Economic Development in Africa Report 2024

Interconnected crises, including geopolitical conflicts, the pandemic and commodity price shocks, have disrupted supply chains, raised trade costs and hampered investment, aggravating Africa’s structural weaknesses and vulnerabilities.

The report uses a new multidimensional framework to analyse vulnerabilities across six areas, highlighting how they are interconnected and amplify each other.

• Political: Coups, governance challenges and weakened democratic institutions
• Economic: High debt, trade imbalances and inflation
• Demographic: Rapid population growth and migration pressures
• Energy-related: Dependency on fossil fuels and limited renewable infrastructure
• Technological: Digital divides and under preparedness for disruptive innovations
• Climate-related: Extreme weather and dependence on climate-sensitive agriculture

For example, governance instability worsens economic conditions and deters investment. Since 1950, Africa has seen 220 of the world’s 492 coups attempts.

Economic vulnerabilities like high debt levels further undermine stability. In 2023, nearly half of African nations had debt-to-GDP ratios above 60%, with many spending more government revenue on debt interest than on education or health.

Infrastructure gaps in transport, energy, and ICT drive up trade costs 50% above the global average, reducing competitiveness.

Energy insecurity compounds risks. Less than half of Africans have reliable electricity access. Closing Africa’s energy gap will require $190 billion annually – about 6% of GDP.

Climate-related risks, especially in agriculture – a lifeline for millions – further deepen vulnerabilities. In 2022, climate hazards affected over 110 million Africans and caused an estimated $8.5 billion in damages.

The report calls for export diversification, debt management and targeted investments in infrastructure to drive growth and shield economies from future shocks.

Between 2002 and 2023, Africa experienced strong economic growth, enhancing its appeal for trade and investment.

From 2000 to 2010, the continent’s economy grew by 4.8% annually, outpacing the global average of 3.1%. Africa’s growth slowed to 3.1% between 2011 and 2020 but remained above the global average of 2.4%.

However, this growth was closely tied to commodity price booms. Over half of African nations depend on oil, gas or minerals for at least 60% of export earnings, leaving them vulnerable to volatile global markets.

The 2014 commodity price downturn and the COVID-19 pandemic highlighted these vulnerabilities, severely impacting investment. Gross fixed capital formation – investments in physical assets like infrastructure – fell from 11.4% in 2014 to 4.8% in 2015. The pandemic caused a 4.1% contraction in 2020.

Macroeconomic risks, such as fiscal imbalances, further deter investment. In 2014, falling commodity prices led to an average fiscal deficit deviation – the gap between actual and planned deficits – of 2% of GDP across Africa. In 2020, pandemic-related spending and revenue losses pushed deficit deviations to 3.4%, underscoring how external shocks strain government revenues.

The report calls for macroeconomic stability and fiscal reforms. Governments should balance growth-focused spending with disciplined fiscal management, reduce reliance on external borrowing, diversify revenue sources and strengthen institutions.

Intra-African trade remains one of the continents greatest opportunities but accounts for only 16% of its total trade.

Over 50% of the continent’s imports and exports are tied to just five economies, all outside of Africa. Meanwhile, only 16 of 54 African nations source more than 0.5% of intermediate goods regionally, missing critical opportunities for value-added trade and manufacturing.

Within Africa, a few major economies – Kenya, Nigeria, and South Africa – dominate as suppliers and users of value-added goods, leaving regional production networks vulnerable to disruptions in key markets.

Strengthening and diversifying Africa’s trade networks is key to resilience, but infrastructure gaps – especially in transport and electricity – and non-tariff barriers hinder regional supply chains. For example, poor connectivity means road transport accounts for about 29% of the price of goods traded in Africa, compared to 7% for those traded outside the continent.

Likewise, it costs less to trade within African regional blocks – for example, the East African Community – than across them. Technical requirements, inefficient customs processes and other non-tariff barriers restrict African trade three times more than tariffs.

Despite these challenges, 61% of Africa’s regional exports consist of processed and semi-processed goods, highlighting opportunities for regional supply chain diversification. The African Continental Free Trade Area (AfCFTA) offers a pathway to reduce dependence on global markets and enhance resilience.

The report calls for reducing non-tariff trade costs, streamlining import and export processes, upgrading infrastructure and diversifying trade partners. A more integrated regional trade system would boost Africa’s resilience, support sustainable growth and enhance global competitiveness.

Improving the business environment is critical to building resilience in Africa. While the continent offers growing markets and high investment returns, businesses – especially small and medium-sized enterprises (SMEs) – face significant challenges.

SMEs provide 80% of employment across Africa, but are particularly vulnerable to economic shocks.

In 2023, 32% of African firms cited limited access to financial tools as a major obstacle to growth. Currency volatility further strains small businesses reliant on foreign currency transactions.

Energy dependency poses another major challenge. Over half of Africa’s energy supply relies on fossil fuels, leaving businesses vulnerable to volatile energy markets and risks during the global energy transition. In 2023, renewable energy investment in Africa totalled just $15 billion – only 2.3% of global renewable energy investment.

However, countries like Botswana, Cabo Verde, Mauritius, Morocco, and South Africa show that resilience can be strengthened in Africa through stronger regulatory environments, connectivity, economic diversification and political stability.

Also, the 2023 adoption of the AfCFTA Protocol on Investment has created new opportunities for intra-African investment. That year, African investors financed 20% of international projects in services and manufacturing and 13% in resource-based industries.

To help SMEs seize opportunities and drive economic transformation, African governments need to strengthen regional financial markets and enhance regulatory frameworks. Key actions such as improving access to financial derisking instruments and bolstering enterprise risk management systems will build resilience and boost investor confidence.

Africa’s economic future depends on addressing vulnerabilities and leveraging opportunities for regional integration and diversification.

Improved infrastructure, financial systems and governance are vital to enhancing resilience, boosting intra-African trade and fostering sustainable growth. Achieving these goals requires collaboration between governments, the private sector and international partners.

The report outlines actionable policy recommendations divided into short, medium and long-term measures to reduce vulnerabilities and unlock Africa’s trade potential.