Africa: 7 Bold Predictions for Economic Development in 2021


The year 2020 will be remembered as the year of the great lockdown, with COVID-19 bringing the world to a grinding halt. The global economy slowed, countless lives are lost and everything from business revenues to profitability plummeted. With all this in mind, one can expect a few things from 2021. This list is not exhaustive but identifies key trends across development that will make or break countries in 2021.

Source: International Chamber of Commerce.

1). Oil Prices Will Recover: Several countries have begun the process of inoculating citizens against the virus. These include but are not limited to the UK, Europe, and the United States, and some Asian states such as South Korea and Taiwan. In line with global vaccination schemes, economic activity will resume and borders will re-open. Higher demand for crude oil for planes, cars, and homes will support recovery. This will be further driven by the oncoming recovery in economic activity, which will be slow and gradual. Oil prices will likely average $50 — $55 per barrel in 2021. This will be drive-by OPEC output restrictions, a mix of geopolitical uncertainty, and higher demand for petroleum products. This will benefit CEMAC member economies, a majority of whom are commodity exporters. Meanwhile, top exporters of crude such as Egypt, Libya, and Nigeria with an average fiscal deficit of 8% in 2019 stand to benefit from higher oil prices.

2). Developing Market Economies will react to Post-COVID Trends: Developing market economies will continue to adapt to higher debt levels, a growing youth population, and the economic fallout from COVID-19. It is important to note that structural trends such as digitization and automation will become increasingly apparent across the continent, while labor market programs will likely serve as an anchor for countries that have been badly hit by the virus and whose education systems are not sufficiently advanced to respond to an increasingly digitized workplace that requires a range of practical skills. A raft of fiscal and monetary policies such as interest rate cuts and the loosening of capital buffers will be used to stimulate economies and reduce the negative impact of COVD-19.

The interaction between structural trends, changing demographics, and macroeconomic factors will see economies that have adapted grow at a quicker pace and shed off the depleting growth-effects of COVID-19. This will see an overall increase in manufacturing as a percentage of GDP, Liberia and Ethiopia will continue to thrive as hubs for apparel, while transformed consumer products will be driven by the continued mechanization of agriculture.

3). Climate Change: COVID-19 will accelerate the transition away from fossil fuels for emerging market economies such as China and India. However, the portion of fiscal policy that can be explicitly greened is limited as policymakers must balance short-term economic growth with long-term structural reforms across labor markets and the economy. Despite COVID-19, over 95% of African countries are signatories to the Paris Climate Accord and several presidential addresses reiterated a commitment to environmental degradation. However, as climate events grow ever more extreme — with floods, wildfires, cyclones, landslides, and soil erosion and species loss becoming the norm — countries will implement a set of climate policies that mitigate against the worst effects of climate change, insulate agricultural value chains and raise better awareness across societies. However, rather than a precipitous shift away from fossil fuels, countries will likely invest further in refinery capacity, to reduce imports of processed petroleum products and reduce the structural deficits.

4). Human Capital Development: COVID-19 exposed the frailties of Africa’s economy, dominated by the informal sector and a poorly trained workforce. While the education system is ridden with gender inequities, in both outcomes and access, governments across the continent realize the need for forward-looking curriculums that ensure individuals are properly trained to become competitive on the jobs market. One criticism is that Africa’s economy is dominated by low value-added products, which do not add substantially to the economy or overall exports. As such, a highly skilled workforce is indispensable for most, if not all sectors of the economy. Countries such as Japan will continue to take a balanced approach, balancing foreign aid with up-skilling its workforce. Meanwhile, apprenticeships and on-the-job training will be increasingly leveraged in the policy maker’s toolbox.

5). Agricultural Output, Poverty and Standards of Living: Climate change is depressing agricultural output across Sub-Saharan Africa, As such; countries will seek to boost agricultural output even as freshwater sources are seen to be declining and are becoming increasingly contentious across countries. Prime examples the Great Renaissance Dam in Ethiopia that will provide electricity to Egypt and Syria. Policymakers will have to balance the risk of climate change to freshwater sources and agricultural output as well as growing con concerns of scarcity. There are 33 million smallholder farms, and the farmers that live on them contribute up to 70% of the food supply. Greater investment and fiscal incentives have the potential to increase food production, boost exports, and reduce poverty — Sustainable development Goal 1. As COVID-19 threatens the gains made in the eradication of poverty, the balance between climate change, agricultural output, and poverty will be increasingly sought.

6). The African Continental Free Trade Area becomes Operational: Member states to the African Continental Free Trade Area (AFCFTA) will begin implementing the signed agreement from Kigali in 2018. This will occasion greater integration even as efforts towards this have been stalled by COVID-190. j

The harmonization of tariff schedules and product quotas will enable countries that produce higher value-added products to witness a surge in GDP growth. Countries such as South Africa and Nigeria stand to benefit, while the West and the Central African States will likely produce substitutes to imported products in other to compete more effectively. Effective production of goods and services will lower prices, which will equally impact poverty levels and access to nutritious food. The spill overs to infrastructure and employment will equally be broad-based, as countries will create physical and digital linkages in other to boost and reinforce trade and economic linkages.

7). Health Care will become increasingly robust due to COVID-19: COVID-19 exposed the vulnerabilities in Africa’s health care system. Whilst greater coordination’s from the African CDC and the African Union enhanced the response from the continents’ health care workers, the underinvested health care systems nonetheless suffered significant strain due to a low number of ICU beds, etc. However, countries such as Rwanda adapted and began using robots to treat patients whilst budgets were designed to reflect the growing health care needs of countries across the continent. In the coming year, policymakers will likely maintain spending in health care, which is expected to reach 10% according to the World Health Organization and 15% according to the Abuja target. Of course, this is unlikely to occur in 2021, but this is unlikely to occur fully in 2021. However, it is expected that the average allocation for health care will rise by 5–15% on average. On the one hand, this will reflect the increased health care costs related to COVID-19, but the purchase and distribution of vaccines.

8). Vaccinations and Sensitization: The coming year will be full of debates surrounding the safety of vaccines? While several vaccine candidates have been approved by the West, there is continued scepticism about vaccines developed in the West. A comprehensive information campaign will likely be employed across the continent in other to encourage people to vaccinate themselves against the virus and reduce the risks of contamination.

Africa is unlikely to get vaccines until the second quarter of next year, which means citizens must be encouraged to obey social distancing and other measures that have been issued in WHO guidelines. No year is ever the same as the previous one and while there are myriad ways in which the world could develop, one must nonetheless forecast most likely outcomes. 2020 will be remembered as a virulent year, where COVID-19 interrupted global supply chains and imposed grave costs on health care systems.

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