Africa economics chartbook 2018 - Deloitte
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Africa economics chartbook 2018 Q2 2018
Africa: Economic chartbook, Q2 2018
Key messages for Q2 2018
• The global economy is experiencing a pick-up in growth in 2018, with a synchronised recovery in
advanced and emerging markets
• Growth in sub-Saharan Africa continues to diverge by region but is projected to gradually rise in
2018 and 2019, as the challenging outlook in commodity exporters gradually improves
• Reduced political uncertainty in Africa’s large sub-Saharan economies of South Africa, Nigeria
and Kenya has bolstered business confidence but the medium-term growth outlook remains
subdued
• Government indebtedness is a rising concern for many African states, with the interest costs on
sub-Saharan African countries’ debt rising sharply in recent years
“The economic powerhouses of Nigeria and South Africa remain underperformers and a
drag on growth, whereas East Africa is driving economic growth in Africa, growing at
almost double the Sub-Saharan African average.”
Martyn Davies, Managing Director, Africa & Emerging Markets
There is a wide divergence in the growth Weighted real GDP growth forecasts (YoY%)
outlook among individual African economies.
8.0
In 2017 growth was weak in Africa’s two
largest economies, South Africa and Nigeria. 7.00
For both, growth is expected to improve in 7.0 6.60
6.40 6.30
2018 and in to 2019. Growth in sub-
Saharan Africa is projected to rise to 3.4% 6.0
5.50
in 2018 (from 2.8% in 2017) and improve
slightly thereafter through the medium term 5.0
to about 4.0%.
Faster-growth economies in East Africa – 4.0 3.70
3.30 3.40
particularly Ethiopia (8.4% forecast for 3.10 3.20
2018), Rwanda (7.2%) and Kenya (5.7%) – 3.0 2.60 2.60
are expected to continue to drive wider 2.30
African growth. Elsewhere, Ghana (6.3%) is 1.90 2.00
2.0
also expected to see particularly sold growth 1.50
this year. 1.10
0.90
1.0 0.70
0.40
0.0
2015 2016 2017 2018f 2019f
Central Africa East Africa Southern Africa West Africa
Source: IMF WEO April 2018 and Deloitte calculations
Africa chartbook 2018 2
Africa: Economic chartbook, Q2 2018
Fast-growing African economies have Sub-Saharan Africa GDP
helped drive Africa’s share of global
3.2 Share of PPP-adjusted world total, per cent
output.
3.0
Growth in Sub-Saharan Africa has
consistently outstripped that of the 2.8
wider global economy since the start of
2.6
the 2000s, although this trend reversed
with slowing growth in 2015 and 2016. 2.4
2.2
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Source: Thomson Reuters Datastream
Equity markets in Africa have generally S&P AFRICA 40
improved as the growth outlook has
400
strengthened and commodity prices
have risen. 350
300
250
200
150
100
50
*The S&P Africa 40 index provides exposure to 40 of the 2005 2007 2009 2011 2013 2015 2017
largest, most liquid companies (including developed market
listings) that operate or are based purely in Africa. It limits
Source: Thomson Reuters Datastream
the number of companies from any single country to eight.
Commodity prices play a key role in many Commodities: Oil, silver, gold, copper & iron
African economies. 17 African countries rely
on commodities for more than 50% of their 120 2014 = 100
export revenue. 100
Nigeria, one of Africa’s largest oil producers, 80
recently saw much weaker growth on the 60
back of lower oil prices. South Africa is the
continent’s biggest producer of gold, chrome 40
and coal – also saw slower growth as 20
commodity prices fell through 2015. 2014 2015 2016 2017 2018
2018 has seen a steady improvement in Silver Gold Oil Copper Iron
most commodity prices; a factor that is
likely to improve the African growth outlook. Source: Thomson Reuters Datastream
Africa chartbook 2018 3Africa: Economic chartbook, Q2 2018
Foreign direct investment is increasingly FDI inflows in to Sub-Saharan Africa
a driver of growth in Africa, with 50
increased investment flows from China USD, billions
in particular. 40
There was a six-fold increase in FDI 30
inflows into Sub-Saharan Africa between
20
2000 and 2015.
10
0
1978
2000
1970
1972
1974
1976
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2002
2004
2006
2008
2010
2012
2014
2016
Source: Thomson Reuters Datastream
Rising government indebtedness is a IMF debt policy rating: Sub-Saharan Africa
growing concern for many African
1=low to 6=high rating
states. 3.35
3.30
S&P Global Ratings report that the 3.25
interest costs on sub-Saharan African 3.20
countries’ debt have returned to levels 3.15
last seen before the debt forgiveness 3.10
programme of the early 2000’s. 3.05
3.00
The IMF has reduced it’s assessment of
sub-Saharan African debt sustainability
as a consequence, and many countries
have suffered credit ratings downgrades. Source: Thomson Reuters Datastream
The World Economic Forum ranks countries WEF Competitiveness League Table 2017/18
on how competitive they are, based on the 2016/17 2017/18
strength of the set of institutions, policies South Africa 47 61 Actual
and factors (such as technology and access Rwanda 52 58 improvement
to finance) that determine the level of Botswana 64 63
productivity of an economy. Morocco 70 71 Actual decline
Algeria 87 86
Improving competitiveness and productivity Kenya 96 91
is key to long-term economic success, and Tunisia 95 95
many of Africa’s fastest-growing economies Senegal 112 106
have improved their scores on rankings such Ethiopia 109 108
as these in recent years. Uganda 113 114
Zambia 118 118
*140 countries globally are ranked on 12 pillars of
Zimbabwe 126 124
competitiveness, which include: institutions, infrastructure,
health and education, labour market efficiency, financial Nigeria 127 125
market development, technological readiness and innovation. Chad 136 135
Africa chartbook 2018 4In focus: Unlocking the potential of the “Africa Rising” narrative
through private equity
The “African Rising” narrative has been subdued in recent years as a result of a slump in hard
commodity prices and political instability in key economies on the continent, such as South Africa
and Kenya.
Private equity as an asset class for investment has outperformed traditional asset classes,
particularly in South Africa.
Key drivers of the potential that was captured by the narrative still exist and include many global
trends such as technological advancement and increased urbanisation, which continue to develop.
The performance of the private equity industry coupled with the potential of the continent supported
the optimism from the majority of practitioners across sub-Saharan Africa, which was demonstrated
through the 2017 Deloitte Africa Private Equity Confidence Survey (PECS).
Some key findings from the survey are:
• The majority of respondents across each region expect private equity activity to increase through
2018, with the highest level of optimism coming out of West Africa.
• Respondents across each region also expect to invest more in the next 12 months.
• Food and beverages had the highest average focus, followed by agriculture and healthcare, all
seemingly driven by higher populations and a burgeoning middle class.
• On fundraising, respondents were most positive about West Africa, where a majority expect an
improvement in the fundraising environment.
• Europe and the USA were the two regions in which the most funds were expected to be raised,
particularly for East and West Africa. With a more positive outlook on south Africa as a result of
more perceived political stability, we expect the views of practitioners in Southern Africa to align
with those of their East and West African counterparts, and fundraising to be sought across
borders with more vigour and optimism.
The continent has suffered a whirlwind of political and market-based wounds over the past two
years. Despite growth in pockets of areas across the continent, the overwhelming impact of low
commodity prices and political instability have been the biggest contributors to slowed growth.
Recent political developments have since renewed hopes of Africa realising its potential in the
medium to long term. Private equity has been a proven asset class in terms of returns, and
practitioners in the industry have always been more positive than not with regards to unlocking
returns on the continent.
The future is always uncertain. With the hindsight of the lows experienced across the continent over
the past few years, Africa is surely now better positioned than ever to continue its once obvious and
envied growth trajectory.
For more, download and read the full report here https://www2.deloitte.com/lu/en/pages/private-
equity/articles/unlocking-potential-africa-rising-narrative-private-equity.html or contact Hanns
Spangenberg, Senior Economist, Africa Services Group, hspangenberg@deloitte.co.za.
Africa chartbook 2018 5Key contacts
Get in touch
Ryan Duffy Alex Cole
Lead Africa Partner, UK Economist, UK
ryaduffy@deloitte.co.uk alecole@Deloitte.co.uk
Africa chartbook 2018 6This publication has been written in general terms and we recommend that you obtain
professional advice before acting or refraining from action on any of the contents of this
publication. Deloitte LLP accepts no liability for any loss occasioned to any person acting or
refraining from action as a result of any material in this publication.
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