🔅 Africa in 2023: Looking Ahead
🔅 Africa in 2023: Looking Ahead
Today’s Issue: What will Africa look like in 2023? From rising geopolitical tensions to the energy crisis, debt and more, we are poised to look very different next year... ☕
Dear readers,
We hope you've had a fantastic year! We here at Baobab have been incredibly motivated by your engagement and support.
We'll be taking a break until the 3rd of January and hope you’ll be doing the same. While we're away, here's a friendly reminder to continue to support Baobab by sharing it with your loved ones and friends.
Thank you for being part of our mission, and have a joyful end of the year,
The Baobab Newsletter team 🎄
Photo of the day: Storm in Monrovia, Liberia
Markets — Year to Date:
🔺 Nigerian SE: 49,485.51 (+15.85%)
🔻 Johannesburg SE: 73,588.31 (-0.16%)
🔻 Ghana SE: 2,444.88 (-12.35%)
🔻 Nairobi SE: 127.72 (-23.27%)
🔻 US S&P 500: 3,878.44 (-19.14%)
🔻 Shanghai Composite: 3,054.43 (-15.91%)
*Data accurate as of the close of markets across the continent
US: Short sellers, who bet on stock prices to go down, are celebrating this year. The S&P 500 has taken a 19% nosedive, juicing the returns of those brave enough to bet against the markets. It’s the first time since 2018 that short sellers have seen a positive return, and Tesla is the big winner, with investors seeing $15 billion in realized and unrealized profits on some $19.3 billion of shares sold short.
UK: The UK’s economy is the weakest link in the G7—that’s what the Office for National Statistics says. Economic output in Q3 fell by 0.3%, down from the previous estimate of -0.2%. Business investment dropped by 2.5%, while manufacturing and construction saw declines across the board. Experts predict the economy will keep contracting in the current quarter, meaning a recession is all but a certainty.
Uganda: The country is about to get a much-needed cash injection of around $240 million from the IMF. The east African country’s economic recovery is underway but still has a way to go. Growth is projected to hit 5.3% in the fiscal year 2022/23, lower than the previous year but still higher than 2020’s 4.7%, thanks to the easing of pandemic lockdowns. But there are still a bunch of obstacles: persistent high inflation in advanced economies, tighter global financial conditions, and more frequent disruptions due to climate change.
GEOPOLITICS
Africa in 2023: Looking Ahead
A recent paper from the McKinsey Global Institute argues that global civilisation is entering a new era, in the same way we experienced transformative socio-economic changes during World War II, the 1970s oil crisis, and the breakup of the Soviet Union.
So, where does the world stand right now?
The world is in a unique spot right now. Whereas a lack of demand defined past cycles, today, our demand is constrained by a lack of supply. Think of supply-chain issues, energy ageing populations, and growing geopolitical tensions.
Let's break these down:
Geopolitical tensions:
The US is setting out to make and keep friends, while China (think, Belt and Road Initiative) is expanding.
Meanwhile, new technologies like artificial intelligence are enhancing competition between superpowers, but they could also significantly disrupt industries, jobs, and societal stability.
Energy crisis:
Investment in energy hasn't kept up with demand. And yet, because of climate change, energy supply needs to increasingly come in the form of renewables, which require significantly more investment and will lead to an increase in prices.
Additionally, the concentration of critical minerals in few locations may further escalate competition between major geopolitical blocs.
Debt:
Major economies have tripled their collective GDP in debt thanks to borrowing for Covid-19 relief. The global pace of growth is unlikely to wipe away the debt soon, unlike what happened after WWII.
OK, so where does Africa stand in all of this?
All of the above will have clear consequences on African societies going into 2023.
Geopolitical rivalries have played themselves out prominently recently, with Africa seemingly benefitting from last week's US-Africa Leaders Summit and China's infrastructure investments concurrently. At the same time, the continent's economies have suffered from supply-chain issues, the energy crisis, and skyrocketing debt and inflation.
However, with more developed global economies reaching "peak child", where demographics continue to age and population numbers drop, Africa will, by contrast, soon have a larger working-age population than even China or India.
The outcome of this shift in the population balance remains to be seen. Shall we see greater prosperity or hardship as a result?
It's up to us to ensure the future is one of progress, not despair. McKinsey's paper notes that when we work together, dramatic changes can happen, citing the example of the rapid development and deployment of Covid-19 vaccines.
ACROSS THE CONTINENT
Other Headlines
🇿🇼 Lithium, the element powering your phone and laptop, is a hot commodity right now. So hot that Zimbabwe, the African country with the world’s largest lithium deposits, is banning its export. Zimbabwe’s mining ministry says it’s tired of letting other countries take advantage of its lithium resources and that it wants to start processing the mineral itself to benefit from the demand. The government hopes that by cashing in on the lithium value-add, it can help turn the country into an upper-middle-income economy. It’s a big goal, since Zimbabwe is currently losing an estimated $1.8 billion in mineral revenue to smuggling and externalization. So far, lithium has skyrocketed in price by 180%. With the ban, Zimbabwe hopes to prevent multinational companies from exploiting its lithium mines and leaving the country poorer.
🇬🇲 The Gambia has suffered an attempted coup. The government was able to get it under control, with four soldiers arrested and three on the run. The attempt to overthrow President Adama Barrow, who won a second term in elections last year, is still a bit of a mystery. For now, it looks like life in the capital, Banjul, is going on as usual, with no gunshots heard, and no loyalist forces deployed. But, the military reservists have been put on standby to be safe. This attempted coup isn’t totally out of the blue. Barrow defeated the long-serving President Yahya Jammeh in 2016, forcing him into exile. Since then, Barrow’s had to rely on foreign forces for security and become unpopular for allying with Jammeh’s old party.
🇷🇼 International pressure is piling up on Rwanda after the US, France, Germany, and Belgium publicly accused the country of supporting armed rebels in the Congo. For months, the M23 rebels have been wreaking havoc in eastern Congo, and the UN says it has “solid evidence” that Rwanda’s armed forces are behind it. In response, France, Germany, and Belgium have made it clear that Rwanda risk cuts to the foreign aid they’ve been receiving. The M23 is primarily made up of Congolese Tutsi, and Rwanda has accused Congo of backing another armed group, the Hutu-led FDLR. Relations between Rwanda and Congo have been strained for decades, and the Rwandan government has recently expressed concern for the ethnic Tutsi in eastern Congo affected by the violence. It’s a complex situation, and with international pressure mounting, the pressure is on Rwanda to make the first move.
FOOD FOR THOUGHT
Proverb of the Day
“How gently glides the married life away, When she who rules still seems but to obey.”
— Kenyan Proverb.