Executive Summary
The African continent is showing much greater resilience than expected, given the set of macro-financial conditions. Economic resilience and adaptability to prolonged political violence, events leading to business interruption and challenging financing conditions will set the stage for an acceleration in 2024-2025 as many growth enablers persist. Africa also retains lower growth volatility than other regions, with positive effects on investor penetration, market expansion and overall business sentiment. If the continent’s GDP growth resumes the pace of 2000-2010, the economy will reach USD4.6trn by 2030, equivalent to a USD1.7trn increase.
Enhancing critical investment and liquidity conditions across Africa will be vital to redress balance of payment imbalances caused by the asymmetric commodity price shock and tackle periodic currency devaluations. Effective implementation of the African Continental Free-Trade Area may result in an average income increase of +7% among member countries by 2035, while increased trust and trade credit will free up to USD65bn or 2% of Africa’s GDP to be reinvested into the real economy. Strengthening legal frameworks and deepening financial and technological infrastructure will be key to attract foreign direct investment and unleash economic growth. This will not only improve the countries’ fiscal position but also lead to the development of a more efficient and inclusive financial system, benefiting both domestic and international investors.
Africa is also home to plenty of undervalued resources, including 24-92% of global reserves of critical raw materials such as platinum, cobalt, manganese, chromium and bauxite. It also possesses a long-term demographic dividend: The number of people aged between 15 and 64 will surpass that of Europe, Latin America and Oceania combined in 15 years. If we consider that in almost half of the African countries at least 50% of the population aged 25 and older have either an account at a financial institution or use a mobile money service, demography could be leveraged once legal frameworks are strengthened and financial and technological infrastructure deepen. This would create a more stable environment for investors and reinforce their confidence, with enhanced fiscal position, capillary logistics and wider financial inclusion as desirable outcomes.
Against a backdrop of geo-strategic challenges, investors, insurers and pension funds have a vital role to play to attract the financial means necessary for Africa to develop its economy further. A thriving insurance sector can close protection gaps and help to reduce the "African premium" for the cost of debt and foster a conducive environment for infrastructure development.