It is unusual to start off a forecast for the year ahead with a reference to nearly 40 years ago, but when it comes to Africa’s economic prospects in 2023, the year 1984 is particularly instructive.
On the African continent, 1984 was the year in which famine in Ethiopia reached a major climax – and the Band Aid charity song “Do They Know It’s Christmas” raised millions to support the cause.
It was the year Nelson Mandela was able to see his wife for the first-time since 1964, when he was imprisoned in apartheid South Africa. The Nobel Peace prize was awarded to Archbishop Desmond Tutu. It was the year Nawal El Moatawakel became the first African woman Muslim to win a medal in the Olympics. Cameroon also beat Nigeria to claim its first African Cup of Nations title.
But perhaps hanging over all these milestones was what some might now term a “polycrisis” at the global level. We know that the brunt of the burden was going to fall on Africa. A few years prior, global interest rates had been raised rapidly to counter the inflation caused by the 1979 oil price shock – which then US President Jimmy Carter described as “the moral equivalent of war” – due to the Iranian revolution.
While some African countries, such as Zimbabwe, had just recently gained independence, others had been independent states since at least the 1960s and were busy investing in their new nations. Many had built new infrastructure – hydropower stations, roads and railways.
Some did so with finance that had been gained from commodity price increases, but others depended on external loans from bilateral, multilateral and even to a degree private lenders – mostly denominated in dollars at fairly low concessional interest rates.
This was logical. This was logical. Public utilities like energy and transport required long-term, low-cost investment. Otherwise, their outputs might have been prohibitively expensive for those still trying to escape colonialism’s poverty.
They also had to be affordable to the burgeoning industry that was being built to deliver the level of self-sufficiency in manufacturing that many African leaders felt was required.
Similar predicaments
Fast-forward to today, and in many ways, while the detail is different, the African continent is in a very similar predicament – as is the world.
In some ways, things look great, and almost certainly better that 1984. Our African Cup of Nations is stronger than ever. South Africa has won the struggle against apartheid. Africans are also winning global prizes for architecture and peace.
All this has also come with new investment since the early 2000s and a zeal for the continent’s progress that is perhaps as strong as that of the pan-Africanist leaders in the years following independence. 2022 saw the first shipment of locally manufactured car batteries and tea from Kenya to Ghana, under the African Continental Free Trade Area (AfCFTA)’s new zero tariffs. This was also the year of the agreement of harmonised investing protocol rules.
As in the 1960s and 1970s, African countries have used loans – this time including massive finance from China’s banks and private sector – for new roads and railways, energy stations, and other infrastructure, and resumed a push for hundreds of new special economic zones.
Yet Africa’s sovereign debt levels are as low, relative to the size of its economies, as they were in 1984 – an average on our continent of around 57%.
Challenging situation
This could mean that 2023 is full of excitement and more promise than 2022. Perhaps. According to the IMF, five African countries are expected to be among the top ten fastest-growing worldwide next year.
However, going back to 1984, we must remember that many now call the 1980s and 1990s “lost decades” in the fight against poverty. These years can also be viewed from an African perspective as the interruption of decades of pan-African ambitions. The 2020s may be the beginning of a repeating trend.
That’s because today the global situation is as challenging as it was in 1984, if not more so. The China-US trade war, Covid-19 shock 2020, and Russia-Ukraine conflict have all created an energy crisis, high inflation in the US, and increased dollar-denominated interest rate.
Covid-19 controls in China in 2023 and a prolonged trade war could cause further uncertainty for our supply chain, leading to higher prices on our shelves. All of this will undoubtedly be exacerbated if there is no global action to combat climate change.
The potential for significant deterioration in 2023 is high due to the African continent’s high exposure to commodities, sovereign debt and climate change.
There are reasons to be optimistic
Given all this, why am i optimistic about 2023’s African continent?
It’s precisely because we have 1984. Today we have the opportunity not to repeat the 1984 mistakes but to look back. We have the opportunity to push our bilateral and multilateral partners – including new ones such as China, India and Arab states – to take radically different actions to those taken in the 1980s and 1990s.
We also have many others – such as our Asian and Latin American and Caribbean peers – to learn from and work with. We can work together to promote international trade and financial reform. We can collectively push for international financial and trade reform.
If I’m being honest, the only way we, as Africans, can be optimistic about 2023 is if we learn from the past, and do things differently. That’s why 1984 is so important. I hope you will listen.
Source: african.business
