Understanding the Sub-Saharan African Business Environment in 2018 - Global Trade Magazine
  January 22nd, 2018 | Written by

Understanding the Sub-Saharan African Business Environment in 2018

[shareaholic app="share_buttons" id="13106399"]

Sharelines

  • The fundamentals responsible for the Sub-Saharan African economic slowdown still exist.
  • Sub-Saharan Africa recorded a GDP growth rate of 2.4 percent in 2017.
  • SSA’s improved economic grow rate is still far below historical trends over the last decade.

The Sub-Saharan African (SSA) business environment, which offers great opportunities for trade and investment, is not so complicated to understand after all. The economic slowdown which became obvious in the region in 2015 is gradually subsiding. However, the fundamental factors responsible for the situation still exist.

Sub-Saharan Africa recorded a GDP growth rate of 2.4 percent in 2017, an improvement from the 1.3 percent of 2016, but still far below historical trends over the last decade. The gain came from rising commodity prices, improved climate conditions in east and southern Africa and a friendlier global environment.

The economic struggles of the two largest economies in the continent (Nigeria and South Africa) weighed down the regional performance at aggregate level. The good news is, these two countries are on a recovery path and expected to rebound in 2018 going by the recently-released World Bank flagship report on Global Economic Prospects. Nigeria has just exited a five-quarter recession while South Africa has pulled through two quarters of negative growth.

TOP AFRICAN ECONOMIC GROWTH PERFORMERS, 2017-2018 Source: IMF Regional Economic Outlook, October 2017. Table: Brookings – Foresight Africa

 

 

 

 

 

 

 

 

 

 

 

 

Isolating these two heavyweights responsible for the weak overall performance, in other places, growth continued at higher rates across the continent. Ethiopia is the fastest growing economy in SSA at an average growth rate of 8.5 percent over the last three years. Its investment in infrastructure is paying off. Ghana witnessed stable growth at 6.1 percent in 2017 and projected to be significantly higher in 2018. Improvement in crop production and public investment facilitated economic progress in Senegal and Cote d’Ivoire while Tanzania and Kenya also have strong projections.

Moving forward, the outlook for SSA is positive with a growth projection of 3.2 percent in 2018 and 3.5 percent in 2019. Eighteen out of the forty-three countries captured in the World Bank economic forecast will grow at 5 percent or above in 2018. Although this optimism is premised on key factors such as sustained higher commodity prices and macro-economic reforms, economic activities are general improving and the worst economic seasons appear to be over for the region.

The political restructuring sweeping through the continent has increased political and social pressure on governments to address past market failures. Thus, policy directions are changing, reforms are being undertaken and conducive regulatory environments are being created to unlock private investments. SSA continues to be the region implementing the highest number of reforms according to the World Bank Doing Business 2018 report.

Also, we have seen strong efforts towards building physical infrastructure through public-private partnerships in some countries. Poor infrastructure in the region depresses productivity growth rate by two percent per year as reported by AFDB in 2016. A successful execution of these agenda is critical to the economic prosperity of the continent.

Considering these positive indicators, investors searching for global opportunities should reassess the continent for their long term investment portfolio.

Kemi Arosanyin is a Global Trade contributor and the Director for Africa Trade Expansion Program at the World Trade Center Miami. She writes, speaks, and advises on trade and investment in sub-Saharan Africa.