The African Development Bank (AfDB) released its Southern Africa regional economic outlook report showing the continued underperformance by the region in comparison to other African subregions, as SA — the region’s largest economy and trading partner — continues to hinder growth performance.
Speaking on a webinar on Monday, AfDB lead economist for Southern Africa George Kararach said not only does the region face external shocks including more persistent global inflation that could prompt significantly stricter monetary policy tightening with substantial spillovers effect, but also that the lingering political and structural issues in SA will continue to subdue regional performance.
“The low Southern Africa numbers are largely a reflection of sluggish performance in SA where civil unrest, natural disasters — such as unprecedented floods and droughts, locust infestations, renewed anti-immigrant protest and cost-of-living crisis in the run-up to the 2024 national election — compound the electricity crisis to hamper economic growth,” Kararach said.
He added that the sociopolitical context could also cloud the economic outlook.
Over 2023-24, six Southern African countries are holding presidential or parliamentary elections, which could put upward pressure on wages and public spending, and challenge fiscal discipline, as well as the implementation of bold structural reforms, he said.
According to the AfDB, the Southern Africa region had the worst economic performance in 2022, growing only 2.7% and is projected to decelerate by 1.1 percentage points in 2023 while growth in Africa is projected to stabilise at 4.1% in 2023—24, higher than the estimated 3.8% in 2022. It also lagged in Central Africa at 5%, East Africa at 4.4%, North Africa 4.1% and West Africa at 3.8%.
“The [Southern Africa] region’s GDP growth is very dependent on the performance of the SA economy, given its overwhelming weight in regional GDP — 60 % of Southern Africa GDP in 2022. In 2022, SA’s GDP growth slowed markedly to about 2%, dragging down the average for the region.
But SA is not the only culprit in low economic growth performance. Malawi, São Tomé and Príncipe and Lesotho also experienced below average growth rate while intense adverse weather events also contributed to stalled growth in several countries including Zimbabwe, Zambia, Malawi, Madagascar and São Tomé and Príncipe.
Mozambique’s growth prospects are also uncertain as security risks and population displacement continue to plague the country after the intensification of terrorist activity in the country’s north. This could further trigger delays of large-scale LNG projects and disrupt farming activities, which would jeopardise growth prospects and cause more severe food insecurity and poverty.
Climate-related risks are major risks that could further deteriorate the projected economic and social outlook, especially since the agriculture sector remains the largest employer in many countries in the region.
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AfDB chief economist Kevin Chika Urama said environmental challenges will continue to hamper inclusive growth and food security and worsen existing social and political tensions.
Urama said the weak institutional capacity of most countries, especially Madagascar, Malawi, Mozambique and Zimbabwe, in failing to address climate vulnerabilities would continue to amplify vulnerabilities to more severe and frequent adverse climatic events.
Climate financing
“Southern Africa’s financial needs for climate actions stand at $1-trillion, with an annual requirement of $90.3bn for 2020-2030. The average annual climate finance flows to Southern Africa stands at $6.2bn, representing 6.9%,” Urama said.
“While in need of investment in adaptation, most of the Southern African countries are recipients of financing mostly for mitigation projects, with the exception of Eswatini, Malawi, São Tomé and Príncipe and Zambia. Climate finance disbursement ratio is generally lower due to weak institutional capacity, limited technology, lack of awareness, poor physical infrastructure and unfavourable political environments,” he said.
In its report, the AfDB identifies short-, medium- and long-term solutions to the crisis.
Short-term solutions include developing a country-level road map for green growth and climate action that includes mobilising of private sector finance; strengthening governance systems to ensure proceeds are transparent and accountable, and tackling specific access barriers to private financing.
Medium-term policy options include the expansion and deepening of capital markets, as well as addressing the unsustainable debt to the mobilisation of private sector finance.
Long-term policy option are reforming the financial sector, increasing governments’ effectiveness and promoting regional co-ordination of international private and public institutions.
