Despite the Covid-19 pandemic, Africa is still a prime investment destination.
Participants at an African Development Bank (AfDB) webinar for Asian audiences have affirmed projections that the continent still has enormous investment opportunities.
A supplement by the AfDB, the African Economic Outlook (AEO), revises growth projections and outlook for Africa for 2020 and 2021 highlighting the impact of Covid–19 on Africa’s socio-economic landscape. The appendage recommends policy responses to safely reopen economies and accelerate growth recovery.
“Despite the Covid-19 pandemic, investment opportunities still abound in Africa,” said Tetsushi Sonobe, the Dean of the Asian Development Bank Institute (ADBI).
He added, “Global markets are shifting to South Asia and Africa. In a sense, Africa is not very far for Asian investors who might be interested in the investment opportunities on the continent.”
Sonobe observed that Africa’s GDP growth is projected to quickly rebound in 2021 following steady growth before Covid-19.
He identified some of the potential opportunities with the African Continental Free Trade Area (AfCFTA) being a key highlight.
“A large market with a very talented youthful population; a three-trillion-dollar market opportunity through the AfCFTA agreements; greater manufacturing potential as low-cost manufacturing opportunities continue to move to Africa; improved business environment; and improving macroeconomic governance.”
The virtual event co-hosted by the Asia External Representation Office of the AfDB had about 350 participants attending including government officials, representatives from the African diplomatic corps in Asia, development professionals, representatives of civil society, academics and think tanks, students, journalists, and the general public
AfDB’s Vice President for Regional Development, Integration and Business Delivery, Khaled Sherif, said despite the pandemic affecting all African economies, its magnitude will vary considerably from country to country, depending on the economic characteristics and initial conditions of the countries.
“This urges us to avoid the one-size-fits-all solution to address the effects of Covid-19 in Africa. For that, the AEO Supplement notes that the continent will need the support and expertise of all. This is an opportunity to enrich the debate on what appropriate measures are needed to support African countries to recover from the pandemic, drawing particularly from Asian experience,” Sherif said.
Participants also observed that although Africa is human-resource-rich, Africa will need to work on closing its infrastructure gap – an issue the African Development Bank has made one of its top priorities.
The AEO underlines the urgency to build the resilience of Africa’s healthcare systems and economies to improve countries’ preparedness for future shocks. This means that African countries will need to rethink their current development strategies and priorities, which have clearly shown their limitations.
“Policymakers must seize the new and real opportunities for participation in global value chains, particularly with Asia and within Africa and build the infrastructure needed to encourage large-scale teleworking, e-health, and distance learning architectures for a rapid, resilient, and sustainable recovery in a post-COVID-19 digital world,” said Chuku Chuku, Officer in Charge of the Bank’s Macroeconomic Policy, Debt Sustainability and Forecasting Division.
“The pandemic notwithstanding, Africa is open to business and we look forward to working with our Asian partners.”
Released annually since 2003, the AEO provides compelling up-to-date evidence and analytics to inform and support African decision-makers.
The outlook shows that the pandemic has triggered a sudden uptick in inflation in the continent, in some cases by more than 5 per cent in the first quarter of 2020.
This has mainly been caused by disruptions in the supply of food and energy, the bulk of which are imported. But for many other countries, the drastic fall in aggregate demand due to the lockdown and other containment measures has eased inflationary pressures, especially among non-resource-intensive economies.
Overall, although headline inflation, which includes food and basic energy prices, would be expected to rise, core inflation might remain stable until demand picks up after the pandemic.
The most affected countries remain those that have poor healthcare systems, those relying heavily on tourism, international trade, and commodity exports, and those with high debt burdens and high dependence on volatile international financial flows.
However, the overall impact of the pandemic on socioeconomic outcomes remains uncertain. It will depend crucially on the unfolding epidemiology of the virus, the extent of its impacts on demand and supply, the effectiveness of public policy responses, and the persistence of behavioural changes.