The African economy is made up of the trades, industries, agriculture, and human resources of the African continent. In 2019, about 1.3 billion people lived in the 54 countries in Africa. Africa is a continent rich in resources. Current increases in the economic structure is largely due to the increase in sales of goods, services and manufacturing. It is estimated that by 2050, the combined GDP of West Africa, East Africa, Central Africa and Southern Africa will reach a total of US$29 trillion.
In March 2013, Africa was identified as the world’s poorest inhabited continent; however, the World Bank predicts that if the current growth rate continues, most African countries will reach a middle income status (defined as every People at least $1,000 per year). There are several reasons for the economic downturn in Africa: historically, several empires in Africa traded with many parts of the world; however, the colonization by Europe and subsequent decolonization challenges and the intensification of the Cold War brought upon Africa, economic and social instability.
However, Africa was the fastest-growing continent in the world in 2013, with an annual growth rate of 5.6%, and GDP is expected to grow by an average of more than 6% annually from 2013 to 2023. In 2017, the Development Department of the Bank of Africa reported that Africa is the second fastest-growing economy, and the average growth in 2017 was expected to rebound to 3.4%, while growth in 2018 was also expected to increase by 4.3%. The entire African continent is growing, and more than one-third of African countries have achieved growth rates of 6% or higher. There is another 40%, an annual increase of 4% to 6%. Some international trade observers also listed Africa as the engine of the world’s future economic growth.
The State of The African Economy prehistoric till Date
Reminiscing the past decades, the United Nations pronounced the African economic growth rate as 3.5% in 2018 and 3.7% in 2019. Also in the year 2007, Africa’s economic growth rate exceeded that of East Asia. The data proved that some parts of the African continent were experiencing rapid growth, thanks to its resources and growing political stability, and “the level of peace that steadily improved since 2007.”
According to the World Bank report, the economic growth rate of sub-Saharan African countries was equal to or higher than the world growth rate. Also reports from UN Department of Economic and Social Affairs, stated that the improvement in overall growth in the region was mainly due to the recovery of the three main African economies, Egypt, Nigeria and South Africa. The fastest growing African countries had significantly higher economic growth than the world average. Such countries with had the highest growth rates in 2007 were Mauritania with a growth rate of 19.8%, Angola with 17.6%, Sudan with 9.6%, Mozambique with 7.9% and Malawi with 7.8%. Other fast-growing countries include Rwanda, Mozambique, Chad, Niger, Burkina Faso, and Ethiopia. However, growth in many parts of Africa, including Zimbabwe, the Democratic Republic of the Congo, the Republic of Congo and Burundi, was frustratingly negative or slow.
Many international institutions are increasingly interested in investing in emerging African economies, especially in the current global economic recession, Africa continues to maintain high economic growth. The rate of return on investments in Africa is currently the highest among developing countries. To support the economic development of Africa, some international institutions are tackling the issue of debt relief. In 1996, the United Nations launched the Heavily Indebted Poor Countries (HIPC) Initiative, which was subsequently accepted by the International Monetary Fund, the World Bank, and the African Development Fund (AfDF) in the form of the Multilateral Debt Relief Initiative (MDRI). As of 2013, the initiative has provided partial debt relief to 30 African countries.
Today, the population of Africa represents about 17% of the world’s population, but only about 3% of the world’s GDP. These statistics not only demonstrate that the development potential of the African continent has not been fully realized, but also highlight the enormous opportunities and risks ahead. As long as Africa continues to lag economically, it will become a source of global instability and extremism. But if it increases, it can become one of the main sources of global growth.
The Impact of COVID-19
Africa is expected to rebound from its worst economic recession in half a century in 2021. After it’s economic activities were restricted by the unprecedented global pandemic caused by COVID-19 in 2020. Africa’s real GDP is expected to grow by 3.4% in 2021 after shrinking by 2.1% in 2020. The tourism industry has recovered from the worst recession in more than half a century, commodity prices have rebounded, and restrictions caused by the pandemic have been lifted. However, the outlook is affected by huge uncertainties brought about by internal and external risks. The COVID-19 pandemic has increased the demand for funds from African governments. Since the beginning of the COVID-19 pandemic in early 2020, governments have announced fiscal stimulus plans, with costs ranging from 0.02% of South Sudan’s GDP to 10.4% of South Africa’s GDP. . The World Bank estimates that African governments will need approximately US $ 154 billion in additional financing in 2020/21 to cope with the crisis. These fiscal stimulus programs have a direct impact on budget balance, borrowing needs, and debt levels to a large extent.
At the beginning of the 21st century, trade drove most of the growth of the African economy. China and India are increasingly becoming important trading partners: 12.5% of African exports to China, 4% to India, accounting for 5% of China’s import, and 8% of India’s import. The Group of Five (Indonesia, Malaysia, Saudi Arabia, Thailand and the United Arab Emirates) is another increasingly important market for African exports.
If Africa can maintain and accelerate structural reforms, some believe that the continent can emulate China’s rapid rise over the past 50 years. From 2015 to 2045, an average of 24 million people will live in their cities each year. McKinsey predicts that by 2025, business opportunities in Africa will reach US$5.6 trillion.