Africa’s 2023 Year in Review
Recapping the important developments in 2023 that are likely to shape African states' economic and political futures.
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As 2023 comes to a close it’s important to take stock of this year’s important economic and political developments that are likely to shape African countries’ futures. Below I outline the five key things that happened (or started happening) in 2023 that I believe will have lasting influence on the region’s politics and economics.
I: An important but underrated shift in Nigeria’s political economy
Nigeria comprises 67% of ECOWAS GDP. And despite the still low levels of economic integration and trade within ECOWAS, it’s fair to say that as Nigeria goes so does the regional economy. Which is why I’m very excited about the potential for Nigeria to witness reforms in the most distortionary sector of its economy: petroleum. President Bola Tinubu already removed fiscally wasteful fuel subsidies. But there’s more to be done to reform Nigeria’s petroleum sector (and the wider energy sector).
It is hard to overstate how much petroleum has distorted Nigeria’s political economy (see graph above). It killed the incentive to invest in other tradable sectors, especially in agriculture (and contributed to Nigeria becoming a net importer of food). It killed the incentive to build an effective fiscal state at the federal, state, and local government area levels. Its “enclave economy” feature killed the incentive to invest in a working domestic investment environment (including in the oil sector) characterized by strong property rights protections and a productive labor force. Consequently, Nigerian elites are more likely to steal public resources and hide their loot abroad than to leverage their influence over state policies to grow domestic commercial empires that create jobs for Nigerians. Finally, easy oil money has impeded all manner of much-needed economic and political reforms.
One hopes that all that will change with the completion of Aliko Dangote’s 650,000 barrels-per-day refinery. Once fully operational the refinery should absorb about half of Nigeria’s oil production, and meet its domestic demand with some capacity to spare for regional exports. This will obviate the need to export crude and import refined petroleum products.
If everything goes to plan — and there are still tripwires all over the place (the oil sector has too many vested interests) — the refinery will be a game changer. It will solve part of Nigeria’s foreign exchange problem; reduce the many distortions in the petroleum sector (from poor accounting for what is actually produced to corruption in the importation and distribution of fuel products); create strong incentives for investments in Nigerian oil production capacity (which has been deliberately allowed to atrophy, despite recent favorable oil prices); and spawn related industries — from plastics, to logistics, to gas, to bitumen, et cetera.
Overall, Nigeria might be about to finally de-enclave and domesticate its petroleum sector. And that is a good thing not only for its economy and politics, but also for the wider region. Reducing the petroleum sector’s distortionary effects is a necessary first step towards creating the right incentives for Nigerian elites to build enabling conditions for private investment, mass job creation, and much-needed governance structures that can convert economic growth into development and improvements in human welfare. And it goes without saying that an economically dynamic Nigeria will be a boon for ECOWAS. I remain bullish on Nigeria.
II: Emerging political economy of energy and climate change
Related to the discussion above, 2023 saw the beginnings of important shifts in the political economy of energy in the region. African countries featured in global discussions of climate change as consumers and producers of fossil fuels (who should be rationed and stopped from exploiting their own fossil fuel deposits), producers of important transition minerals (who should be lured with aid and exploited), or potential targets of green bonds and other climate finance products to preserve forests (often to the benefit of polluters elsewhere).
Overall, the emerging global distributive politics of climate change does not bode well for the region’s energy future and prospects for transformational economic development. Forever addicted to being cheap and easily satiated geopolitical dates, Africa’s ruling elites showed this year that they are willing to abandon the pursuit of energy security in exchange for a pittance in aid, useless summitry, and unfulfilled climate financing promises from rich countries that are frying the planet. In the same vein, “green financing” has quickly become a boondoggle through which African countries will most likely abandon their developmentalist agendas in service to others’ conservation priorities (which invariably prioritize Africa’s flora and fauna over its people). 2023 saw a number of African governments mortgage huge swathes of land for trinkets to the benefit of foreign financiers.
Climate change is real. Millions of Africans are already paying the price with their livelihoods and lives in the now frequent climate disasters. Which is why it’s disheartening to see African governments capitulate to the NGOization and (opaque) financialization of their climate policies.
Nothing good will come of this. If this year is any indication of what is to come, Africa will remain energy poor like it has been for decades (see above). It is worth explicitly stating that the vast majority of Global North NGOs that dominate the climate sector think of Africa as little more than an open air zoo whose flora and fauna should be protected from the people that live in the region. Few understand the need for a nuanced approach that involves a radical reduction in Global North fossil fuel consumption, but a gradual transition in Africa coupled with technology transfer to accelerate African states’ energy transition. The region’s economic development and the welfare of its peoples are simply not a priority.
Similarly, the emerging “green financiers” don’t care about development in the region. They want to make money, and will throw trinkets at complacent African leaders in exchange for access to carbon credits — very much in line with how the natural resource sector operates in the region.
As shown above, energy consumption is broadly positively correlated with economic development. To be clear, energy abundance does not cause economic development. But it is mighty hard to get a growing and dynamic economy going under conditions of energy poverty. Yet as things stand, 600m Africans live without electricity. Meanwhile, all of Africa’s major economies face serious energy deficits that continue to be a drag on firms’ productivity and profit margins. It’s time Africa’s ruling elites understood that poverty is not a viable climate strategy.
III: Gulf cash and influence
In 2023 the United Arab Emirates (UAE) emerged as the largest source of foreign direct investment in Africa — from scooping up agricultural land, to ports and logistics, to climate finance. The UAE also cemented its role as a nefarious geopolitical actor in the region. For example, it is helping fuel murderous conflicts in Libya and Sudan — with spillover effects in the wider Sahel and the Horn.
The example of the UAE is illustrative of the future of African relations with Gulf States. On the one hand, there’s enormous potential for Gulf states flush with cash to park some it as investments in African economies — from PPP infrastructure projects, to equity plays, to concessional loans, to agriculture, to transformational investments in schools and hospitals.
On the other hand, increasing interest from Gulf states in the region bring important risks. Like in Sudan, Libya, and Somalia, they can be a source of insecurity and political instability. Similar to European countries like France, the United Kingdom, and Switzerland, the Gulf’s emerging status as a safe haven for ill-gotten wealth is a corrupting influence on complacent African ruling elites. Many politically exposed individuals now store their stolen wealth in Gulf property, domicile secretive corruption-enabling firms there, and launder their cash through Gulf banks. It is no wonder the Gulf is the new hub for smuggling precious metals out of Africa.
The other unwelcome development this year was African leaders’ heightened appetite for cheap labor “exports” to the Gulf. Regular readers know that I am not one to worry about the so-called brain drain. To the contrary, I believe that overproduction of high-skill workers would be good for African economies. However, that is different from the current fixation with exporting domestic and farm workers (and other low-skill labor) to foreign lands in desperation for forex. This sort of labor policy betrays a generalized unwillingness to create export-promoting jobs in the region, and fits within the broader regional pattern of a reflexive inability to invest in domestic value addition and economies that work for Africans. Just like it is easier to be a rent-seeker exporting raw commodities than to invest in domestic value addition, it is much easier to export low-skill labor and skim off their remittances than invest in working education systems and mass job creation.
All that said, Gulf cash — especially from the UAE and Saudi Arabia — can fill important gaps left by dwindling Chinese investments in African states. The UAE’s DP World has the potential to increase the efficiency of the region’s transportation and logistics networks. There is an unfunded $100b infrastructure need in the region that could benefit from Saudi investment appetite. And, if done well, there is potential for agricultural investments to improve productivity and create jobs in agro-processing. Ultimately, successful engagement with the Gulf will hinge on African governing elites’ ability to channel foreign cash towards job-creating investments instead of always falling for easy side payments as outsiders pillage their countries’ resources. Unfortunately, on this score only Rwanda appears to be playing its cards right so far.
IV: Navigating the current regional economic slowdown
This year saw the intensification of the Continent’s economic woes. The two-decade stall in growth and productivity persisted. About two dozen countries continued to experience debt distress — Ghana and Zambia worked on restructuring their debts following defaults in the previous year, while Ethiopia defaulted this year.
The bright spot amid the gloom was the overall resilience of the region’s major economies despite global shocks — from Covid, to Russia’s war on Ukraine, to China’s economic slowdown, to high interest rates in many creditor countries. This is reason to believe that this time will be different from the disastrous long decade (1980-1994) of economic stagnation in the region. African states are older and relatively stronger. Africans are better educated. African economies are relatively more diversified both internally and in terms of global economic partners. Finally, it helps that both the World Bank and the IMF understand the need to avoid the policy mistakes from last time.
Moving forward, the main policy goal should be for African governments and their partners to learn the right lessons from the current crisis. First, debt and taking risks on big infrastructure plays aren’t bad, but there’s a need for a more efficient use of borrowed money moving forward. Second, there’s an urgent need to focus economic policy on mass job creation and improving productivity in both agriculture and non-agriculture sectors. To this end African states must embrace bold growth-promoting industrial policies that make sense for their contexts and not settle for mere poverty alleviation. Third, reform efforts should be designed to protect and build upon the tremendous improvements over the last two decades in education, health, and other social sectors. Finally, it is important to avoid unnecessary catastrophizing about the region’s economic prospects every time there’s an economic slowdown (as is typical of most “Africa watchers”). Downturns are a feature of economic cycles. What’s important is for policymakers to build resilience against cyclicality. In addition, it is normal that a region with dozens of countries will have variation in economic performance.
It is worth remembering that in 2024 12 of the 20 fastest growing countries in the world will be African. Things aren’t great, for sure. But it wouldn’t hurt to have some perspective.
In the quest for an economic turnaround, a low-hanging fruit that is hopefully obvious to regional policymakers is the African Continental Free Trade Agreement (AfCFTA). According to the World Bank, the AfCFTA could unlock income gains of 9% by 2035 and raise 50m people from extreme poverty. Which is to say that trade, trade, and more trade (on the back of gains in agricultural productivity, domestic value addition, and manufacturing) is the only way out of the current economic doldrums amidst an ever increasing population.
V: The enduring problem of weak state capacity and conflict
When all is said and done, the biggest structural challenge currently facing African states is the enduring problem of weak state capacity. The many coups, conflicts, and instances of autocratization in the region this year were reminders that there’s no escaping this reality. For three decades the region’s elites have bought into the idea that electoralism would unlock a virtuous cycle of economic prosperity and improved capacity to provide essential public goods and services. While this approach (together with a whole host of governance reforms) has yielded some fruits, a lot remains to be done.
What is clear, though, is that ritual electoralism and governance reforms do not constitute a magical portal to a well-ordered society. Effective government is just as important and, in fact, reinforces electoralism and good governance. With this in mind, it is imperative that African elites invest in strong states that can guarantee security for their citizens (by deterring or defeating challengers to states’ coercive monopoly), facilitate sustained economic growth and development, provide essential public goods and services, and create an enabling environment for democratic consolidation.
Failure to do so will be terribly catastrophic (more people should be catastrophizing about this!). There will be more coups, conflicts, and entrenched autocratic rule presiding over widespread poverty and underdevelopment. To be blunt, Africans will not simply elect their way to having well-ordered societies. The high demand for working economies as well as complex challenges like internationalized cross-border conflicts, climate change, and the uncertainties of a multipolar world will not be addressed by weak client states led by complacent ruling elites. Everyone in the region ought to internalize the fact that African societies will not magically leapfrog state weakness. There are no shortcuts to meaningful self-government of well-ordered societies.
Notably, the region’s perennial failure to invest in state-building is a symptom of a deeper malaise whose cause extends well beyond complacent rulings elites. In addition to structural conditions that severely limit ruling elites’ socio-cultural hegemony, there is a regional consensus — that “good governance” is always the answer — that erroneously conflates state capacity (including intensity of government) with autocracy and bad governance. Consequently, the region’s reformists, academics, and wider commentariat seldom see its woeful under-government as a problem in need of urgent attention. With few exceptions, the dominant analytical approach to solving the region’s myriad problems remains inexplicably anti-statist and characterized by a sisyphean quest for substitutes to the African state.
All this to say that it will be hard for African states to thrive over the next 60 years at the same levels of state capacity witnessed since 1960. Continuing state weakness will undoubtedly condemn the region and its peoples to endemic poverty and underdevelopment, and expose its states to being used and abused by outsiders.
I returned just before Christmas from a weeklong tour with a music group to Benin and Burkina Faso. Wonderful experience, but I had no idea how wide the disparities in energy use were until seeing it. Your chart was so helpful in quantifying it for me. Thanks for this informative review.
Wonderful summary. Many, many thanks!!