The economic outlook of Africa in 2022 showed the resilience and resolve of the continent that many pundits and opinion leaders believe will transform the global economy if its inherent potential is harnessed in the right way. Still recovering from the lingering economic shock of a global pandemic, many African countries faced internal crises ranging from political instability, rising debt, and high inflation that affected the economy. Forex issues, banditry, terrorism, and other forms of arms struggle also changed the political dynamics and economic outlook.
Nevertheless, the commitment and synergy of African leaders toward overcoming the myriads of challenges led to the creation of different strategic economic policies and programs aimed at revitalizing the economy.
Africa is now the centerpiece for investment due to the vast untapped opportunities in agriculture, natural resources, human capital, technology, manufacturing, and service sectors.
The African Development Bank announced in November 2022 that the Africa Investment Forum – the premier investment platform in Africa, attracted a $31 billion investment interest in Africa. Combined with the $32.8 billion from the restructured 2021 Africa Investment Forum Market, the Forum has drawn a total of $63.8 billion worth of investment interest in the 2022 economy year.
2023 Economic Outlook
Forward to 2023, African economies will likely face economic growth and downturns from internal and external shocks that might undermine the development projections and create instability. But it is believed that most of the countries in the region will come through.
Resource-intensive economies and exporters might face difficulties from unfavorable market conditions, price pressures, and stiff competition amid a global economic slowdown.
Curbing inflation remains a challenge as most countries witnessed high inflation in 2022. Many countries will likely have tight monetary policies, while the cost of non-domestic capital will increase substantially for some countries. The heavy debt of many countries remains a concern with the burden of debt servicing.
Climate issues, election cycles, political instability, food security, arms proliferation, and lingering insecurity remain the main concern that threatens the economic stability of the continent.
However, Africa focuses on building economic resilience and sustenance by attracting sustainable investments in different sectors of the economy. The African Continental Free Trade Area is a step in the right direction; it is expected to accelerate in 2023. The private sector, seen as the main driver of the economy, is the focal point believed to attract massive interest that will turn around the continent.
Investment deals for 2023 are already pouring in, signaling an Africa with a brighter prospect in 2023:
On February 2022, the EU and Gates Foundation announced an investment of over 100 million Euros ($113.4 million) over the next five years to support the set up of an African drugs regulator that will boost the drugs and vaccine production in the continent.
On October 2022, Bloomberg announced that South Africa and Indonesia will get a combined $1 billion from the Climate Investment Funds for their coal industry.
On July 2002, Financial Post announced that British International Investment, a UK government development-finance arm wants to invest $6 billion in Africa across renewable power, women-owned businesses, and digital infrastructure over the next five years.
On March 2022, Bloomberg announced that Netflix plans to invest $63 million in the creatives industry in South Africa by 2023.
Recently Etisalat announced in December 2022 its intention to invest in Vodafone’s African business to boost its presence in the continent.
On December 2022, Equinix EMEA president Eugene Bergen said in an interview that the company is to invest $160 million in South Africa Data Center Entry.
Al Kelly, the CEO of Visa, announced in December 2022 at the US-Africa Business Forum that the company will invest $1 billion in Africa over the next five years.
Top Five Prospective African Countries to Invest In 2023
We look at the Five Prospective Countries for Investment in 2023, drawn based on their GDP, GDP growth rate, export, population size, population growth rate, and Size of agricultural land area.
Nigeria will likely remain the top destination for investment and the largest economy in Africa, having a GDP of $440.78 billion in 2021 (the largest in the continent) and expected to reach $454.00 billion by the end of 2022. With an annual GDP growth rate of 2.25% in the Q3 of 2022, projections indicate that the GDP might hit $468.9 billion in 2023. The current population is about 219.5 million, with a population growth rate of 2.62%, and projected to reach 222.1 million in 2023.
The demography of Nigeria shows that the country has a more youthful population indicating a country with a labor force not yet utilized for production. Africa has vast arable lands for agricultural purposes that can yield more fortunes if put into active production. Nigeria has the second largest agricultural land area, with a size of 69.4 million hectares (second largest in the continent). The agriculture sector is still underdeveloped but holds great potential to generate much wealth.
The financial industry continues to grow and dominate the tech startup space. The successful acquisition of Nigeria Paystack in 2020 by United States payment firm, Stripe, has opened doors of interest from international investors to the up-and-coming businesses in Africa. The oil industry has experienced challenges over the years, but still an active investment opportunity with the recent successful discovery of a new Oil and Gas field, the Kolmani Oil and Gas field, which has already attracted a $3 billion investment.
Aside from Oil and Gas, the mainstay of the economy, Nigeria has large deposits of other mineral resources that are still unexplored. The GDP Per Capita stands at $2400 in November 2022 and is projected to grow to $2,500 in 2023. With a total export of $43.8 billion in 2021 (second in Africa), Nigeria hopes to surpass the mark in 2022 and beyond through massive industrialization and agricultural revolution.
South Africa is the second largest economy, having a GDP of $419.9 billion in 2021 (second largest in the continent). South Africa’s GDP might reach $426.6 billion by the end of 2022, with a growth projection of 4.1% from the previous year, and a projected GDP of 430.9 billion in 2023, with a growth projection of 1.1%.
With an agricultural land area of $96 million hectares (the largest in the continent), South Africa holds a vast opportunity to attract enough investment in the industry. The population stands at 60.1 million and is expected to reach 61.9 million in 2023 at a growth rate of 1.28%. South Africa has reserves of mineral deposits that hold great fortune if the right frameworks exist to attract investors.
South Africa has a stable governance process, a robust and independent judiciary, a robust financial sector, press freedom, and political stability that respect the Rule of Law. South Africa’s GDP Per Capita will likely reach $7200 by the end of 2022 and is projected to hover around that figure in 2023. With a total export of $130.64 billion in 2021 (first in Africa), South Africa hopes to surpass the mark in subsequent years through increased domestic production and diversification.
Egypt is sitting on a land mass of 1.002 million km2, of which 3.9 million hectares is the agricultural land mass that is available for the mass production of agric products. The 2021 GDP stood at $404.1 (the third largest in the continent). The GDP expanded by 5.4% year-on-year in Q1 of 2022 and is expected to reach $426.3 billion by the end of 2022. The GDP will likely hit $451.95 in 2023 at an annual growth rate of 4.4%. Egypt has a youthful population of 107.3 million as of early December 2022 and is projected to reach 111.7 million in 2023.
The GDP Per Capita is expected to reach $3170 in 2022 and is projected to hover at about that figure in 2023. Past few years, Egypt has enjoyed enough peace, political stability, and steady growth, making it a safe destination for investors. The tourism sector is growing and attracting tourists increasingly. Egypt exported goods worth 43.6 billion in 2021 and is expected to increase in subsequent years as the country keeps making good policies to tackle its challenges.
Egypt has opportunities and possibilities to boost its economy with its geographical advantage as a transcontinental country. As of November 2022, Egypt’s foreign reserve stood at $33.5 billion.
The Oil and Gas sector has remained a key source of foreign exchange and revenue for the country. The 2021 GDP stood at $168 billion. It expanded by 1.60% in Q1 of 2022 and is expected to reach $173 billion by the end of 2022. In the long term, the GDP will likely reach $177.1 billion in 2023 at an annual growth rate of 2.6% based on projections. The agricultural land area is 41.3 million hectares good for investment. The total export in 2021 stood at $42.04 billion and will increase in subsequent years as expected. Through a sustained effective growth strategy that will harness all the potential in different sectors of the economy, Algeria will attract more investment and reap huge rewards. The population stood at 45.2 million in 2021 and will reach 46.6 million at a growth rate of 1.7% annually, as projected.
Like Nigeria, Kenya has attracted massive investment in the financial industry, and Fintech has remained dominant in the industry and is expected to continue expanding in the coming years. Unarguably, Kenya is the most advanced country and the largest economy in East Africa, having a total GDP of $110.3 in 2021 and expected to reach $116.4 billion by the end of 2022 at an annual growth rate of 5.5%.
In the long term, the GDP will likely hit $122.3 billion in 2023 at a yearly growth rate of 5.2% based on projections. With a total export of $11.6 billion in 2021, Kenya’s export will likely surpass the figure in subsequent years. Kenya’s population stood at 54.5 million in 2021 and will reach 57.4 million at a yearly growth rate of 2.2% based on projections. Kenya is sitting on a land mass of 582,646 km2, of which 27.6 million hectares is the agricultural land mass that is available for the mass production of agricultural products.
Being home to the fastest-growing economies and to 17% of the world population, Africa will most likely see increased investment in 2023. With political stability, better ease of doing business, improved infrastructure, adequate security, improved monetary and fiscal policy, and respect for the Rule of Law, Africa is poised to continue to attract massive investment.
President of Microsoft Brad Smith said, “…the right way to think about Africa in my view is, it is the continent of the 21st century…”