AfDB: east Africa set to boom

East Africa will be the conteinent’s fastest growing region, with a significant portion of the growth driven by increased public and private investments, according to the African Economic Outlook 2019 report from the African Development Bank (AfDB).

“East Africa is projected to achieve growth of 5.9% in 2019 and 6.1% in 2020,” said Hanan Morsy, director of macroeconomic policy, forecasting and research at the AfDB. “However, growth in several countries in the region, notably Burundi and Comoros, may remain weak and tepid due to political uncertainties in those countries.” 

The economic growth of Africa as a whole remained resilient in 2018, according to AfDB figures, reaching an estimated 3.5%. East Africa achieved GDP growth of 5.7% in 2018, followed by north Africa at 3.3%, central Africa at 2.2% and southern Africa at 1.2%.

AfDB figures report that FDI inflows into Africa fell from the 2008 peak of $58.1bn to a 10-year low of $41.8bn in 2017. However, African FDI inflows in 2018 bucked the global downward trend, rising by 6% from $38bn to $40bn year-on-year, according to estimates in the United Nations Conference on Trade and Development (Unctad) Global Investment Monitor 2018, released on 21 January.

“Between 2017 and 2018, about 18 countries in Africa managed to reduce inflation rates, overall economic growth recovered from the trough in 2016 of 2.1% to about 3.6% in 2017 and 2018, and fiscal balances have improved in many countries,” explained Ms Morsy. “All these factors help to explain why FDI inflows to Africa increased, despite the global decline.”

The AfDB report compares FDI flows from 2005 to 2010 and 2011 to 2017, highlighting that east Africa experienced the largest FDI growth among African regions during the latter period. Ethiopia accounted for 60% of the rise, thanks to investments announced by Chinese and Turkish manufacturers.

North Africa attracted the most FDI among African regions between 2005 and 2010, but it was the only region where FDI decreased between the two periods, mainly due to political uncertainties and transitions; notably, there were significant declines in Libya and Egypt.

Egypt was in fact the largest recipient of FDI in 2018, with an increase of 7% to $7.9bn, following investments in real estate, food processing, oil and gas exploration and renewable energy, according to the Unctad Global Investment Monitor 2018.

“Of Africa’s projected 4% growth in 2019, north Africa is expected to account for 40%. But average GDP growth in north Africa may face high uncertainty due to Libya’s rapidly changing economic circumstances,” said Ms Morsy.

South African FDI flows soared 446% in 2018 year-on-year, pushing up FDI flows for the southern Africa region, following large investments in mining, petroleum refining, food processing, It and communcations and renewable energy.

The African Continental Free Trade Agreement (AfCFTA), an accord between 49 African states agreed in March 2018, is expected to come into force soon. Just four more countries needed, and 8 countries have already ratified the agreement or passed legislation to do so.

“The AfCFTA can provide the opportunity to African countries to bring in greater harmonisation in investment regulations, policies and treaties, and thereby promote greater intra-Africa investment as well as FDI from outside the continent,” Ms Morsy said. “An integrated African market is also likely to see a shift in the flow of FDI from natural resources to industry and manufacturing.”