African economies see reasons for optimism despite crises
NNN: From covid-19 to the war in Ukraine, external crises have put pressure on African economies, but many on the continent see opportunities for sweeping reforms.
Africa has already shown some resilience during the pandemic, as its economic contraction was less severe than the rest of the world, shrinking by two percent compared to 3.3 percent globally in 2020.
While the Russian invasion of Ukraine weighs on the world economy, Africa faces brighter prospects again in 2022.
“Africa is heading for growth of around 3.7 percent, while in North America and Europe there is a real risk of recession,” said economist Lionel Zinsou, a former prime minister of Benin.
“We have not been the biggest victims of the pandemic, and we will not be the biggest victims of the collateral consequences of the war in Ukraine,” Zinsou added.
The conflict in Europe has caused global inflation to rise, but Zinsou said rising commodity prices will offset higher import costs in Africa.
Another positive sign is that investor confidence in Africa has reached a higher level than before the pandemic.
Of 190 business owners in Africa who were questioned, 78 per cent expressed confidence in their development prospects, compared to 61 per cent before the Covid crisis, according to a report by accounting firm Deloitte.
‘Opportunity to transform’ The fallout from the war in Ukraine, however, remains a threat, driving up prices of wheat and other key agricultural products, raising fears of famine in some countries.
“We are concerned about the slowdown in global growth and the availability of certain products for Africa, such as wheat or fertilizers,” Ivory Coast President Alassane Ouattara said during the Africa CEO Forum in Abidjan this month.
Makhtar Diop, director general of the International Finance Corporation (IFC), a branch of the World Bank, said African economies “have been affected and have not recovered their pre-2019 growth rates.”
“The situation remains particularly difficult with inflation disproportionately affecting the poorest populations,” he added.
But some see the situation as an opportunity for African countries to plan new strategies.
“We lose a good part of our crops every year due to lack of electricity and cold chain,” Zinsou said, referring to the transport of goods that must be kept refrigerated throughout the supply chain.
These losses could be reduced through investment in infrastructure, he added.
For Diop, “every crisis is an opportunity to structurally transform the situation. There is potential for the economic transformation of African countries by increasing the added value created on the continent.”
‘Get independence’ Some countries have picked up the pace in recent years. Côte d’Ivoire has built new cashew processing plants, while Nigeria is building a major oil refinery in Lagos.
In Guinea, foreign companies have recently been commissioned to build bauxite processing plants.
“One of the consequences of the pandemic is that many groups wanted to be less dependent on foreign imports,” said Emmanuel Gadret, Deloitte’s head of francophone Africa.
Georges Wega, deputy director of international banking networks for the Africa region of France‘s Societe Generale financial group, believes that Africa has “a lot of potential” to finance its essential projects.
“This is the time for Africa to gain its independence in many ways. We need to rely more on funds raised on the mainland than foreign debt,” she said.
The African Continental Free Trade Area (AfCFTA), which aims to harmonize customs tariffs across the continent, which is gradually happening, is hopeful of boosting intra-African trade.
“Africa has been extraordinarily responsive (to the pandemic), financially and technically, and it will be again,” Zinsou said.
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