African economies are going through a pivotal period, marked by a succession of global crises that are aggravating their structural vulnerabilities. In this context, the continent is looking for solutions to strengthen its resilience and stimulate sustainable growth. The 2024 report of the United Nations Conference on Trade and Development (UNCTAD) highlights the main challenges facing Africa. This roadmap also recommends levers to improve its economic stability.
Six major vulnerabilities to watch
The report identifies six main vulnerabilities that hamper the continent’s economic development. These interconnected factors weaken the economic foundations and make African countries more exposed to external shocks.
Political instability
Political tensions weaken institutions and discourage investors. At the same time, global crises have indirect but profound repercussions. Currently, the lack of global wheat supplies is impacting African countries dependent on cereal imports.
Economic distortion and indebtedness
The external debt of African countries is another factor of fragility. Nearly half of African countries have a debt-to-GDP ratio of over 60%. This situation limits their ability to finance essential public services such as education and health. Many states use a significant portion of their revenues to repay debt interest, to the detriment of productive investments.
Population explosion
With a population expected to reach 2.5 billion by 2050, Africa faces a major challenge. Such growth places heavy pressure on infrastructure, particularly in the education and health sectors. In addition, the job market is struggling to absorb this demographic boom. This growth leads to high unemployment among young people and encourages rural exodus and migratory flows.
Energy insecurity
Access to reliable energy remains a critical issue. More than 50% of Africans do not have access to stable energy. According to UN estimates, filling this gap would require approximately USD 190 billion annually, or nearly 6% of the continent’s GDP.
Digital divide
Africa is lagging far behind in terms of technology and digitalization. For example, the average cost of Internet on the continent is five times higher than the global average, making it difficult for the majority of the population to access it. Only 37% of Africans have an Internet connection, which limits economic opportunities and the competitiveness of local businesses.
Climate change
Although Africa is responsible for only 4% of global greenhouse gas emissions, the continent is bearing the brunt of the effects of climate change. In 2022, more than 110 million people were affected by climate-related disasters, causing losses estimated at USD 8.5 billion. Agriculture, which is the basis of many African economies, is particularly vulnerable to climate hazards.
Recommended measures to improve resilience
Develop intra-African trade
Intra-African trade represents a major opportunity for the continent’s growth, but remains underexploited. Currently, this sector represents only 16% of total trade. While more than half of African trade is concentrated with only five external economies. This dependence limits development prospects and hinders local industrial transformation.
However, regional markets offer a promising alternative. Trading within African economic blocs is much less costly than intercontinental trade. However, several obstacles persist, including:
- Non-tariff barriers
- Cumbersome customs procedures
- Lack of suitable infrastructure, particularly in the areas of transport and energy.
These challenges hinder trade and prevent African economies from fully exploiting their potential. Despite these obstacles, some signs are encouraging. For example, 61% of intra-African exports concern processed or semi-processed goods, which demonstrates the beginnings of economic diversification.
In addition, the African Continental Free Trade Area (AfCFTA) could be a real catalyst for integration and boosting regional trade. To achieve this, it is essential to reduce trade costs, simplify customs formalities and invest massively in infrastructure.
Improving the business environment
A more favorable business climate is an essential condition for ensuring the continent’s economic resilience. While Africa is attracting more and more investment thanks to its strong growth potential, SMEs still face many structural challenges. These companies, which account for 80% of the continent’s jobs, suffer in particular from limited access to financing. In 2023, 32% of them felt that this constraint was holding back their expansion.
Another factor of instability is currency volatility. The latter complicates trade and makes investments riskier. In addition, the heavy reliance on fossil fuels exposes the African economy to fluctuations in global energy markets. For the time being, investment in renewable energy remains insufficient. In 2023, only 15 billion USD was devoted to this sector in Africa, or barely 2.3% of global investments.
Some countries, however, are showing the way forward. Botswana, Morocco and South Africa have been able to put in place stable regulations, diversify their economies and strengthen their governance. These strategies have made them more resilient to external shocks. In addition, the adoption of the AfCFTA Protocol on Investment in 2023 encourages intra-African investments, financing 20% of international projects in services and manufacturing.
