Africa faces economic headwinds this year, but some of the continent’s brightest sparks are shading it in a more hopeful light.

Six of the top-10 performing economies in the world are forecast to come from Sub-Saharan Africa in 2024, according to the International Monetary Fund.

Their smaller size won’t be enough to make up for less-stellar performances by South Africa and Nigeria, which together account for two-fifths of Africa’s $2 trillion economy. But collectively, they are helping to make a difference in a region that remains severely challenged by poverty and inequality.

“Sub-Saharan Africa’s growth prospects are brightening,” said Bloomberg Africa Economist Yvonne Mhango. “Eight of the region’s top-10 biggest economies – which together account for another 40% of regional GDP – will grow by a strong 5% on average.”

These include Ivory Coast at 6.6% and Tanzania at 6.1%. The two countries have done a good job of diversifying their economies and attracting foreign investment.

Africa’s Economic Growth Prospects are Brightening

As a result, the IMF sees regional growth improving moderately to 4% in 2024 from 3.3% in 2023. And while the two heavyweights aren’t likely to deliver quicker output in the near term, both Nigeria and South Africa are pursuing reforms that may yield benefits over time.

The IMF sees growth in Nigeria picking up to about 3% this year and next, while South Africa is projected to expand by 1.8% and 1.6% over the two years, up from a tepid 0.9% in 2023.

‘Big Picture’

“Big picture Africa, the external environment is difficult,” said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank. “But reforms matter, and this will be the crux of the growth turnaround that we expect in both South Africa and Nigeria.”

Nigerian President Bola Tinubu has embarked on aggressive measures to relax the country’s foreign-exchange regime and remove costly fuel subsidies.

South Africa, hobbled by an energy crisis, is finally making tentative progress on boosting electricity supply, which is expected to continue.

“The important point for South Africa is that we’ve probably reached the turning point,” said Khan. “The years ahead should deliver faster growth. And that is under-appreciated.”

That’s despite potential uncertainty before elections this year. The vote, likely to be held in April or May, may cost the ruling African National Congress its absolute parliamentary majority. But it’s expected to remain the largest party in government and the ballot won’t have a major impact on policy, she said.

Near-Term Caution

Still, analysts remain cautious on Africa’s outlook in the immediate future. The pick-up in growth is coming from a low base after the setbacks suffered by the region during the pandemic, straining public finances and leaving many countries struggling with heavy debt burdens.

Those have already triggered defaults in Ghana, Zambia and Ethiopia, with the IMF warning other nations remain at risk, and access to foreign capital markets is effectively closed.

Moody’s Investors Service has a negative outlook on the credit of African sovereigns because of elevated debt-refinancing risks, and because it expects slower growth in China to dampen demand for the region’s commodity exports.

Aurelien Mali, senior credit officer at Moody’s Sovereign Risk Group, notes that Africa’s ratio of debt to gross domestic product has risen to 60% on average. That’s back up to the crisis levels of the early 2000s that galvanized debt forgiveness for the poorest nations.

“Many of these countries have been running twin deficits — fiscal deficits and current-account deficits — in the post-Covid period,” he said. “They need to access external funding at a moment when you have a wall of maturities coming due.”

Moody’s estimates about $5 billion of eurobonds will come due in 2024 in Sub-Saharan Africa, with more than $6 billion in 2025. That doesn’t count debts coming due to bilateral creditors like China or multilateral lenders including the IMF and the World Bank.

Eurobonds Coming Due in Sub-Saharan Africa This Year

Billions of dollars

No African country has tapped the eurobond market since the US Federal Reserve began raising interest rates aggressively in 2022.

Nor do analysts see market access reopening for most African sovereign issuers this year, unless the Fed cuts interest rates aggressively, which may help bring borrowing costs back down to more affordable levels.

Optimism that the Fed will move quickly to lower borrowing costs in 2024 has faded in recent weeks, amid signs the US economy remains robust.

“A lot of these countries, despite the recent rally, are still locked out of the market. They’re having to find new ways, as their debt comes due, to roll that over to make good on their obligations,” said Patrick Curran, senior economist at Tellimer Ltd. “Countries especially in Africa but in frontier markets generally, are going to be particularly vulnerable as long as interest rates stay near current levels.”