Whats up with Africa in 2025
What last year says about the year ahead.
Introduction
Last year was a hard-fought battle for many African economies. Global shocks and local policy responses made life measurably worse for many and the public backlash finds the continent's political systems battling to maintain their legitimacy. Though strong economic fundamentals are likely to see the regional situation improve in 2025, a full recovery will come down to local leadership's ability to wield the continent's bargaining power in resources to best effect in an increasingly uncertain geopolitical environment.
Weathering the Storm - A Year in Review
African economies had a tough time in 2024. A combination of high global interest rates and a strong dollar kept new FDI well clear of developing markets and convinced many of those already invested to make their exit. The result for Africa was a sharp drop in outside investment and capital flight at a time when they could least afford it. This pinch was made all the worse by the fact that it coincided with the end of both the Eurobond debt markets and Chinese BRI (Belt & Road Initiative) lending as trusty alternatives for securing developmental funds. The post-COVID and Ukraine shocks led many African states to exhaust their borrowing capacities. Whilst China’s own economic woes did the same for developmental financing. Now bereft of other options, African states had no choice but to submit themselves to painfull IMF austerity programmes , cutting much-needed social spending in favour of tackling their ballooning debts.
This sudden economic polycrisis was felt across the continent at all levels of society. The local tech startup scene, which enjoyed such acclaim in the 2010’s, practically ground to a halt last year as much-needed investment dried up. lt. According to AVCA(The African Private Equity And Venture Capital Association) VC & PE deals on the continent exceeding US$50m declined by 75% YoY from 2023 to 2024, with deals exceeding US$250m being practically absent. Data published by UNCTAD (The United Nations Conference on Trade & Development) concurs, showing that there were 200 fewer project financing deals in Africa in 2024 compared to the year before.
While startup founders clamoured for funding, ordinary people the continent over did the same for food and fuel. Hangover supply chain bottlenecks from covid times, the Ukraine war's impacts on grain and fertilizer prices and freight price rises due to the Houthi attacks in the Red Sea had all served to drive up the price for basic necessities to unprecedented levels by the start of 2024. Government policy would worsen the situation further still. Desperate to rein in runaway debt, authorities the continent over, in markets as diverse as Egypt, Nigeria, Angola & Cameroon moved to cut down on food and fuel subsidies, often with disastrous results. Nigeria saw its fuel price increase from ₦185 to ₦500 per litre, with food inflation for June 2024 standing at 40%.
Local populations have not taken this crisis lightly and political systems the continent over have been made to feel the people's rage. In June mass demonstrations against proposed tax hikes in Kenya evolved into a general movement against high living costs and government corruption, prompting copycat movements in other Anglophone nations like Uganda, Ghana & Nigeria. Mozambique & Senegal played witness to similarly violent protests over electoral irregularities whilst North Africa saw protestors direct their energy towards the Israel - Palestine issue. Further afield, many continue to reject traditional politics entirely. Last year saw old conflict hotspots like Sudan, the Sahel, Somalia, Eastern DRC & Northern Mozambique all blaze uncontrollably.
This growing dissatisfaction with the status quo in Africa is something upon which more organised political factions (both local and foreign) are capitalising. Throughout 2024, opposition parties won elections in Ghana, Senegal, Botswana, Liberia & Mauritius. In Southern Africa, incumbent parties in South Africa, Namibia & Mozambique had to cede much ground and were only saved by the comparative disorganisation of their opposition coalitions.
Elsewhere, political shifts have been far more seismic In West Africa, democratically elected governments are on the back foot, battling to maintain their legitimacy amid a metastasizing regional alliance of Pro-Russian military juntas who have dealt a fatal blow to Western, particularly French influence in the region.
Such increased geopolitical competition has become par for the course in an increasingly multiregional world order. France & the United States have rebounded from their rude Sahelian eviction by cosying up to Nigeria, Ethiopia, & various Southern African countries respectively. Turkey has now become a major security partner and mediator throughout North Africa & the Horn and GCC countries from the Arabian Gulf have become heavily involved in African mining, air transport and logistics, Though investors may presently be shunning Africa, governments with more strategic interests are doing everything but.
Navigating 2025
The coming year may yet see the dark cloud over Africa's economies reveal its silver lining. Though average growth for the region in the coming year is fairly modest at 4%, this represents both an improvement on continental 2024’s average (3,7%) and the global average at large (2,7-3,7% depending on who you ask) In the coming year, the painfull shock therapies induced by IMF directed austerity programs may finally bear their first fruit. The continent is expected to pay US$88,7Bn for debt servicing this year, down from US$102B in 2024 in a trend which will hopefully continue.
Key African markets like Egypt, Nigeria & South Africa are set to help lead the charge in the continent's recovery but they will also be joined by new players like Senegal, Libya, Benin , South Sudan & Tanzania. Previous years' capital outflows have left African assets undervalued, particularly in markets like Egypt, Ghana Angola & Malawi , which underwent sharp currency devaluations last year. Exits of prominent multinationals (particularly financial & FMCG companies) over the last 18 months have opened valuable niches in various key markets.
BNP Paribas & HSBC both exited South Africa in 2024. While French banks including Societe Generale & Credit Agricole similarly jettisoned their West & North African operations. P&G, Heineken, Unilever & Nestle meanwhile have all exited or scaled back their operations in major African consumer markets like SA & Nigeria, creating space in some of the continent's most valuable consumer markets.
Will the world bite? Much will come down to external factors beyond African leaders' control. The Trump presidency will be the main wildcard to watch. On the one hand, his efforts to lower the Fed rate would do wonders for capital inflows into developing markets like Africa, but on the other hand, his proposed tariff regime could hurt African manufactured goods. Free passes like AGOA might no longer apply as an America First regime may seek to punish those African countries not sufficiently aligned on key issues for the US (like Israel). However, the temperamental nature of US foreign policy under the new incumbent may play to Africa's advantage if local leaders can employ sufficient flattery in their diplomatic overtures.
Failing that, the continent will always have its resources. Though the global economy may be sluggish, demand for critical minerals - i.e copper lithium, rare earth & other elements meant to power the global “green” transition away from fossil fuels is set to remain feverish for decades. Africa has these metals in abundance and the global industry is prepared to pay a premium for access. Ghana, Nigeria, Mali, Rwanda & Zimbabwe are all undertaking steps to join the global club of lithium producers, and will soon help the continent achieve a 10% share of global lithium production. Equally pressing is the global need to access African copper, which has prompted the investment of vast sums into African ports and railways despite the ongoing investment downturn. Africa's beneficiation of its resources has extended the critical metals space however
Last year revealed just quite how much leeway Africa has in demanding a greater share of its mineral remuneration, Botswana negotiated a deal for long term majority ownership of its De Beers diamond partnership and Mali maintained its status as a globally important gold supplier despite its very rough treatment of foreign mining companies. Recently The DRC & Zambia announced a plan to play a greater role in copper trading whilst other southern African countries, including Namibia & Zimbabwe, announced bans on rare exports, compelling companies to invest in value-added manufacturing. While the mining industry has repeatedly warned of how the externalities of African “resource nationalism” will eventually outweigh the premium on the continent's resources, it would appear that such a moment is still well off for the time being.
In conclusion despite the hardships of 2024, Africa enters 2025 with a chance to turn crisis into opportunity. With economic fundamentals stabilizing, strategic industries emerging, and global demand for critical minerals surging, the continent has a unique window to reshape its economic destiny. Political and business leaders alike must capitalize on undervalued assets, new trade dynamics, and shifting geopolitical tides to secure sustainable growth. The coming year will test Africa’s ability to wield its bargaining power effectively, but if leveraged wisely, the continent could emerge not just as a resource hub, but as a true player in the global economy.