Africa is forecast to grow 3.8% this year as it recovers from the recession caused by the COVID-19 pandemic, according to recently released data.
Within the continent, Morocco (5.2%), Kenya (4.7%), and Ghana (4.6%) are poised to be the fastest growing major economies, according to data and analytics company GlobalData. Also in the top five for predicted GDP growth are Egypt (4.1%) and South Africa (4.1%).
Gargi Rao, economic research analyst at GlobalData, said in a press release: “Morocco has been moving ahead in leaps and bounds in recent years, having provided the world with produce following promising agricultural seasons.”
He added that the country’s expected growth of 5.19% was also influenced by its “effective vaccination drive, accommodative monetary policies, and fiscal stimuli”.
Earlier, in June, a report from the World Bank Group forecast 2.8% growth for Sub-Saharan Africa this year, rising to 3.3% in 2022.
Across the world this year, the report suggested an “exceptionally strong but highly uneven recovery”, with growth of 5.6%. While this is the “strongest post-recession pace in 80 years” high levels of growth are focused in a few major economies, with emerging economies and developing countries lagging behind, the report said.
Swati Nathwani, ACMA, CGMA, director at Primal Consultants based in Kenya, said the country’s banking system had “stood up well to the challenges posed by the pandemic”. She said other factors driving Kenya’s relatively high forecast growth rate were:
- A steady uptake of vaccines despite supply problems, and the government’s stated objective to vaccinate the whole adult population by June 2022.
- The recovery of private spending (wages spent on household expenses).
- Good agricultural harvests, including tea, coffee, and cane (for sugar), fruit, and vegetables.
- Remittance of money by the Kenyan diaspora back home to Kenya. “This held steady during the pandemic and continues to do so,” Nathwani said.
She added that the sectors likely to see the most growth included agriculture, the fast-moving consumer goods sector, and construction.
Andrew Akoto, FCMA, CGMA, partner and head of advisory at KPMG Ghana, said the country’s government has made several important interventions including launching the Ghana Enterprises Agency which had “repositioned” the response to support SMEs affected by the COVID-19 crisis. Policies and social interventions to help the most vulnerable people in the country survive the economic shock through distribution of relief packages and providing free utilities in the form of water and electricity over an appreciable period had also helped.
A further initiative driving growth in Ghana, Akoto said, is its partnering with the World Economic Forum, the EU, and the Danish government in the Country Financing Roadmap for the SDGs: Ghana to unlock greater financing through public-private collaboration to achieve the UN’s Sustainable Development Goals (SDGs).
Many of the West African economies are “commodity price dependent”, but Akoto explained that Ghana, with less dependence on oil “was able to respond a bit better”.
Leslie Dwight Mensah, economist at Ghana’s Institute for Fiscal Studies, highlighted four main sectors —hospitality, information and communication technology, cocoa, and mining — leading Ghana’s strong growth recovery in 2021.
He said the information and communication technology sector was a beneficiary of the COVID-19 crisis as more people turned to digital ways of doing things, “and it will continue to drive growth in response to the government's ongoing digitisation reforms”.
Ghana, he said, is projected to see record cocoa production volumes this year of more than 1 million tonnes for the first time in a decade. “Minerals production will also pick up strongly from a year ago due to high international prices and the dwindling effects of the virus on companies'’ operations,” he suggested.
Nigeria: ‘risks and headwinds’
Akoto said that Nigeria “is beginning to get the dividends of … an uptick in oil pricing”. But, he said, “there are other headwinds and risks to the Nigerian economy”.
“For example, inflation is still in double digits and soaring and … Nigeria remains among the top three … countries [on] the Global Terrorism Index, as a result of the activities of the Boko Haram and other insurgents.”
These factors are mitigating against a rapid bounceback, Akoto said.
Mensah said: “Nigeria is West Africa’s biggest economy and market by far, accounting for almost two-thirds of the region’s GDP and with an economy about seven times the size of Ghana’s, the second-largest. Nigeria’s relatively weaker performance will subdue West Africa's overall economic growth, keeping it below 4%.”
Wider Africa region
Akoto explained that for Africa, “You can classify the economy [in] three main segments: the services sector, the [industrial] sector and then agricultural sector.”
He said: The [agriculture] sector has fared somehow better than all these other sectors, because evidently one of the areas that governments have had to quickly drive their attention towards is to be able to sustain livelihoods and make basic food available to their citizens … so a lot of attention went into that space.”
The industrial sector, by comparison, he said, “suffered a lot of stunted growth … as a result of restricted investments and disruption to supply chains.”
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.