Factors shaping Africa’s economy

Factors shaping Africa’s economy   

In many parts of Africa this year, the price of crude oil, which is determined in the international market, is shaping the way we live our lives and will continue in 2015 and beyond.

Crude oil prices have dropped by more than 50% in the last 12 months and the outlook for prices does not look good.

Oil dependant countries are feeling the pressure. Angola, for example, has announced plans to borrow $25 billion this year ($15 billion through treasury bills and the balance via external borrowing) as the country’s revenues take a hit from the steep drop in crude oil prices. The government has also announced plans to remove fuel subsidies, which costs the country about $2.2 billion a year and devalue its currency.

In Ghana, the government announced that it will scrap the remaining of its fuel subsidies by September 2015 in a bid to reduce expenditure, which has come under pressure in the face of dwindling crude oil prices. This is after successfully arranging a billion dollar facility from the IMF.

Nigeria’s successful and peaceful elections has raised hopes but the new government is faced with tough decisions to make in the face of dwindling revenues from crude oil and the resurgence of Boko Haram activities in Northern Nigeria.

The new Nigerian government may be forced to eliminate fuel subsidies, increase tax collection while delivering on the many welfare projects promised. Meanwhile, economic growth has slipped in the first quarter in Nigeria while unemployment rate rose to 7.5% from 6.5% amidst pressure on the country’s foreign reserves and the Naira which has been devalued by 7.5% in the last six months.

But it is not all gloomy on the continent. Kenya’s economy is still growing strong though at a slower pace. The International Monetary Fund (IMF) expects that the economy will grow at 6.5% this year as against 7% as previously announced dampened by rising insecurity followed by the tragic Al-Shabab attacks and softening of commodity prices.

Democratic Republic of Congo's economy is another bright spot on the continent with the IMF forecasting that the country’s economy will expand 9.2% in 2015, which will make it one of the fastest growing economies in the world.

Following new deep sea recoveries off the South Coast of Tanzania, the country’s current natural gas reserves have been put at about 55 trillion cubic feet (tcf). This is expected to attract new investments into the country, creating jobs for many Tanzanians.

Perhaps, the biggest news that will shape Africa’s economic future is the announcement that three existing trade blocks, made of 26 countries with a population of over 600 million people will create the largest free-trade zone on the continent.

These trade blocks are the Southern African Development Community (Sadc), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (Comesa). The treaty will facilitate the movement of free goods and services among the countries and allow preferential tariffs between them.

Another good economic news is the declaration that Liberia is Ebola free and the relative decline in infection rates among Guinea and Sierra Leone. This is expected to lead to a resurgence of economic activities not only in the affected countries but in West Africa and positively affect travel and tourism across Africa generally.