Detailed Insights

Economic Indicators

• GDP Growth:
  • Africa-wide real GDP growth is projected at 3.8–3.9% for 2025, up from 3.3% in 2024, despite macro shocks. Growth could reach 4% in 2026 if stability persists¹³⁷.
  • Top performers: Ethiopia, Rwanda, Senegal, and Niger could exceed 7% growth, driven by robust services, expanding infrastructure, and increased agri-output¹⁵.
  • Major economies: Nigeria (largest GDP), Egypt, South Africa, and Kenya expected to post moderate growth; Ethiopia’s GDP growth forecast is particularly strong at 7.2% in 2025—substantially above regional average—underpinned by logistics, mining, and energy⁵⁹.
• Inflation & Currency:
  • Inflation rates are gradually easing in East and parts of Southern Africa as supply chains stabilize; e.g., Tanzania’s inflation forecast is 3.3% in Q1 2025⁵.
  • Currency pressures persist in Nigeria and Egypt due to forex shortages and policy adjustments, contributing to capital controls and higher import costs³.
  • Sub-Saharan Africa’s public debt exceeds 60% of GDP (on average), with some countries allocating 40%+ of government revenue to debt servicing—signaling serious fiscal stress and limiting policy flexibility³.
• Foreign Exchange & Trade:
  • African currencies broadly remain under pressure due to tighter global monetary conditions and continued USD strength.
  • The ratification of the African Continental Free Trade Area (AfCFTA) by nearly 50 nations marks a critical step toward regional trade integration, aiming to reduce non-tariff barriers and deepen competition²⁴.

Foreign Direct Investment (FDI)

• Overall Trend:
  • FDI inflows to Africa declined sharply in Q1 2025, with Africa’s share of global greenfield FDI projects dropping from 3.8% (2024) to 3% (2025), mirroring global investor caution amid external shocks².
  • Capex for new projects fell to $6bn in 2025 from $17bn in 2021, primarily due to global risk aversion, trade uncertainty, and commodity price volatility².
• Sectoral and Regional Details:
  • Despite the overall drop, FDI is concentrating in specific growth sectors:
    • Renewable Energy: Major projects in green hydrogen (Mauritania), wind (Morocco), and solar (South Africa, Egypt) are drawing multi-billion-dollar commitments⁴.
    • Technology: Digital economy, fintech, e-commerce, and ICT infrastructure are key drivers of new FDI, especially in Nigeria, Kenya, Egypt, South Africa, and Ghana⁴⁸.
  • Intracontinental FDI is expected to rise, supported by AfCFTA’s investment protocol and harmonized regulatory reforms²⁴.

Sectoral Insights

• Technology & FinTech:
  • Africa’s tech sector is experiencing record venture capital and corporate FDI, with significant investments in mobile money, AI-driven services, and BPO. The digital sector now leads all new project announcements⁴⁸.
  • Notable hubs: Lagos, Nairobi, Cape Town, and Cairo for fintech and digital startups.
• Renewable Energy:
  • Africa is emerging as a frontier for green hydrogen and large-scale renewables. For example, Mauritania’s hydrogen project is valued at several times its GDP; Egypt’s Suez Economic Zone hosts major green ammonia investment⁴.
  • Morocco and South Africa continue to expand wind and solar capacity, catering both to domestic demand and export objectives⁴.
• Agriculture:
  • Improved rains have boosted agricultural output in East Africa, helping ease inflation and supporting stronger GDP growth in countries like Ethiopia and Kenya³⁵.
  • Investment in agri-tech and value-chain digitalization remains a source of future productivity.
• Infrastructure & Real Estate:
  • Infrastructure investment remains solid, but heavily reliant on public financing and concessional funding, which is under strain due to high debt servicing costs³.
  • Urbanization trends in West and East Africa support logistics and real estate demand.
• Telecommunications & Digital Economy:
  • Ongoing commitments to expand broadband coverage and data centers as digital transformation becomes central to national growth agendas, especially in Kenya, Nigeria, and Egypt⁴⁸.

Regulatory and Policy Developments

• Major regulatory advances:
  • AfCFTA Protocol on Investment (2023) seeks to lower barriers, harmonize investor protections, and support intra-African investment scaling⁴.
  • Kenya and UAE signed a Comprehensive Economic Partnership Agreement in early 2025, boosting trade and economic collaboration beyond the continent².
  • Ongoing pro-business reform waves in Ghana, Rwanda, and Senegal target ease of doing business and investor confidence⁴.
• Fiscal room is limited by rising debt costs, prompting calls for expanded domestic resource mobilization and tax base broadening, especially for countries with large informal sectors³.

Geopolitical Considerations

• Political Stability:
  • Electoral cycles in Tanzania and elsewhere pose localized risks, but overall, major investment destinations maintained relative stability during the period⁵.
  • Persisting regional tensions and periodic security incidents in parts of West and Central Africa remain points of risk, particularly in extractives.
• International Relations:
  • Tighter access to global credit markets, partial withdrawal of donor funding, and heightened scrutiny from rating agencies affect several Sub-Saharan African countries²³.
  • AfCFTA’s operationalization is creating a stronger platform for regional economic cooperation and could counterbalance fragmenting global trade relations⁴.

Forward-looking Perspective

Short-term Market Predictions: GDP growth will remain moderate but positive, underpinned by resilient service sectors and ongoing digital transformation¹⁷.

FDI is expected to stay subdued overall, but sectoral allocation will shift further towards tech, renewables, and agro-processing.

Debt-related fiscal constraints may prompt new rounds of pro-business reforms and domestic resource mobilization.

Developments to Watch:

• Full implementation of AfCFTA and potential new entrants.
• Upcoming elections, especially in West and East Africa.
• Possible commodity market rebounds and renewed investor risk appetite if global macro stability improves.
• Expansion of green infrastructure financing and digital infrastructure, particularly in regional technology hubs.