted in 2023? A group of expert African economists has made, on behalf of the economic magazine African Business, a series of forecasts and analyses of what this year will be like for Africans. Unfortunately, optimism does not abound.
As the new year begins, Africa is likely to experience a further contraction in its annual GDP growth as rising inflation and interest rate hikes continue to take their toll, limiting borrowing and government spending, says Charlie Robertson, chief economist at Renaissance Capital.
“It will be a year of austerity for many low-income countries, not just Africa. They can’t borrow easily from abroad. Is too expensive. We have a global slowdown, which won’t help exports. And that’s a tough combination. Governments will have to take steps like removing the fuel subsidy or at least reducing it in the second half of 2023, which will likely hurt the middle classes.”
But whether African economies wither further under the flurry of external shocks or take tentative steps towards recovery is likely to differ widely between individual countries. In particular, the continent’s oil exporters could be buoyed by robust energy prices that currently sit at $75 a barrel, at least for now, says Miguel Azevedo, head of investment banking, Middle East and Africa at Citigroup.
“On the one hand, for energy-producing countries, 2023 looks like a good year considering the current surge in prices, while 2024 will be less profitable. For producers of industrial raw materials, however, it is the opposite: 2023 will probably be under a bit of pressure, and in 2024, with the growth of the world economy, things will improve”.
2023 will be the year of debt restructuring. By 2021, sub-Saharan Africa’s external debt was nearly $800 billion, representing a more than doubled increase in ten years. Elsewhere, 2023 will see extensive talks on debt restructuring. Last November, the Ghanaian government proposed its 2023 budget plan, which includes restructuring of local and foreign currency debts that are likely to result in substantial losses for investors.
Next on the list is Ethiopia. In early 2022, the war-affected Ethiopian government in the Tigray region applied for debt treatment under the G20 Common Framework, a process created during the Covid-19 pandemic that applies the debt relief methodology of the Paris Club but with China and other multilateral lenders playing a role. Although the official creditors’ committee has met four times, it has not yet reached an agreement.
As a peace deal was reached between the Tigrayan forces and the government of Abiy Ahmed last November 2022, the medium-term macro and fiscal outlook is likely to improve in 2023: the IMF currently forecasts an economic expansion of 3, 8%. However, the optimism of the IMF is shattered by the continuation of the civil war in Ethiopia against the Oromia still far from being resolved.
Tunisia, which is experiencing political turmoil after President Kais Saied adopted a controversial new constitution that curtails the power of parliament, is also facing a high probability of debt restructuring, according to Oxford Economics.
Over the past 10 years, foreign direct investment has more than doubled, while the country’s external debt has increased from $22.6 billion (2010) to $41.6 billion (2021). “Public finances continue to put significant pressure on the country’s creditworthiness,” says van der Linde.
To avoid the Risk of defaults across Africa in 2023, Chatham House urges deeper cooperation between China — which has emerged over the past two decades as the largest individual lender to dozens of African countries — and the Paris Club of rich countries lenders.
The negative impact on the economic performance of 2023 in Africa will be increased by the worsening of the ongoing cold wars between France and Russia and between the United States and China. Russia is on the offensive in many West African countries to replace France. Moscow is betting on the fight against Islamic terrorism by helping countries like Burkina Faso, Mali and the Central African Republic to get rid of the terrorists who infest their territories.
Paris feels threatened economically as natural resources from its former African colonies account for around 40% of its economy. If the colonial flow of raw materials from Africa to France will drastically decrease, the French economy would enter a deep crisis that would jeopardize its role as a European power.
To avoid losing control of the former African colonies, Paris is implementing two distinct but complementary tactics. The first sees the sneaky and secret support (also in weapons and intelligence) to the various Islamic terrorist groups with the aim of intensifying the destabilization of “rebel” African countries and putting Russia in difficulty in its anti-terrorist work.
The second is linked to the Ukrainian conflict. France, while continuing to send weapons under the command of the United States, is trying to present itself as a peace broker opening a dialogue with Russia with the hope that these good “services” may facilitate dialogue between Paris and Moscow regarding Western Africa. Note that Russia in its periodic condemnations of the West tends to exclude France or to launch very moderate accusations.
For the United States, China represents a real nightmare as in Africa the Asian Dragon is increasing its sphere of influence and starting a process of industrial relocation. The Chinese strategy on the Continent also aims at a monopoly on minerals and hydrocarbons to deprive the West of the natural resources necessary for its industry. In an effort to stop China, the United States is trying to step up its role on the continent after years of disengagement.
In December, US President Joe Biden pledged Africa $55 billion over the next three years at the US-Africa Leadership Summit in Washington. This financial pledge is more than the $40 billion pledged by China at the latest Forum on Sino-Africa Cooperation (FOCAC) in 2021, and more than the $30 billion pledged by Japan at the 8th Tokyo International Conference on African Development (TICAD ) last August.
