Africa: Economies in Africa Had It Rough in 2022 … and it will be rougher in 2023

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[It's been rough across Africa and it will remain rough. Nice! Jan]

Record inflation, high debt levels and weak currencies sent the cost of living soaring in many parts of sub-Saharan Africa throughout the year.

When Richard Gbewornyo graduated as a videographer in Accra, he was ready to go into the field and start shooting.

But hardly any assignments came his way in 2022. He’s now an Uber driver in Ghana’s capital — although that puts very little in his pocket.

"It’s difficult, very difficult, because I ventured into Uber and when I started fuel prices were somewhere around 4 cedis (€0.44/$0.47) per liter (0.264 gallons), but now it is 15 cedis per liter," Gbewornyo told DW.

The fuel price shot up by over 140% in Ghana in 2022.

Inflation at runaway levels

In Lagos, university graduate Moses Oduola also felt the pinch as the cost of living rose in 2022. He markets energy drinks. Sales have been low in Nigeria’s economic capital, he told DW.

"It is not easy especially for someone like me that is making effort to make it in a legal way. As a youth that wants to make it in a legal way," Oduola said.

"There is no money, people are complaining that there is no money so people that even want to buy your products must be people that have extra money to spend."

Inflation crossed the 50% threshold in Ghana this year, the highest level in over three decades. Nigeria meanwhile saw 10 consecutive months of rising inflation, with 21.47% recorded by November.

The Economic Intelligence Unit (EIU) has put average the annual inflation in sub-Saharan Africa at 14% year-on-year.

Setback for poverty reduction efforts

The International Monetary Fund (IMF) said incomes and food security was "devastated" in sub-Saharan Africa as the region entered a slow recovery from the pandemic, high levels of public debt, and soaring energy and food prices.

"If you used to spend 100 cedis for lunch, now you must look for a way to spend 40 cedis," Gbewornyo said. "So, if you used to eat three square meals now you have to do maybe one and drink water throughout the day."

In the World Bank’s latest Africa’s Pulse report, the institution’s chief economist for Africa, Andrew Dabalen, said the economic trends that took hold in 2022 pose "a threat to long-term human development."

"These trends compromise poverty reduction efforts that were already set back by the impact of the COVID-19 pandemic," Dabalen wrote.

Conflict and weak currencies

In the conflict-torn eastern Democratic Republic of Congo, food was too expensive or in short supply for many. After M23 rebels captured the city of Kiwanja in North Kivu province, prices have spiked and towns in the north have been cut off from the regional capital Goma.

Bisafi Viviane who sells maize flour at the city’s Olive Lembe mother market told DW that the price doubled because of a shortage.

"Before, we sold a measure of maize for 1,000 Congolese francs ($0.49, €0.46) because we bought a bag for 100,000 francs. But today, we sell it for 2,000 francs because of the increase in the price of the bag which now costs 200,000 francs," Viviane said.

"And the maize we sell today comes from Tanzania and Zambia through Rwanda."

Father-of-six Kitumaini Kimwenge told DW in Goma about his hardship in 2022: "We have been living miserably for some time because money is not circulating, and the price of food has doubled in all markets. There are eight of us in my family and I have to work like a slave just to find food for every day."

A fall in agricultural production in conflict zones often leads to high inflation, according to Thomas Gahamanyi, professor of economics at the Higher Institute of Commerce in Goma.

"The justification for inflation or price increases is the law of supply and demand. Imagine that during this war, there was a massive displacement of the population, which at the time was a supply player," he told DW.

Over-reliance on imports

Some economists have blamed the high inflation rates seen in countries such as Ghana, Nigeria and Sierra Leone on the very weak performance of local currencies against major international currencies.

"The exchange rate has meant that importers needed more money to buy the same about of dollars in order to import the crude oil," Accra-based economist, Cleanse Tsonam Akpeloo, told DW.

Ghana’s cedi lost nearly 52% of its value in 2022 and was ranked the worst-performing out of 148 currencies worldwide.

Industries across Africa struggled to cough up extra money to secure the needed forex to import goods for their productions.

"In our industries, we discovered that most of our importers cannot be able to afford dollars to be able to purchase their goods and these things are really affecting the business in Nigeria," Edward Adeola, a Lagos-based economist, told DW.

Interventions that didn’t work

In Accra, Clement Boateng had made a steady living selling vehicle parts for more than 20 years. But when the cedi weakened

"Anytime the cedi depreciates that means if you want to import or bring in more goods that means you have to find additional money to top up whatever money you are supposed to use to do your imports," he told DW.

"If you go to the bank to borrow you still going to borrow at a very high rate. So, it has not been easy, and it is even difficult trying as much as possible as a family man to provide three square meals for my family."

According to the Accra-based economist Cleanse Akpeloo, there is a danger that inflation could continue to surge in the coming years in African countries that rely heavily on imports.

"You will realize that we import about 70% of everything we use in Ghana," he said.

A strategy by some governments of increasing taxes on imports to discourage has lead to high prices in some cases, Adeola told DW.

"If you ask the government, they would tell you that they want to discourage importation of some goods and increase exportation but the truth is that continuous increase monetary policies, duties, taxation will not help," he said.

The Lagos-based economist believes that until governments create alternative products to replace those being imported, many economies on the continent will remain import-driven.

A public debt burden

The World Bank projected that public debt levels in sub-Saharan Africa would remain elevated at 58.6% of GDP in 2022.

"African governments spent 16.5% of their revenues servicing external debt in 2021, up from less than 5% in 2010," according to the World Bank.

It found that eight of the 38 countries that were eligible for International Development Association (IDA) loans in the region were in "debt distress" and 14 at high risk.

"High commercial borrowing costs make it difficult for countries to borrow on national and international markets, while tightening global financial conditions are weakening currencies and increasing African countries’ external borrowing costs," the World Bank said.

Ghana’s debt-to-GDP ratio is over 80% and worsened by poor tax revenue. At the start of 2022, Ghana said it would not resort to an IMF bailout. But after facing protests, public pay disputes, the government made a U-turn.

As 2022 drew to a close, the IMF granted Ghana a bailout loan of $3 billion.

Economists say that African countries could have avoided high living costs had governments had kept tighter controls on public borrowing and spending. "We can’t continue to be doing a four-year circle of going to the IMF. It is becoming an unfortunate situation," Akpeloo told DW.

Outlook for 2023

Some economists have warned of the risk of current economic trends continuing across sub-Saharan Africa. The EIU has forecast a fall in economic growth in the region to 2.8% in 2023, from an estimated 3.3% in 2022.

The aspiring videographer, Richard Gbewornyo, is bracing for an even tougher 2023.

"In the coming year, we all know what is going to happen. We just have to tighten our belts. It is just what it is unless the leaders sit and accept their faults and work towards it," he told DW.

The graduate, Moses Oduola, wants to grow his drinks business and see Nigeria create more jobs for the youth.

"Any country that doesn’t invest in its youth, have nowhere to go. Because those youth are the one kidnapping when they don’t see support. They have to find a way to survive," he said.

Source: https://allafrica.com/stories/202212310121.html