Defend Truth


Africa can’t afford another lost decade — what has gone wrong?


Natale Labia writes on the economy and finance. Partner and chief economist of a global investment firm, he writes in his personal capacity. MBA from Università Bocconi. Supports Juventus.

Not long ago, the continent was the poster child for fast-growing emerging markets, with The Economist declaring in 2011 ‘Africa Rising’ on its cover.

The opulent Palazzo Madama in Rome plays host this week to more than 70 African heads of state, senior government officials and representatives of the African Union and European Union to discuss something of shared importance for the two continents on either side of the Mediterranean: the future of Africa.

While easily derided as yet another talking shop in a European capital cut off from the reality of the challenges faced daily by Africans, it could not come at a more critical moment for the continent.

The series of coups plaguing sub-Saharan Africa — at least nine attempts in three years — plus a continent-wide political and economic malaise have prompted some soul-searching. 

Across Africa, 22 countries — including major economies such as South Africa, Senegal and Ghana — are supposed to hold elections this year, a record. Worryingly, this year’s elections are likely to further reveal African voters’ deepening dissatisfaction with democracy. Afrobarometer surveys show that more Africans are today dissatisfied with democracy than at any time since 1999.

It’s a depressing state of affairs. Not long ago, the continent was the poster child for fast-growing emerging markets, with The Economist declaring in 2011 “Africa Rising” on its cover. What has gone wrong?

Fundamentally, the instability and dissatisfaction stem from the reversal in economic fortunes that most countries on the continent have experienced in the past 10 years. Sub-Saharan Africa’s GDP per capita peaked in 2014 at $1,936 and has since fallen by more than 10% to about $1,700 this year. In the same period, global GDP per capita has risen by nearly 15%.

Negative factors

Several factors have led to this slowdown. First, the Covid pandemic hit Africa disproportionately hard. Without any fiscal breathing room, African countries could not unleash the types of lavish support enjoyed by rich Western countries. Commodity and tourism-based economies collapsed.

Second, there has been a crushing funding squeeze. Africa is, by far, the region worst hit by rising US interest rates. Across the continent, borrowing costs have risen to unaffordable levels. African finance ministers are having to make impossible choices between paying the salaries of civil servants, keeping schools and hospitals open or compensating foreign investors. People are fed up with governments failing to improve conditions.

The drought of hard currency African bond issuance shows the disproportionate impact that higher US interest rates are having on the world’s poorest continent, as surging borrowing costs force African governments to tighten belts, restructure debts or seek alternative funding.

Kenya’s decision to cancel its Eurobond issuance in 2023 meant that it was the first year since 2009, amid the financial crisis, without a single international bond offering from a nation in sub-Saharan Africa. Furthermore, Chinese loans and direct foreign investment are drying up.

Sovereign debt crisis

At the World Economic Forum in Davos this month, Nonkululeko Nyembezi, the chairperson of the continent’s biggest bank by assets — Standard Bank — said that a sovereign debt crisis was the most critical problem facing Africa right now.

Ethiopia became the latest African country to default on its debt after it failed to make an interest payment in December, joining a league of non-paying nations that includes Zambia and Ghana. According to the International Monetary Fund, more than half of the low-income countries in the region are now assessed to be at a high risk of or already in debt distress. 

Finally, there has been an overreliance of African countries on commodity exports, flattering their growth statistics during the commodity boom. This is not only risky, as eventually commodity booms give way to busts, but leads to imbalanced economies suffering from “Dutch Disease”, with limited linkages between the enclave sectors of resource extraction and meaningful, broad-based employment. The past two years of lower oil, copper, diamond and platinum prices have hurt.

Stagnating personal income

The risk of another decade of stagnating personal income is real, and it would be a dreadful outcome for the world’s poorest continent. Africa is particularly vulnerable because such a large share of its population is already living below the poverty threshold, and its emerging working and middle classes are more fragile than elsewhere, floating between making ends meet and impoverishment.

As finance minister of Zimbabwe Mthuli Ncube says, middle-class status in Africa is not one-way but rather a “revolving door”. For many, that door continues to turn, pushing families back into poverty.

With the world’s attention elsewhere, Africa needs to get back on the agenda. Hopefully, this week’s summit in Rome will aid that. Italian Prime Minister Giorgia Meloni has staked much on the success of her €5.5-billion “Mattei Plan” of Italian investment into Africa to drive economic growth and, consequentially, slow the stream of immigrants to Europe. 

As she said at the opening, “The objective is to discuss our shared vision of development for Africa… It is a new approach: not predatory, not paternalistic, but not charitable either. Rather, the idea is to work together as equals, to grow together.”

Whether much is forthcoming from such lofty rhetoric remains to be seen. But whatever happens, Africa needs investment, structural reforms and moreover — growth. Its people simply cannot afford the economic and political consequences of another lost decade. DM


Comments - Please in order to comment.

  • Ben Harper says:

    Define “not long ago” 50 years. 100 years? There may have been a glimmer of hope in 2013 but the reality is that Africa does as it always does and that’s not going to change any time soon.

  • Robert Pegg says:

    As with all debt, if you borrow more than you can afford to repay, you are on a downward spiral. Countries that borrow money to pay bloated civil servant salaries instead of using it to develop their economies is the norm in Africa. Ghana is a typical example of a bloated civil service and SA is not far behind.
    When countries populations grow faster than their economies, poverty will be the end result. Africa will remain third world blaming colonization, or apartheid, for the situation when its themselves to blame.

    • Stef Coetzee says:

      “Countries that borrow money to pay bloated civil servant salaries instead of using it to develop their economies is the norm in Africa. ” As one looks at the grass possibly being greener elsewhere, you could be describing the UK today Robert. The population of the UK, reported this week, is setbto hit 70million in two years by 2026 – a decade earlier than forecast two years ago in 2022. The London Evening Stadard report that 92% of the 6.6 million projected growth – or 6.1 million people – was attributed to migration in the research based on current and past trends. Food for thought on what percentage of this migrant population are nett contributors to the economy to balance the strain on schools, hospitals, transport and hoysing provision.

  • Chris le Montfort says:

    The major reason why African countries fail and continue to fail their own people is not ignorant, inept and incompetent government – although those are all there – but overriding it all is corruption. The worst performing economies in Africa, including South Africa, are riven with corruption, from top to bottom. And no amount of fine words in conferences is going to change that. Ramaphosa’s presidency is now assessed as more corrupt than Zuma’s, and that’s quite an achievement!

  • Ben Harper says:

    Africa is ALL about corruption and greed. I find it hilarious when people try and make out the evil West and the Oil & Gas companies are blamed for all of Africa’s woes because it simply a case of playing the victim and refusing to acknowledge and take responsibility for their own terrible position.

    Lets for a moment consider two countries who, at the same/similar point in history were at the same point economically – Nigeria and the United Arab Emirates. Oil was discovered in commercial quantities in Nigeria in 1956 and the UAE’s first commercial quantity discovery was year later in 1958. Lets compare the two countries now and see the difference.

    Please don’t try the colonialism nonsense, the Arab states were under British mandate until the breakaway in 1971 where the UAE was formed. Nigeria had a 20 year head start as it gained independence in 1960 and became a republic in 1963.

    So why exactly is there such a huge difference between the two countries success and prosperity? Both have Oil, both were colonized, both gained independence yet one is miles and miles ahead of the other.

    It tells you HEAPS about the leadership of the countries and why the phrase TIA is so apt

    • Gerrit Marais says:

      The trajectory for South Africa and Korea is the same. In 1990, the GDP was USD200 and USD400 billion respectively. Today it is USD400 and USD1800 billion respectively.

    • Karsten Döpke says:

      Spot on Ben, I have lived and worked in both the Lagos and Dubai, I would have to say that it is corruption and short sightedness ie culture that is the main reason for the state of Nigeria as opposed to the UAE. Its time Africa took responsibility for its own future, and stopped blaming the west for its woes, from a resource standpoint it is the richest continent on the planet.

  • KEVIN COX says:

    Why is sub-Saharan Africa undeveloped? Simply because, and South Africa aside, it never experienced full-blown capitalist development. For that to occur, you need labor that has no alternatives but to work for a wage. But over the vaster area of the sub-continent, people do have alternatives. And this because of customary land tenure that provides people with exactly that. For sure, the pieces of land that they can use are falling in size, and in virtue of population growth. But the answer so far, has been rotating between the cities and the informal economy and the rural areas. Meanwhile, and for the same reasons of tribal culture, you have failed states: diverting public money to private purposes. Tribal Africa has always had trouble differentiating between public and private. But for capitalism to take off, you need that separation.

  • Cecil Rhodes says:

    Foreign mining companies extracted $6.1 billion in revenue from Zambia, and paid $0 taxes (subsidies), as a condition to access IMF loans. Has been going since 1990, when Kaunda left power. Africa is impoverished because foreign corporations/IMF are just as greedy and corrupt as African leaders they make.

  • Ivan Pauw says:

    Thanks for the article, I found it very insightful. However, why do we continue to promote our continent’s success based on ‘Africa Rising’ appearing on The Economist cover page? Why are our hopes for future prosperity looking to Europe and elsewhere? Why is there no mention of the pool of potential intra-continental solutions we have at our disposal? If we shift the conversation of Africa’s future to what is happening and what could be happening in the continent, by the people of the continent, would that not shape a fresh narrative of sovereignty and hope?

    Many questions and few comments, but always curious how what we read shapes the way we think about our collective future.

    • dexter m says:

      interesting comment

    • Ben Harper says:

      the continent’s success? What success would that be, successfully starving millions of people, successfully carrying out Genocide against it’s own people that is endorsed by it’s peers, successfully overthrowing their own governments in numerous Coup’s de-tat?

      Which successes do you refer to?

Please peer review 3 community comments before your comment can be posted