Spanning 54 countries, Africa is a powerhouse in the world of natural resources and innovation. And despite the social and political issues the continent faces, there’s no doubt that it’s on track to see an abundance of opportunities to grow in the coming years.
Here is a quick look at the richest countries in Africa by GDP:
1. Nigeria ($446,543 Billion)
A key component of the African economy, Nigeria has a population amounting to half of West Africa (just over 202 million). With an abundance of natural resources, it remains Africa’s number one producer in terms of GDP output.
The country is Africa’s largest crude oil exporter, recording production about 1,6 million barrels a day in December of 2019. Petroleum exports account for 10% of GDP and exceed 80% of export revenue. Apart from petroleum, Nigeria’s other natural resources include natural gas, tin, iron ore, coal, limestone, niobium, lead, zinc and arable land.
Between 2000 and 2014, Nigeria grew its GDP year-on-year by 7%, one of the fastest rates in Africa. However, growth has since slowed to around 2% due to oil and production shocks and with political instability in the region and a growing young and unemployed population, Nigeria is expected to grow slowly and living conditions to worsen.
However, with the 2020 crude oil price war between Saudi Arabia, Russia and the US, and the impacts of Covid-19, it’s possible Nigeria won’t hit its growth target of 2%.
2. South Africa ($358,839 Billion)
South Africa holds on to the second spot, after a difficult 2nd half of 2019. South Africa went into a recession after 2 consecutive quarters of negative GDP growth. The main reason, among others, power outages from ageing operations at its main power producer, Eskom.
South Africa has diversified its offering over the past two decades away from mainly raw material exports such as gold, iron ore and platinum group metals, to financial services and manufacturing. Financial services, mining and personal services were the only industries to post positive growth in the 4th quarter, however, 4th quarter growth ended at -1,4%. South Africa only grew its GDP by 0,2% in 2019.
With the entire global economy experiencing a slowdown, and its main iron ore trade partner, China, having to close factories and slow construction, South Africa could face a difficult road ahead. Covid-19 will have a profound part to play in South African growth, not only suppressing industries such as tourism and travel, but also mining and personal services.
3. Egypt ($302,256 Billion)
The Government of Egypt recently concluded an economic reform program backed by the IMF in order to bolster economic growth. Real GDP growth reached 5,6% in 2019, up from 5,3% in 2018. Unemployment has also fallen to 7.5% in the 4th quarter, from 9.9% a year before. By sector, gas extractives, tourism, wholesale and retail trade, real estate and construction have been the main drivers of growth.
With more than 50% of GDP being derived from service-based employment, Egypt has done well to diversify itself from raw material exports. However, with 32,5% of the population living below the poverty line and the imminent global slowdown, Egypt could face some socio-economic headwinds in the years to come.
4. Algeria ($172,781 Billion)
Algeria is a country highly exposed to the performance of hydrocarbons, including oil and natural gas. In fact, hydrocarbons make up nearly 70% of total GDP. However, in mid-2019, many high ranking executives in the hydrocarbon industry were detained on investigations of corruption. This political uncertainty has slowed down hydrocarbon growth, with growth in the sector contracting by 7%.
By sector, commercial services, industrial, construction and public works, and agriculture sectors continue to drive non-hydrocarbon growth, reaching 5.6%, 4.6%, 3% and 2.7% in Q1-2019, respectively. However, in an economy so highly correlated to oil and natural gas prices, the current war in oil production could have detrimental impacts on its economy.
5. Morocco ($119,04 Billion)
Moroccan real GDP growth slowed to 2.7% in 2019, missing the World Banks’ estimate of 2.9%. Morocco derives just under 15% of its GDP from agriculture, 30% from industry and the remainder from services. Domestic demand remains strong with average salary increases outpacing the low inflation of 0.6%.
Before mention of Covid-19, the World Bank estimated an average growth rate of 3.3% for 2020/21 due to increased investment in the Moroccan automotive industry. One such investment was made in their Peugeot plant which hopes to double production capacity.
6. Kenya ($98,607 Billion)
Kenya, one of the quickest growing economies in Sub-Saharan Africa, averaged GDP growth of 5.7% in 2019. The recent economic expansion has been boosted by a stable macroeconomic environment, positive investor confidence and a resilient services sector.
Although Kenya has experienced fast growth in both technology and financial services, their total output still remains heavily skewed to agricultural produce (approximately 35% of GDP) including coffee, tea and corn. It’s industrial sector still has room for growth while its services sector ranges between 45 – 50% of GDP. They benefit from increased international investment, a stable political climate and a clear business agenda.
7. Angola ($91,527 Billion)
From the end of the Angolan Civil War in 2002, Angola has been working on political and structural reforms in order to stabilise its economy. There is no doubt that this is an economy built on oil, with more than a third GDP and 90% of its export revenue derived from crude oil sales.
Angola is currently implementing reform programmes from both the IMF and World Bank who have pledged $3.7 Billion and $500 Million to the Angolan government respectively. Until the country is able to diversify from oil dependency, the majority of its population will remain below the poverty line and growth will be difficult. That being said, the Angolan government has come a far way since its civil war and should remain a contender for strong African growth.
8. Ethiopia ($91,166 Billion)
Ethiopia’s Prime Minister, Abiy Ahmed, who took office in 2018, has launched an ambitious economic reform which will aim to drive economic transformation and open up one of Africa’s most closed economies. The process has already begun for the privatization of sectors such as telecommunications, banking and sugar plantations.
Ethiopia’s economic growth has averaged 9.9% year-on-year from 2008 to 2018 and shows no signs of giving up. It does, however, suffer from strong headwinds of high consumer inflation and underdeveloped private sector and socio-political instability. It will be a long and difficult road, but if the government is able to provide good leadership and capital allocation, Ethiopia could become the new manufacturing hub of Africa.
9. Ghana ($67,077 Billion)
Ghana mainly exports resources such as cocoa, crude oil, gold and timber. The country experienced an economic expansion of 6.7% in the 1st quarter of 2019, with non-oil growth at 6%. Inflation remains in the single digits at around 9% and the banking sector is well-capitalized.
Ghana’s energy sector remains under financial pressure due to high costs and natural gas supply. With an election cycle in the midst of an oil price war and Covid-19, 2020 will be a test of what growth will be seen in Ghana.
10. Tanzania ($62,224 Billion)
Tanzania supports a population of around 55 million people. Although the poverty rate has decreased in the last few years, the absolute number of citizens in poverty has remained the same. The estimated GDP growth rate was 5.6% for 2019 due to high government investment in a new rail line, the revival of the failed state airline and a new hydropower plant.
Tanzania mainly exports gold, cashew nuts, coffee and cotton. Tanzanian President, John Magufuli’s government has high growth plans for Tanzania including the expansion of their budget deficit in the next few years to support capital outlays for new developments.