Long before the ‘Africa Rising’ narrative gained traction, the region grappled with a severe debt crisis, as exemplified in 1982 when virtually every African nation faced unsustainable debt burdens. By 1987, Africa’s total debt skyrocketed to $174 billion from just $8 billion in 1970.
China’s lending provided some relief, but Africa’s debt mountain remains high decades later. By 2019, the cumulative regional debt-to-GDP ratio had stabilized at 57% but the growth seemed built on shaky ground.
The pandemic and Ukraine war have since strained African economies, pushing the debt-to-GDP ratio up to 66% by 2021, with many countries exceeding 100%. Eritrea’s ratio peaked at a staggering 175.1%.
Africa’s recovery has been disrupted, with Sub-Saharan GDP growth contracting sharply to a projected 3.6% in 2023 amid global slowdown. Developed economies are already in recession, but Africa will still outpace most G7 countries. However, decreased overseas demand will hurt export-reliant African nations.
To manage inflation while preventing economic collapse, countries are hiking interest rates, which reduces spending and growth. This tricky balancing act persists across Africa.
For investors, Africa’s volatility and financial mismanagement pose huge risks, especially in forex trading, as seen with the South African rand’s plunge after President Ramaphosa’s impeachment panel findings.
Still, leveraged instruments like spread betting and CFDs allow hedging currency risks. Africa remains a high-risk, high-reward market best suited to aggressive speculative investors who embrace volatility for potential short-term gains. The challenges underscore why ‘Africa Rising’ faces hurdles before becoming reality.