The Next Wave, Is Africa Ready? GDP Concerns

The next wave is here, and the positives incubated in it are already being felt across sectors. The region cannot get carried away by the miniature successes it has experienced so far. There are real economic concerns stemming from years of unsolved economic shocks the region has experienced. Gross Domestic Product (GDP) forms a large part of such economic concern. Keeping a blind eye on this matter might constrain the region from enjoying the full benefits of the next wave.

The state of the economy plays an important part in the stock market as it affects the investment decisions. A strong economy reflect in GDP would instigate a different trading strategy compared to a weak economy.

A rise in the GDP is required to witness economic growth (GDP). Increase in GDP can happen with an increased consumer expenditure and consumer demand is influenced by disposable income. If there is a fall in quantity demanded, then more businesses will struggle, lowering GDP.

Africa’s GDP Reality

Africa is a diverse continent that is composed of human and natural resources with potential to yield inclusive growth. In context, resources—both human and natural cannot be excuses for lack of growth. The continent’s 1.2 billion-person market should have the capacity to harness the potential of its resources and eradicate poverty in the region. Is this the case?

The World Bank identified Africa as the world’s poorest inhabited continent in 2013. It however projected that the region’s per capita income will increase to $1,025 by 2025 if current growth rates continue. Fast-forward to 2021 and Africa is still the poorest continent in the world with a GDP per capita less than the global average. Africa accounts for 2.84% of the world GDP in nominal terms.

Data from Trading Economics showed that Seychelles had the highest GDP per capita income in Africa at $14087. This amount will be bettered by even countries considered poor in North America and Europe. Even when blessed with all the natural and human resources needed for wealth creation, Nigeria didn’t make it into the top ten in Africa.

Source: Trading Economics, 2022

African countries have shown strong reliance on oil revenue, which has contributed significantly to their economies. Libya had the highest oil revenue as a percentage of GDP with 52.6% in 2020 while Gabon’s oil earnings as a percentage of GDP was 36.7%. African governments need to take a chill pill on oil emphasis, else they will miss the next wave. Tech is the next wave, ‘tech is the new oil’.

How GDP concerns the Next Wave

Everyone easily discusses how tech and innovation can push Africa to the next level of economic growth. However, tech needs GDP to get to the level where it is supposed to accelerate GDP. If GDP is the total monetary value of all goods and services produced in a country annually, then it means that a country and by extension, region that is characterized by low GDP is having some economic crises.

Notable factors from GDP include consumption expenditure, private investment, government expenditure and net export. In Africa, private investment accounts for over 80% of total production, 2/3 of total investment, and 3/4 of lending within the economy. The sector also provides jobs for about 90% of the employed working-age population. So what exactly has governments’ capital expenditures in the region been used for?

Africa isn't poor, its wealth is being stolen.

There's $203bn leaving the continent. Illicit financial flows (multinational corporations using tax havens) accounts for 6.1% of Africa’s entire GDP – 3x what Africa receives in aid. pic.twitter.com/psKDQrXc9k

— The Decolonial Atlas (@decolonialatlas) April 5, 2022

According to the UN Economic Commission for Africa, Small Medium Enterprise (SMEs) are the backbone of the African private sector accounting for over 90% of businesses in Africa and translating to 63% of employment in low-income countries while contributing to over 50% of the Gross Domestic Product (GDP). Africa can’t grow tech from these peanuts.

Africa’s population must be equipped with the required digital skills in order for the continent to realize its full potential. Africans require access to digital tools and technologies while operating within a legislative framework that safeguards everyone’s safety and interests. Since stats have shown that governments are doing very little in this regard, GDP is major concern. Tech based policies and expenditures must be implemented to reassure the region’s stand in the next wave.