Why Africa’s Economic Surge Leaves Many Behind

If you’re looking for a reason to be optimistic about Africa’s future, here’s one: In 2026, the continent’s economic growth is expected to outpace Asia’s for the first time in modern history, according to the International Monetary Fund.

There are many factors behind that surge. For one, at least half of the world’s 20 fastest-growing economies are in Africa.

Prices for commodities such as gold, copper, and cocoa – the bread and butter of some of Africa’s major economies – are high, and the dollar is weak, curbing inflation and making international loans easier to pay back.

And there’s another big reason why forecasters are optimistic about Africa, particularly sub-Saharan Africa.

After a difficult decade, the region’s two largest economies, South Africa and Nigeria, are in an upward swing. Given that they together account for about 30% of the region’s gross domestic product, that rising tide could lift many boats.

But economists also have some warnings. For one, this economic recovery hasn’t translated to improved prospects for the average South African or Nigerian, and people in both countries remain, on balance, poorer than they were a decade ago.

“This is usually how early recoveries look,” says Stears lead economist Dumebi Oluwole.

Stears is a market intelligence firm focused on African investment.

“The numbers improve first. The relief for households comes much later.”

NIGERIA TACKLES INFLATION

That is the reality for Ifeanyi Raphael, who runs a small restaurant in Nigeria’s capital, Abuja.

As he wipes down a plastic table and checks the pot simmering on the gas burner on a recent morning, he says he has had to raise the prices on his menu four times in the past two years.

“Everything costs more now,” he says. “Gas, ingredients, transport. Some customers understand. Some stop coming.”

He’s not alone in his concerns. The cost of basics – food, rent, transport – have shot up over the past decade in Nigeria, where 30% of people live in what the World Bank calls ‘extreme poverty’.

But counterintuitively, the price shocks may be the beginning of the end of Nigeria’s long-standing economic crisis.

The roots of the country’s recent troubles lie thousands of feet below the surface of the earth. Nigeria has long relied heavily – very heavily – on oil revenue to fill its coffers.

In 2017, for instance, oil accounted for more than 90% of Nigeria’s foreign exchange earnings, and more than half of government revenue.

“We became addicted to oil,” says Basil Abia, co-founder of Truva Intelligence, a research and data intelligence company.

“And that has left us extremely vulnerable.”

The country was particularly vulnerable because Nigeria’s oil pipelines are frequently tapped by criminal syndicates and desperate communities, as well as tampered with by vandals, most often as an act of political sabotage.

In recent years, these factors contributed to a steep decline in production, and dollar earnings tumbled. Nigeria’s foreign exchange reserves, which were over US$50 billion (N$819 billion) in 2008, halved to around US$25 billion (N$409 billion) by 2017.

The central bank responded by controlling who could buy dollars and at what price. The government got dollars at one rate.

Everyone else had to use the black market, where dollars were more expensive, and that was if one could get them at all.

“Businesses struggled to get the foreign currency they needed to import raw materials and machinery,” Oluwole explains.

The dollar shortage also meant companies couldn’t get their profits out of Nigeria, and as a result, they began to pack up.

Foreign investment fell from US$3.31 billion (N$54 billion) in 2021 to negative US$186.79 million (N$3 billion) in 2022, meaning that for the first time in decades, more foreign money left Nigeria than came in.

GLOBAL CRISES

Global crises made things worse. The Covid-19 pandemic disrupted trade, while the Russia-Ukraine war cut off cheaper wheat imports.

Desperate for cash, the government borrowed heavily. Between 2015 and 2023, Nigeria’s debt roughly doubled.

At its worst, paying back loans ate up 96% of government revenue, leaving little for schools, hospitals, or roads.

To cover the gap, the central bank simply printed more money.

When Bola Tinubu took office as president in 2023 on the promise of turning things around, he began with a startling announcement.

He was ending the subsidy that had long kept fuel prices in the country extremely low – and devoured 40% of the national budget.

That freed up money, but sent transport and food prices skyrocketing. By mid-2024, inflation hit nearly 35%.

Since then, it has begun to fall, as Tinubu’s government raised interest rates, removed certain restrictions on food imports, and allowed the naira to trade more openly, at a single exchange rate.

That doesn’t mean, however, that the difference is obvious to the average Nigerian, explains Ikemesit Effiong, head of research at SBM Intelligence.

“Inflation is like a speeding car – slowing down doesn’t mean prices reverse; it means they rise less quickly,” he says.

“Businesses and markets adjust gradually.”

For Raphael, the wait is not over.

“They say prices are coming down,” he says, washing his hands under a running tap. “But it hasn’t reached our side yet.”

SOUTH AFRICA’S DARK DAYS

Across the continent in South Africa, it has also been a dark few years – at times quite literally.

The country’s creaking power infrastructure has long been on the verge of collapse, and in late 2021, just as the country was starting to climb out of its own Covid-induced economic tumble, the lights went out.

For the next two-and-a-half years, rolling power outages left South Africans without power for up to 12 hours a day. In 2023, the height of the crisis, there were power cuts 335 days of the year.

By one estimate, that cost the South African economy US$79 billion (N$1.26 trillion).

Mines, factories, and other large businesses weathered the crisis – if barely – by investing in generators and solar energy.

More broadly, Operation Vulindlela, a government task force set up in 2020 in part to reform and privatise parts of South Africa’s flailing public infrastructure, helped the state-run power company Eskom drag itself out of the crisis.

“The political choices to make those reforms and put the private sector at the centre of development is really pulling South Africa forward,” explains economist Lumkile Mondi.

“But it came at a huge cost, which is the exclusion of the poor.”

The fixes from the top got big business back in business, he says, but still left public infrastructure like overcrowded hospitals and pothole-punctured roads “in a state of collapse”.

The official unemployment rate has held steady at over 30%.

GROWING IN FRACTIONS

Wishes Pfende, a tailor and fashion designer in Johannesburg, says in the first few years after she opened her shop in 2016, business was brisk.

“Tourists wanted something to take home; people wanted beautiful things to wear to weddings,” she recalls. But since 2020, “things have never gone back to where they were”.

Meanwhile, Pretoria is hoping recent trade negotiations will further aid the country’s economy, which is now growing, though only by fractions of a percentage point.

In early February, the United States announced a one-year extension of the African Growth and Opportunity Act, which allows South Africa to export its minerals, cars, and other products to the United States duty-free.

At the same time, the government had begun negotiating a new trade deal with China designed to send more of its exports there.

But for Pfende, that all feels far away.

On a recent afternoon, she was experiencing another asterisk in South Africa’s economic recovery.

There had been no water in her pipes for more than three weeks.

“We have lived through worse, but I can’t lie or pretend,” she says. “Things are still very hard.”

– The Christian Science Monitor

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