Business in Africa: What to expect in 2020?

by Grant Geraghty | Jan 17, 2020 | PEO

Last year has seen major political and economic change across Africa. 2020 will be a test to the African continent’s resolve to enhance its socio-economic conditions.

We had a look at changes around Africa’s the different regions and here’s what to expect in 2020.

North Africa starting its own industrial revolution

Morocco’s manufacturing sector has shown its growth rate is not a fluke. Over recent years, the country has cemented its manufacturing sector – which contributes to over 20% of the country’s GDP, while employing 11% of the labour force. 2020 shows no sign of slowing down as the country continues to attract significant foreign direct investment.

Meanwhile, both the Egyptian economy stabilised and maintained strong a currency, which led to a 3.6% drop in inflation. At this rate, international investors may be tempted to plant down factories in the country and make use of Egypt’s 100 million people to start a manufacturing powerhouse.

Southern Africa countries slowing down this year

South Africa’s growth continues to stall as the country faces a 29% unemployment rate. The authorities are failing to turn promises into reforms, which could lead even lead to a credit downgrade if the latest government budget (released in Feb 2019), fails to deliver. With South Africa’s growth projections lowered from 1.2% to 0.7% by the International Monetary Fund (IMF) this year, frustration is brewing from locals and investors alike, leaving little room for error.

Elsewhere, Southern Africa’s second largest economy, Angola, is expected to struggle in 2020, with growth shrinking to 1.9% compared to 3.6% previously, according to the Economist Intelligence Unit.

Rising Stars of Eastern Africa

Meanwhile in East Africa a transport race is unfolding. Tanzania and Rwanda are making an aggressive push to depose Kenya as the regional transit hub. Tanzanian president John Magufuli is building a $2.5 billion bullet train with the help of Rwanda in a bid to capture East Africa’s inland trade and drive it through the port of Dar es Salaam. Compromising Kenya’s regional transit routes further is oil-rich Qatar, who are fronting the funds for Rwanda to build a gleaming international airport in Kigali, in return for a 60% stake in the project and a foothold in East Africa’s aspiring service hub.

In the year to come, Ethiopia and Tanzania will continue to grow at 7.2% and 4.5% respectively, the IMF predicts. Their sophisticated economies will be tempered only by liquidity constraints and political contestation with impending elections in both countries.

Western Africa’s Uncertainty

Meanwhile in West Africa, the Nigerian government has escalated anti-trade policies and import restrictions, in an attempt to boost local production. The government moves, which benefits only a few industrialists, are shaping the economic climate of Africa’s biggest economy with dramatic spill-over effects on neighbouring countries like Benin and Togo.

Investors will be more relaxed about Francophone Africa’s other key market, Senegal, where the re-election of Macky Sall in February promised continuity for international oil companies, and sound oversight of the multi-billion hydrocarbons sector, which expects to see first production in 2022. Yet they will be operating under a different monetary system. The CFA franc will be renamed the Eco, but will remain pegged to the euro, in eight west African countries from July 2020. African countries in the bloc will no longer have to keep 50% of their reserves in the French Treasury as financial ties to former colonial master Paris weaken.

The Future of African Investment

South Africa and Nigeria, despite being economic superpowers of the African continent, will most likely deter most investors, as they are averaging growth of only 1-2% for the past five years. In both cases, GDP has been growing below population growth for the last four years, which is a sign of people getting poorer.

According to Rob Hersov, the CEO of investment platform Invest Africa, the key hubs for investment in 2020 are expected to be Morocco, Egypt, Ghana, Cote D’Ivoire, Namibia, Botswana, Rwanda, Ethiopia, and Kenya.