By Antony Mutunga
For Africa, 2019 was full of the unexpected as leadership changes and demonstrations rocked many countries. For instance, South Africa faced a number of violent protests against foreigners. On the other end, Sudan lived through a revolution that saw the removal of strongman Omar al-Bashir. On a more positive note, the African Continental Free Trade Area (AfCFTA) was ratified.
With the new year just beginning, the continent will expect a more positive result than recorded in 2019. This year brings with it new opportunities for the continent to develop and catch up to the rest of the world. For instance, AfCFTA is expected to be implemented come July this year, heralding a borderless Africa. If done successfully, Africa will create the largest free trade area with a market of over one billion people generating an income of about Sh303 trillion ($3 trillion).
The agreement is expected to cause an increase in intra-African trade, which, over the years, has been at an all-time low compared to Europe and Asia. For example, according to the Annual Development Effectiveness Reviews 2019 by African Development Bank (AfDB), intra-African trade still remains low at 14.4 percent of the total trade as compared to inter-regional trade in Asia where it accounts for 59 percent of total trade. Because intra-regional trade facilitated the growth of blocs such as the European Union, Africa will be hoping starting this year the same will come to pass for the continent.
In addition, the agreement is also expected to increase job opportunities for the region’s growing population. Unemployment has been one of the biggest challenges on the continent. With open borders, more opportunities will come up helping a majority of people to improve their living standards.
In 2019, Africa was well represented in the list of the fastest growing economies in the world; in 2020, the same trend seems to hold. For instance, according to the World Bank, in the top list of the fastest growing economies in 2019, four countries were from Africa; Ivory Coast, Rwanda, Ethiopia and Ghana. With these countries still continuing to progress further in terms of infrastructure and economic ties and others such as Uganda and Senegal coming up, the overall growth of the African economy is expected to increase as compared to the previous year.
Despite this rosy picture, challenges are to be expected, which may cause a slowdown in the growth of the African economy. For instance, 2020 will be an election season for the continent whereby a majority of the fastest African economies will be going to the poll. Countries such as Ethiopia, Ghana, Côte d’Ivoire and Egypt will be going to the elections.
Looking at past events, a majority of elections in the continent have been marred by violence. For example, in 2005 Ethiopia held elections which resulted in riots as the opposition did not accept the results. As a result, about 200 protesters were killed; thousands others were jailed. Even though the country has changed under the leadership of Prime Minister Abiy Ahmed, uncertainty persists.
If the same was to occur among the fastest growing economies whose citizens will be going to the polls, the resultant effects will reverberate continentwide. With large economies such as Nigeria and South Africa growing at a slow pace, the African economy has relied on the growth of countries such as Ethiopia and Rwanda to maintain growth figures.
In the past three years, South Africa and Nigeria have grown on an average of 2 percent and in 2020 they are expected to continue disappoint with low growth rates. Many expected South Africa to climb back to its former glory after Cyril Ramaphosa took over following the resignation of Jacob Zuma but to date the country continues to struggle as unemployment continues to rise and the government struggles to implement new policies.
With trade tensions between the US and China dying down, the country has a chance to pick up as investments in its products start to increase again. Reforms will have to be implemented in order to get the country back on track. However, with corruption and mismanagement still growing, the country is expected to continue on its slow growth. If this persists, South Africa will continue to reduce its credit worthiness which will cause a reduction in investment.
On the other hand, Nigeria has taken up protectionist measures as a way of boosting growth in its non-oil sector. The country has in place trade restrictions and border closures to curb smuggling from other West African countries and boost crop production. Unless changed, these policies will be in place for the next several years and thus they will continue to slowdown the economy. Additionally, these policies are the opposite of what AfCFTA wants to accomplish.
Last but importantly is how African countries will continue to handle their debt. So far several countries, Eritrea, Gambia, Mozambique, Congo Republic, Sao Tome and Principe, South Sudan and Zimbabwe, are already considered to be in debt distress. With global trade tensions causing a reduction in uptake of African exports, more are at risk.
With AfCFTA gathering momentum, it is necessary that all African countries be prepared to ensure they enjoy the full benefits. Reforms and new policies will be required to help the continent move forward.