African Economic Outlook

Africa’s general economic performance continues to recover and GDP growth is projected to accelerate to 4.0% in 2019 and 4.1% in 2020, says the 2019 African Economic Outlook report, launched by the African Development Bank.

However, improved macroeconomic and employment outcomes will require industry to lead growth.

The 2019 report focuses on three key areas - Africa’s macroeconomic performance and prospects; jobs, growth and firm dynamism; as well as integration for Africa’s economic prosperity.

Energy:

The report identified energy subsidies as a significant fiscal burden, stating that "despite the drop in global oil prices, energy subsidies as a share of GDP have remained mostly unchanged." The report says further that subsidy reforms should be aimed at more-efficient and better targeted social safety nets for the most vulnerable. The Bank believes this will "improve public finance management, create more fiscal space for much-needed public investments in infrastructure, and improve the debt situation."

However, limiting government spending should not affect growth-enhancing spending. Given the importance of public investment in acting as a catalyst to private investment, particularly in core infrastructure, "public expenditure should be well targeted to ensure that poverty-reducing social sectors and key infrastructure investments are adequately protected."

The African Development Bank has embarked on two major initiatives when it comes to power related investment and leadership. The first is to make Africa a renewable energy powerhouse through the Desert to Power Initiative and by integrating power grids as a regional public good.

The Desert to Power initiative aims to "connect 250 million people with green electricity by tapping into the region’s abundant solar resource. It will develop and provide 10GW of solar energy by 2025 through a combination of public, private, on-grid, and off-grid projects."

Furthermore, the Bank believes that there are significant benefits to integrating regional power grids. They include "less instability and greater security of supply and increased efficiency. And integration of power grids when electricity is produced by renewables increases environmental sustainability by accelerating the transition to a green economy." For instance, ESKOM, the South African power utility, has secured through a treaty 2,500MW of clean hydropower from the Inga-3 development in the Democratic Republic of Congo.

Other highlights:

The report identifies five key trade policy actions that could potentially bring Africa’s total gains to 4.5% of its GDP, or U$134 billion a year:

  • eliminating all applied bilateral tariffs in Africa;
  • keeping rules of origin simple, flexible, and transparent;
  • removing all non-tariff barriers on goods and services;
  • implementing the World Trade Organisation’s Trade Facilitation Agreement to reduce cross border time and transaction costs tied to nontariff measures and ;
  • negotiating with other developing countries to reduce their tariffs and non-tariff barriers, by 50%.

The African Economic Outlook suggests that “a borderless Africa” is one of the key foundations of a competitive continental market that could serve as a global business center.”

The Continental Free Trade Agreement (CFTA), signed in March 2018 by 44 African countries, offers substantial gains for all African countries according to the report's authors.

A full set of updated growth projections will be released in May 2019, ahead of the Bank’s Annual Meetings in Malabo, Equatorial Guinea.

The full report is available online in English, French, and Portuguese at: http://www.afdb.org/aeo