Africa: Challenges facing Sub-Sahara

Climate change

Nine out of the 10 countries in the world most vulnerable to climate change are in sub-Saharan Africa. The region has at least 10 vulnerable coastal cities with a population of more than 1 million people, including Accra, Dakar, Durban and Lagos, according to the Forum report.

Africa is expected to be one of the continents hardest hit by climate change, with increasing extreme weather events threatening the health of its people and economies. At the same time, mass-migration as a result of flooding or droughts could put resources such as food, water and housing under pressure in areas less affected.

Unemployment and underemployment

Unemployment in sub-Saharan Africa stands at around 6 percent, according to the International Labour Organisation (ILO). But most of the work available is unskilled or low-skilled, in part because the region has the world’s lowest levels of access to higher education.

So, although many Africans are employed, 70 percent of sub-Saharan Africa’s workforce is vulnerable. The global average for vulnerable occupations is 46 percent.

Business leaders in 22 out of 34 sub-Saharan African countries told the World Economic Forum’s 2018 Executive Opinion Survey that unemployment and underemployment was their most pressing concerns.

Underinvestment in infrastructure

Physical infrastructure across much of the continent is a challenge to productivity, according to the African Development Bank. It calculates an estimated $130-to $170 billion needs to be invested each year on Africa’s infrastructure, despite a financing gap of as much as $108 billion.

A lack of funding for roads, telecommunications, water, electricity and more are impeding the continent’s productivity by around 40 percent, according to World Bank estimates. This “failure of critical infrastructure” is a major risk to business in the region, respondents to the World Economic Forum’s survey said last year.

Fiscal crises

Nearly 40 percent of sub-Saharan African countries are at risk of slipping into a major debt crisis, according to the Brookings Institution. And the “number of African countries at high risk [of] or in debt distress has more than doubled from eight in 2013 to 18 in 2018.”

The region’s aggregate debt-to-GDP ratio rose to 46 percent in 2017, up from from 23 percent in 2008. As debt levels increase, so does the pressure of servicing the debt; money that could be invested in society goes to repaying loans. This could make it less likely that the region can achieve the African Union’s Agenda 2063 development targets.

Political change

“Failure of national governance” is a leading risk to business, according to executives in sub-Saharan Africa.

“Since the beginning of 2015, Africa has experienced more than 27 leadership changes, highlighting the continent-wide push for greater accountability and democracy,” according to the Brooking Institution.

Sub-Saharan Africa’s two largest economies both recently held presidential elections.

In May, Cyril Ramaphosa was elected president of South Africa with a commitment to promote economic growth and fight corruption. At the start of the year, Muhammadu Buhari was re-elected president of Nigeria on a similar pledge to fight corruption, while strengthening national security and the economy.

“The political changes taking place offer an opportunity to address citizens’ concerns and priorities. However, leaders — and economies — will face considerable risk should policy agendas fail to deliver results,” the Forum report cautions.

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