The Lion King | 19
Economic Outlook
How will Africa fare
economically in 2015?
I
t is a New Year and it is time to look into the crystal ball and
see the factors that will affect economic and financial well
being on the African continent in 2015.
The International Monetary Fund (IMF) forecasts that eco-
nomic growth on the African continent will remain robust in
2015, with the continent’s economic output expected to rise
up to 5.8% compared to 5.1% in 2014. The key drivers of eco-
nomic growth on the continent will include:
Significant investment in infrastructure
Many African governments are committing significant invest-
ments in infrastructure expansion and rebuilding. A recent
report by KPMG “Infrastructure 100-A World Report” highlights
some of the key infrastructure projects that will shape the
future of the continent from 2015.
These projects include: Khi Solar One (South Africa), Square
Kilometer Array (South Africa), PRASA Rolling Stock (South
Africa), Kudu Gas Field and CCGT Project (Namibia), Nigeria
High Speed Rail (Nigeria), Trans-Saharan Natural Gas Project
(Nigeria to Algeria), Mombasa-Kigali Railway (Rwanda), Kivu-
Watt (Rwanda), Jinja Bridge (Uganda), and Jomo Kenyatta
International Airport Terminal (Kenya).
According to accounting firm Pwc, spending on infrastructure
on the African continent is expected to grow at an average
rate of 10% over the next decade to a high of $180 billion by
2025. Nigeria and South Africa are expected to be the domi-
nant spenders on the continent.
It is estimated that Nigeria will need to invest $190 billion in
infrastructure over the next 20 years to meet its target of
becoming a top 20 economy. The Nigerian government
has already started making some of this key expenditure. In
December 2014; it signed a contract with China Railway Con-
struction Corp. Ltd. (CRCC) for a high speed railway project
costing $12 billion. The railway line will run for 1,402 kilometres
(871 miles) along the coast and link Lagos to Calabar.
Rising purchasing power
Over 200 million Africans are expected to enter the consum-
er goods market in 2015 alone. This will significantly influence
consumer demand on the continent driving economic growth
and employment. The country with the biggest opportunity is
Nigeria, where several shopping malls are coming up to take
advantage of the rising purchasing power of Nigerians.
Spending power of the average African consumer is expect-
ed to increase by about 35% in 2015. Consumer facing indus-
tries will grow by about $410 billion between 2012 and 2020,
an average of $51 billon every year with apparels, consumer
goods and food accounting for about 45% of the growth
according to Mckinsey report.
Internet penetration
Increasing internet penetration and mobile subscription are
changing the way Africans engage with their environment. In
2015, mobile subscription is expected to cross the one billion mark
in Africa. Mobile data revenues are expected to average $15 bil-
lion in 2015 from $13 billion in 2013(Informa Telecoms and Media)
The Increasing mobile broadband penetration, rising pur-
chasing power, and low-cost smart phones will continue to
change the way the average African interact with his or envi-
ronment significantly changing banking and shopping habits
and even behavioural patterns on the continent.
The clouds that could dampen growth
Ebola
Ebola is the elephant in the room that could slow the growth
of African economies in 2015 and make a lot of Africans
poorer. The World Bank estimates the loss in economic output
that could occur in West Africa due to Ebola could be as high
as $25.2 billion in 2015 in a worst case scenario. This would
dampen economic growth in West Africa and consequently
for the whole of the sub-Saharan region in 2015.
The Ebola economic cost could be higher if it spreads
beyond the three most affected countries of Liberia, Sierra
Leone and Guinea to as much as $32.6 billion. The costs
arises mainly from the forgone economic output, higher
government spending, rising prices, and lower real household
incomes.
Crude oil prices
Crude oil prices have fallen significantly since June 2014 from
above $100 per barrel to just below $60 per barrel as at the
end of December 2014. This is bad news for many African
countries that are dependent on crude oil as a major source
of financing government expenditure.
There are 16 crude oil dependent economies on the con-
tinent. The countries are; Nigeria, Angola, Libya, Algeria,
Sudan, South Sudan, Equatorial Guinea, Congo (Brazzaville),
Gabon, Chad, Egypt, Tunisia, Cameroon, Ivory Coast, Demo-
cratic Republic of Congo (DRC), and Mauritania.
All these countries are expected to face significant economic
challenges in 2015 if crude oil prices remain low. There are
also countries like Ghana, Tanzania, Mozambique, Kenya and
Uganda that have major new oil discoveries but may see
investments in the exploration of these discoveries slow down
significantly. This will have a negative impact on government
revenues and unemployment in these countries.
However, there is a good side to the lower crude oil prices, as it
is expected to dampen inflation due to lower consumer spend
on fuel. This may boost purchasing power on the continent.
Security
Many African countries are facing challenging security issues
that will impact negatively on economic growth in the region
in 2015. The security issues range from Boko Haram attacks
in Nigeria to civil strife in Libya and South Sudan, to militant
attacks in Kenya and Central African Republic. Security issues
are expected to negatively impact general well-being of
many Africans in 2015 if not curtailed.
By Anthony Osae-Brown
