African Trade Boosted by Optimistic 2023 Economic Outlook, Says Robert Besseling

By Robert Besseling* – In 2023, Africa is expected to experience economic growth exceeding the global average, signaling a return to pre-pandemic optimism. The continent’s economic revival is being driven by strong commodity prices, external support from multilateral organizations, and managed debt restructurings in some countries. These factors are helping to offset the long-term impacts of the COVID-19 pandemic on African economies.

According to Africa News Agency, external challenges remain, including the ongoing war in Ukraine, potential travel restrictions due to the pandemic, disruptions in global trade and supply chains, and delayed inflation peaks in emerging markets. Despite these risks, the overall economic outlook for African countries in 2023 appears positive. Commodity prices are expected to stay high, with oil prices forecasted to average above $80 per barrel, benefiting emerging producers in Africa. However, some of Africa’s largest oil producers like Angola, Republic of Congo, and Equatorial Guinea may see reduced benefits due to declining output.

Nigeria’s efforts to combat crude oil theft could reverse a long-standing downward trend in exports. New fossil fuel projects in East and West Africa are likely to gain traction as long-term gas and oil prices remain elevated. Countries like Mozambique, Senegal, Mauritania, and Guinea are set to begin natural gas exports in 2023, with Tanzania potentially finalizing investment decisions on gas projects. Significant investments in major oil and gas infrastructure, including pipelines, are anticipated in East and West Africa.

Metal prices are expected to be volatile, but base metal prices will likely be supported throughout 2023. Gold prices have been on a six-month upward trend, with predictions of continued growth, benefiting major producers like Tanzania, Ghana, and South Africa. Meanwhile, divestments continue in Mali and Burkina Faso due to security and reputational concerns. Demand for fourth industrial revolution metals, particularly in countries like the DRC, will continue to drive economic benefits as global demand for components remains high.

At the IMF’s autumn 2022 meetings, no additional African countries were classified as debt-distressed, but this might change at the April 2023 meetings. Sub-Saharan African long-term loans have more than doubled to $636 billion over the past decade, surpassing the combined GDP of over 40 African nations. High debt levels are leading African governments to allocate more revenue to external debt servicing, increasing exchange rate risks, especially for countries with high external debt. African nations owe an estimated $84 billion to China, and the risk of default on Eurobonds and Chinese loans is high.

The World Bank has suggested that international support for debt restructuring may be necessary. Last year, Pangea-Risk accurately predicted debt restructuring in six African countries: Kenya, Nigeria, Ghana, Chad, Ethiopia, and Zambia. These countries have begun domestic or external debt treatment, with Chad completing its external loan reprofiling.

The upcoming year will see 16 African countries hold elections, which may influence political stability and potentially lead to unrest. More than ten countries with upcoming elections have been identified as areas to monitor for potential security issues. However, elections should not always be viewed as a risk. Recent polls in countries like Angola and Kenya reflect a stable political climate and a trend towards democratic maturity, which could influence the outcomes of 2023 elections.

Elections offer an opportunity for electorates to address grievances related to inflation, debt, and other issues by voting for political renewal, thus avoiding broader instability. While country risk analysts often view elections as indicators of insecurity, they can also mitigate political risk and offer opportunities for both local electorates and foreign investors.

*Robert Besseling is the founder of EXX Africa, a specialist intelligence company, and has a decade-long career in political risk forecasting at leading firms in the UK and US.