Sub-Saharan Africa growth in 2023 hangs on economic reforms

Sub-Saharan Africa’s economic growth in 2023 will hang on the implementation of bold economic reforms capable of reducing poverty and creating badly needed jobs.

Joseph Nnanna, chief economist, Development Bank of Nigeria, at the ongoing annual Africa Business Convention 2023, themed “Africa connected” holding at the Eko Hotels & Suites said “there’s going to be little or no growth this year for Ghana, South Africa, Nigeria, Kenya and Egypt except there are provisions for bold reforms in their economy.

According to the World Bank, economic growth in Sub-Saharan Africa (SSA) probably slowed to 3.3 percent in 2022 from 4.1 percent in 2021, as a result of a slowdown in global growth, rising inflation exacerbated by the war in Ukraine, adverse weather conditions, a tightening in global financial conditions, and the rising risk of debt distress.

“When there’s too much money in the economy it has a counter effect heating the economy, causing inflation,” Nnanna said

With the sole exception to Egypt, Nigeria, Ghana, South Africa and Kenya are forecast to grow slowly. In South Africa, the key interest rate was raised to 7.25 percent in 2022 which is expected to lead to slower growth.

Nnanna noted that the major challenge facing the South African economy is power, which translates to increase in the cost of goods.

South Africa is forecast to grow between 1.8 percent to 2 percent, but can be better if there is restructuring in the power industry, according to Nnanna.

Kenya’s economic growth slowed to 4.7 percent year-on-year in the third quarter of 2022, down from 9.3 percent in the same period a year earlier, and this was because of the removal of subsidy.

“As a result, Kenya’s unemployment rate stands at 6 percent. It’s been around six to 7 percent for the past few years now, but we suspect it’s still going to grow around four to six percent this year,” Nnanna said.

The major source of growth in Kenya is the tourism sector, manufacturing sector, as well as the agriculture sector.

For Nigeria, the economy is yearning for reforms to position it for robust growth that creates opportunities for its rapidly rising population.

“So the structure of the Nigerian economy has changed over the years. This is true, but not for the reason you think. It’s gotten worse,” Nanna said.

Egypt on the other hand, is known for tourism and export in terms of the agriculture sector. Inflation is in double digit but is forecast to slow to around 19 percent, thereby eroding purchasing power, according to Nnanna.

Egypt’s GDP expanded by 3.20 percent in the second quarter of 2022 over the same quarter of the pervious year and is forcased to decline to 0.1 percent to 3.5 percent year on year in 2023, if they are lucky and will take structural reforms to achieve this, Nnanna said. Its unemployment rate is also forcasetd to grow to 7.0 percent to 7.9 percent in 2023.

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The Ghanaian economy according to Nnanna is currently dealing with alot of issues which stems from the downgrade given by internation credit rating agencies, hence, the difficulty in raising money from the international market.

Its economy grew by 2.9 percent form a year earlier in the third quarter of 2022. It is forecasted to advance by 3.8 percent to 5.1 percent in 2023, while its unemployment rate is forecast to expand by 9.5 percent to 13.8 percent during the year.

Furthermore, according to economist, the big players in the African continent have a major role to play, especially when it comes to the African Free Trade Agreement.

“I say this simply because it has the potential to actually solve the currency crisis. Because if you can trade amongst yourselves, you’re less dependent on an external currency, the US dollar, thereby strengthening your local currencies. And economies, lifting households in tandem. So that is an opportunity,” he said.