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Key Macroeconomic Themes Faced by African Economies


Curated by Standard Bank’s Head of Global Markets

Standard Bank recently gathered central bank governors from across the continent to discuss the key macroeconomic themes faced by African economies. The articles below, curated by Standard Bank’s Guido Haller reflect the key themes discussed by the central bankers at this pivotal convening.

With sovereign debt restructuring discussions ongoing in both Zambia and Ghana and high debt levels across much of the continent after the impact of Covid and the more recent Russia / Ukraine conflict, debt sustainability and the economic crowding out effect of high debt servicing burdens has been a central topic of discussion recently.    

At the recent IMF/World Bank Spring meetings in Washington DC, it was high on the agenda. There is a sense of urgency for a solution as debt levels have reached a 50-year high and there are more African countries under the “watchlist”.   

Many column inches have been written with different views that range from various degrees of debt cancellation to more creative solutions that tap into concessionary financing sources or the development of new sources of investment capital including deepening local currency domestic investment pools to reduce the cost of debt servicing. There is also a growing focus on the other side of the equation; in finding ways to stimulate productive growth and tighten revenue collection. One thing is clear however, the solution must involve Africa with solutions that match this continents needs and preferably address both sides of the equation.
The articles cover the current debate hinting at some new more sustainable financing solutions being explored but also talk to stimulating both domestic driven growth and intracontinental trade to creating a more balanced relationship between debt and economic growth.

The Biggest Issue on Every African Finance Ministers’ Mind at the Spring Meetings was the Risk of a Debt Crisis in the Region

African countries are pushing for greater influence at the World Bank and International Monetary Fund to prioritize the needs of developing countries grappling with one of the harshest economic environments since the 2008 financial crisis.Calls to reform the so-called Bretton Woods’ financial institutions have grown louder in recent months as the mounting debt problem threatens to wipe away socio-economic gains of the last 25 years. The process to restructure distressed debt has been held up in countries including Ghana and Zambia, where China, a key bilateral lender, has so far been reluctant to take a “haircut” without the World Bank doing so too. African finance ministers and their teams want the World Bank and the IMF to move quicker and offer much larger support than seems possible under the current order. There are also concerns that the efforts to reform the World Bank, with an increased focus on climate change, will deprioritize poverty alleviation and end up benefiting high and middle income countries rather than low income countries.


[WATCH] Standard Bank’s Sim Tshabalala Gets Behind AfCFTA To Drive Cross-border Growth In Africa

The role of banks in enabling the African Continental Free Trade Area (AfCFTA) has been highlighted at AfCFTA’s Business Forum held in Cape Town. The AfCFTA is a key opportunity for Africa to alleviate poverty, drive economic activity and achieve prosperity for her people, says Standard Bank, a key sponsor of the important business event.


IDB Invest Eyes Rare Risk-Transfer Bond Deal Pioneered in Africa

Inter-American Investment Corporation is looking to free capital as part of its plan to increase lending in Latin America and the Caribbean through a type of synthetic securitization pioneered in Africa almost five years ago. IDB Invest is looking to build on a $1 billion transaction known as Room2Run, which was first used by African Development Bank and other parties such as Mizuho International Plc in September 2018. A portion of the deal was placed with private investors.


IMF Calls on African Nations’ Creditors to Step Up Debt Relief Efforts

The head of the IMF’s Africa department has called for a significant increase in international support to help countries overcome a funding squeeze that is jeopardising the continent’s economic development. Abebe Selassie told the Financial Times that reform of the current mechanisms for dealing with unsustainable debts of African countries was “desperately needed”. Many have been shut out of international debt markets since 2020 by “exorbitant” borrowing costs, Selassie said, while finance from China and other new sources of lending had been curtailed, along with development assistance from rich countries. Yields demanded by investors to buy foreign currency bonds issued by governments in sub-Saharan Africa have soared to more than 10 percentage points above those on US Treasury bonds for much of the past year, a gap typically regarded as a sign of severe distress. 


WEF: A New Era for African Agriculture

According to the World Economic Forum’s Insight Report on the deal — AfCFTA: A New Era for Global Business and Investment in Africa — the free trade area, one of the world’s largest by number of people and economic size, is projected to host 1.7 billion people and oversee $6.7 trillion in consumer and business spending by 2030. The deal will be transformative for many of Africa’s industries, but given agriculture’s already central role in the continent’s economy, and its huge potential for growth, agriculture will be a prime beneficiary. The Forum’s report notes that agriculture has exceptional potential for increasing intra-African trade, meeting local demand, accelerating GDP growth, creating new jobs and improving inclusivity due to upstream and downstream linkages.


US, Kenya Teams Open Trade Talks Amid Smallholder Farmers’ Protest

As Kenya and the US began the second round of the Strategic Trade and Investment Partnership (STIP) negotiations, concerns are being raised on whether the two sides will fully address key issues that have held back Kenya’s economic take-off. The Export Processing Zone manufactures apparel for the US market under the African Growth and Opportunity Act (AGOA) which comes to an end in 2025.Fears abound that the decades-old deal, a preferential trade programme which allows duty- and quota-free access to the US market for sub-Saharan African countries, might not be renewed after it expires in September 2025.


What’s Behind the Spike in Debt Servicing Repayments?

For most countries experiencing new highs in debt servicing costs, it is not so much a spike, but rather a gradual increase over several years. For emerging market and developing economies the debt ratio increased from 33.5% in 2008 to 64.6% in 2022. Though at a slightly lower level, the same scenario played itself out for sub-Saharan African countries. With higher debt comes higher debt servicing costs. A default often has a significant fallout in the economy, with governments, companies and households facing forced austerity. Governments must then cut back significantly on their expenditure, often in the face of shrinking tax revenues. Although the COVID pandemic caused an accelerated increase in the debt ratio, the ratio was on an upward trajectory well before the pandemic.


Zambia-FQM: Swapping Dividend Rights for Royalties Fuels Mining Optimism

ZCCM-IH, Zambia’s holding company that holds stakes in privately-owned large-scale copper mines, says it has agreed to convert its dividend rights in Kansanshi Mine – majority-owned by First Quantum Minerals (FQM) – to a 3.1% revenue royalty. The move is expected to end a years-long dispute with the Vancouver-based mining giant. In the new payment system, royalties are paid on a quarterly basis for 23 years.


Brookings Looks at Urban Economic Development in Africa Using Nairobi as Case Study

Ajay Banga began his global tour on Monday, with his first stop in Abidjan, Côte d’Ivoire where he met Dr Akinwumi Adesina, senior management and the Board of Directors. Banga spoke about the need for the World Bank Group to develop a strong partnership with the African Development Bank Group that would help deliver transformative results. The candidate for the top job highlighted three major issues affecting many parts of the world, which he said were of significant concern to him. He said these were inequality, tension between humanity and nature, and the tendency to apply short-term solutions to long-term problems which only delivers poor results. Banga said the challenges facing the world got complicated because of the Covid-19 pandemic, environmental degradation, and the impact of the Russia-Ukraine War. Adesina said Banga’s call for a regenerated partnership resonated with him. He stressed the need for a new way of working between the World Bank and the African Development Bank.


A Mining Boom could Drive Corruption Risks, especially in Emerging Markets

While an increase in mining investment presents economic opportunities for mineral-rich countries through taxes, jobs and new infrastructure, past experience provides a cautionary tale. The EITI’s report charts the many governance challenges that could arise from a mining boom, ranging from environmental harm, social conflicts and corrupt deals to price shocks and disruptions in global supply chains.


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