Giovedì, Febbraio 13, 2025
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Investments in Africa expected to grow, amidst unpredictable endogenous and external factors

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A new analysis on economic trends in 2025 published on Africa Confidential predicts that the continent will grow faster this year and that inflation will fall down, partly due to improved growth prospects in bigger economies like South Africa and Angola, as estimated by some economic observers like the World Bank. Despite this, the continent keeps lagging behind the rest of the world on almost all metrics, including poverty reduction, access to sanitation, access to water and electricity, secondary schooling completion, noncommunicable disease (NCD) mortality, among others. The number of Africans facing challenges is also growing, while other regions of the world are making progress, albeit slowly. According to World Vision, food crisis is intensifying across Africa as well, with the number of people that suffer from hunger and starvation that has increased in recent years due to a combination of factors, including the war in Ukraine, regional conflicts, extreme weather events, and the still ongoing effects of the COVID-19 pandemic.

The article warns that the conflicts in the Sahel, the Horn of Africa and Central Africa; climate shocks; strikes and protests in major African economies; as well as elections in several nations, could cause economic upheavals that can totally upend the growth forecasts of African economies, including estimates on attraction of investment. This situation could be exacerbated by other unpredictable external factors outside African governments’ control, such as the China slowdown or the effect of the new US trade policy of the second Trump administration; the resumption of Middle East hostilities; the outcome of the Russia-Ukraine conflict; and a deterioration of global financing conditions.

Current trends suggest inflation on the continent will continue to fall from the highs of 2022. But average Africa inflation rates, Africa Confidential notes, will still exceed those in other parts of the world.

On the industrialization side, countries like Zimbabwe and Zambia are predicted to be among the fastest-growing Southern African economies this year, being such countries actively pursuing projects to attract investments in the manufacture of higher value-added “green transition” minerals for export (combined with the maintenance of bans on raw minerals exports such lithium ore). Other African economies such as Nigeria, Kenya, Ghana and Egypt, face a pressing need to boost revenues: an objective that must be balanced with the need to maintain a forward-thinking and non-punitive tax environment for businesses, otherwise the much-needed investment necessary to promote industrialization and improve social services will flee from their territories preferring other destinations.

Almost all African governments - Africa Confidential notes - are aware of the need to attract external capital to meet their key investment needs, while less efforts are conducted to reduce the size and expenditure of the public sector, an objective that should be balanced with the need to avoid compromising the offer of public services such as education, research & development and infrastructure, which are also essential for countries to embark on a path of economic growth.

Many economists predict that overall investment in Africa is expected to increase this year and that diaspora remittances could continue their upward trend. But so is the risk that one or more of the above mentioned risks will materialize, calliing these growth estimates into question. The financial gap relating to Africa's climate "adaptation" costs also remains enormous. And, in the aftermath of the COP29 climate summit in November, the budget  allocated so far by rich economies for the much-vaunted “Loss and Damage Fund” ($700 million), remains far short of Africa's needs.

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